1 Regulating Sex Work Adrienne D. Davis VERY ROUGH DRAFT ...

legally, independently “underground,” or underground for a company. Workers opt for
underground labor for a variety of reasons. Of course some do not have a choice, i.e.,
they may lack the paperwork for legal labor or are coerced into illegal markets. Others,
though, are enticed into illegal labor by autonomy, convenience, or “wedge” effects, i.e.,
a substantial difference between the amount the employer pays into the system and the
amount the worker receives.
Market sectors that are either capital intensive and/or require a fixed business site
have the lowest substitution effects. For instance, a manufacturing plant cannot easily go
“underground.” Similarly, restaurants must operate out of a specific site. 333 This lack of
mobility means they cannot easily evade inspection. (Of course, with manufacturing,
there is a different substitution effect at work, outsourcing to a different, less regulated
jurisdiction, whether domestic or foreign. However, outsourcing exchanges one legal
sector for another; it does not go completely underground.) One of the arguable reasons
that mining can be so heavily regulated is that it is unsusceptible to substitution effects.
It is both capital intensive and site specific. Mining companies are not mobile—they
must be situated where the natural resources are located. In addition, they invest heavily
and, unlike manufacturing, cannot outsource the work.
In contrast, sex work would seem to be the opposite of mining. Sex work requires
neither a high investment of conventional capital nor does most of it require a fixed
business site. 334 It requires little capital (dance clubs and brothels can be run out of
almost any space) and is not site specific, i.e., sex can occur in a home, leased or rented
premises, or even the street or car, and is highly mobile, it is highly susceptible to
substitution to the underground economy. Thus, like housekeeping, yard work, and drug
dealing, sex work is highly susceptible to substitution effects. Hence, there is a concern
that if decriminalized and then regulated, sex work would remain in the underground
economy. My gamble, though, is that because much sex work already is illegal, the
effects would flow the other way. Instead of people fleeing the legal sector for the illegal
one, we are trying to induce people to move out of the underground economy to the legal
one. At least some owners, workers, and customers, I am betting, would prefer the lower
risk and lesser stigmatization of a legal market, as opposed to an illegal one. While it
may be true that the more regulations that are imposed, the less illegal work will
“substitute up” to legal markets, it is also the case that some who currently opt out of
professional sex because of the criminal and other risks would almost certainly be drawn
into a decriminalized, legalized, fully regulated market. [find any empirical data on what
happens in legalized jurisdictions?] [Or alternatively, a different kind of substitution
effect would take place, the classic race to the bottom in which, like the highly mobile
pornography industry, regulation precipitates a move to a more friendly jurisdiction.]
Importantly, there is also substitution between different sectors of sex markets, e.g.,
brothel, outcall, and street prostitution (or in dancing, club versus outcall). [I have to
think this through: For instance, one would hypothesize that increasing regulation of
brothel/dance clubs through body guards, etc. will increase the substitution to outcall. 335 ]
333 Pop up restaurants, “underground restaurants,” and trucks are the exceptions.
334 The exception would be dance clubs.
335
Experience suggests that if brothels are closed street prostitution and escort services become more
popular. Thus, as a practical matter, the question is whether we prefer street prostitution and escort
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