Beginning last year, the Bank of England included prostitution in its GDP measurements. According to the Office of National Statistics, prostitution generated $9 billion a year, adding 0.7% to the UK GDP. They aren’t alone: Sweden, Norway and a few other European countries already include it. And if you can measure it, you can tax it. And legalization is necessary for measurement.
Prostitution is legal in most of the developed world. In fact, of the G20 countries, prostitution is illegal in just five: China, South Korea, Saudi Arabia, South Africa, and, of course, the United States.
Mainstreaming prostitution U.S.-style
Leave it to the 1% to find a way around the law. SeekingArrangement.com (SA) is a website catering to men and women who exchange sex for compensation, like an allowance or paying bills like student loans and rent. It has 4.5 million registered users: 3.3 million Sugar Babies and 1.2 million Sponsors (aka Sugar Daddies & Mommies). The average age of Sugar Babies is 21, the average age of Sugar Daddies/Mommies is 45 with an average income of $500k. The average compensation is $5,000 per month.
The Economic relevance of SA is where the 1% converges with the 99%. Earning $500K or more and spending $60,000 per year on a mistress; this is the 1% needing help with college loans, and rent is the other 99%.
It’s not an online dating website. If someone wants a relationship or a liaison, there are plenty of other sites like Craigslist and Ashley Madison. Is it a prostitution website? According to SA, they are not—repeat not—engaged in prostitution. Their disclaimer: “An arrangement is not an escort service. Seeking Arrangement in no way, shape or form supports escorts or prostitutes using our website for personal gain.”
Despite protestations, SA appears to be a clever way one percenters can safely and discretely get around the law. As a prostitution website, it may not be as explicit as WhatsYourPrice or Backpage, but SA has at its core a business transaction: companionship with extras in return for cash or the equivalent. Or, as users refer to it, a dating site with “mutually beneficial relationships.” The Sugar Babies aren’t paid, they are given an allowance. A financial arrangement for sex is prostitution, and when it involves millions of participants, it’s worth measuring.
Millions of college students and recent grads are struggling to make ends meet. There is a 3:1 ratio of Sugar Babies to Sugar Daddies/Mommies. Sugar Babies need help with college loans, rent and car payments. This works well for Sugar Daddies/Mommies because these can be hidden as business expenses, which is helpful when dealing with the IRS and/or the spouse.
Rent is now 40% of income in most major cities, 50% in New York. Following the recent recession, home ownership began to plunge while rental vacancies dropped. Simply put, housing is unaffordable and more people have to rent (See “Finding a pad”).
For young people, renting is the only option. And from 2000-2014, incomes have grown 25% while rents have grown 53%. Housing used to require 25% of incomes. Today, it is bumping 40% in major cities; 50% in New York. The consequence is today’s young people can’t buy homes or afford rents.
It would be ridiculous to try and make a cause and effect argument between higher rents and the success of SA, but it makes a convenient excuse for those inclined to look for a Sugar Daddy.
Real estate inflation is outpacing incomes by such a wide margin thanks to loose monetary policy under recent Federal Reserve regimes.
And for those of college age looking for Sugar Daddies/Mommies, they can simply blame the Fed.