There’s one more angle to consider when examining the male-female wage gap. Rather than interpreting women’s lower wages as a failure, perhaps it should be seen as a sign that a higher wage simply isn’t as meaningful an incentive for women as it is for men. Could it be that men have a weakness for money just as women have a weakness for children?
Consider a recent pair of experiments in which young men and women were recruited to take an SAT-style math test with twenty questions. In one version, every participant was paid a flat rate, $5 for showing up and another $15 for completing the test. In the second version, participants were paid the $5 show-up fee and another $2 for each correct answer.
How’d they do?
In the flat-rate version, the men performed only slightly better, getting 1 more correct answer out of 20 than the women. But in the cash-incentive version, the men blew away the women. The women’s performance barely budged when compared with the flat-rate version, whereas the average man scored an extra 2 correct questions out of the 20.
Economists do the best they can by assembling data and using complex statistical techniques to tease out the reasons why women earn less than men. The fundamental difficulty, however, is that men and women differ in so many ways. What an economist would really like to do is perform an experiment, something like this: take a bunch of women and clone male versions of them; do the reverse for a bunch of men; now sit back and watch. By measuring the labor outcomes of each gender group against their own clones, you could likely gain some real insights.
Or, if cloning weren’t an option, you could take a bunch of women, randomly select half of them, and magically switch their gender to male, leaving everything else about them the same, and do the opposite with a bunch of men.
Unfortunately, economists aren’t allowed to conduct such experiments. (Yet.) But individuals can if they want to. It’s called a sex-change operation.
So what happens when a man decides to employ surgery and hormone therapy to live as a woman (a so-called MTF, or male-to-female transgender) or when a woman decides to live as a man (an FTM, or female-to-male)?
Ben Barres, a Stanford neurobiologist, was born Barbara Barres and became a man in 1997, at the age of forty-two. Neurobiology, like most math and science disciplines, is heavily populated by men. His decision “came as a surprise to my colleagues and students,” he notes, but they “have all been terrific about it.” Indeed, his intellectual stature seems to have increased. Once, after Barres gave a seminar, a fellow scientist turned to a friend of Barres’s in the audience and issued this left-handed compliment: “Ben Barres’s work is much better than his sister’s.” But Barres doesn’t have a sister; the commenter was slighting Barres’s former, female self.
“It is much harder for men to transition to women than for women to transition to men,” Barres admits. The problem, he says, is that males are presumed to be competent in certain fields—especially areas like science and finance—while females are not.
On the other hand, consider Deirdre McCloskey, a prominent economist at the University of Illinois at Chicago. She was born a male, Donald, and decided to become a woman in 1995, at the age of fifty-three. Economics, like neuroscience, is a heavily male field. “I was prepared to move to Spokane and become a secretary in a grain elevator,” she says. That proved unnecessary, but McCloskey did “detect a queerness penalty toward me in some of the economics profession. I reckon I’d make a little more money now if I were still Donald.”
McCloskey and Barres are just two data points. A pair of researchers named Kristen Schilt and Matthew Wiswall wanted to systematically examine what happens to the salaries of people who switched gender as adults. It is not quite the experiment we proposed above—after all, the set of folks who switch gender aren’t exactly a random sample, nor are they the typical woman or man before or after—but still, the results are intriguing. Schilt and Wiswall found that women who become men earn slightly more money after their gender transitions, while men who become women make, on average, nearly one-third less than their previous wage.
Their conclusion comes with a number of caveats. For starters, the sample set was very small: just fourteen MTFs and twenty-four FTMs. Furthermore, the people they studied were mainly recruited at transgender conferences. That puts them in the category of what Deirdre McCloskey calls “professional gender crossers,” who aren’t necessarily representative.
“One could easily believe,” she says, “that people who do not just become women and then get on with their lives, but keep looking back, are not going to be the most successful people in the workplace.” (She may have changed gender, but once an economist, always an economist.)
Back in Chicago, in a chic neighborhood just a few miles from where the street prostitutes work, lives someone who was born female, stayed that way, and makes more money than she ever thought possible.
She grew up in a large and largely dysfunctional family in Texas and left home to join the military. She trained in electronics and worked in research and development on navigation systems. When she rejoined the civilian world seven years later, she took a job in computer programming with one of the world’s largest corporations. She made a solid five-figure salary and married a man who earned well into six figures as a mortgage broker. Her life was a success, but it was also-well, it was boring.
She got divorced (the couple had no children) and moved back to Texas, in part to help care for a sick relative. Working once again as a computer programmer, she remarried but this marriage also failed.
Her career wasn’t going much better. She was smart, capable, technically sophisticated, and she also happened to be physically attractive, a curvaceous and friendly blonde whose attributes were always well appreciated in her corporate setting. But she just didn’t like working all that hard. So she became an entrepreneur, launching a one-woman business that enabled her to work just ten or fifteen hours a week and earn five times her old salary. Her name is Allie, and she is a prostitute.
She fell into the profession by accident, or at least on a lark. Her family was devout Southern Baptist, and Allie had grown up “very straitlaced,” she says. As an adult, she was the same. “You know, yard-of-the-month in the suburbs, no more than two beers a night and never before seven.” But as a young divorcée, she started visiting online dating sites—she liked men, and she liked sex—and just for fun listed “escort” on her profile. “I mean, it was so instantaneous,” she recalls. “I just thought I’d put it up and see what happens.”
Her computer was instantly flooded with replies. “I started hitting minimize, minimize, minimize, just so I could keep up!”
She arranged to meet a man at two o’clock on a weekday afternoon at a hotel, in the southwest corner of its parking lot. He’d be driving a black Mercedes. Allie had no idea what to charge. She was thinking about $50.
He was a dentist—physically unintimidating, married, and perfectly kind. Once inside the room, Allie undressed nervously. She can no longer recall the particulars of the sex (“it’s all a big blur by this point,” she says) but does remember that “it was nothing really kinky or anything.”
When they were done, the man put some money on the dresser. “You’ve never done this before, have you?” he asked.
Allie tried to fib, but it was useless.
“Okay,” he said, “this is what you need to do.” He began to lecture her. She had to be more careful; she shouldn’t be willing to meet a stranger in a parking lot; she needed to know something in advance about her clients.
“He was the perfect first date,” Allie says. “To this day, I remain grateful.”
Once he left the room, Allie counted the cash on the dresser: $200. “I’d been giving it away for years, and so the fact that someone was going to give me even a penny—well, that was shocking.”
She was immediately tempted to take up prostitution full-time, but she was worried her family and friends would find out. So she eased into it, booking mainly out-of-town liai
sons. She curtailed her programming hours but even so found the job stultifying. That’s when she decided to move to Chicago.
Yes, it was a big city, which Allie found intimidating, but unlike New York or Los Angeles, it was civil enough to make a southern girl feel at home. She built a website (those computer skills came in handy) and, through intensive trial and error, determined which erotic-services sites would help her attract the right kind of client and which ones would waste her ad dollars. (The winners were Eros.com and BigDoggie.net.)
Running a one-woman operation held several advantages, the main one being that she didn’t have to share her revenues with anyone. In the old days, Allie probably would have worked for someone like the Everleigh sisters, who paid their girls handsomely but took enough off the top to make themselves truly rich. The Internet let Allie be her own madam and accumulate the riches for herself. Much has been said of the Internet’s awesome ability to “disintermediate”—to cut out the agent or middleman—in industries like travel, real estate, insurance, and the sale of stocks and bonds. But it is hard to think of a market more naturally suited to disintermediation than high-end prostitution.
The downside was that Allie had no one but herself to screen potential clients and ensure they wouldn’t beat her up or rip her off. She hit upon a solution that was as simple as it was smart. When a new client contacted her online, she wouldn’t book an appointment until she had secured his real name and his work telephone number. Then she’d call him the morning of their date, ostensibly just to say how excited she was to meet him.
But the call also acknowledged that she could reach him at will and, if something were to go wrong, she could storm his office. “Nobody wants to see the ‘crazy ho’ routine,” she says with a smile. To date, Allie has resorted to this tactic only once, after a client paid her in counterfeit cash. When Allie visited his office, he promptly located some real money.
She saw clients in her apartment, mainly during the day. Most of them were middle-aged white men, 80 percent of whom were married, and they found it easier to slip off during work hours than explain an evening absence. Allie loved having her evenings free to read, go to the movies, or just relax. She set her fee at $300 an hour—that’s what most other women of her caliber seemed to be charging—with a few discount options: $500 for two hours or $2,400 for a twelve-hour sleepover. About 60 percent of her appointments were for a single hour.
Her bedroom—“my office,” she calls it with a laugh—is dominated by a massive Victorian four-poster, its carved mahogany pillars draped with an off-white silk crepe. It is not the easiest bed to mount. When asked if any of her clients have difficulty doing so, she confesses that one portly gentleman actually broke the bed not long ago.
What did Allie do?
“I told him that the damn thing was already broken, and I was sorry I hadn’t gotten it fixed.”
She is the kind of person who sees something good in everyone—and this, she believes, has contributed to her entrepreneurial success. She genuinely likes the men who come to her, and the men therefore like Allie even beyond the fact that she will have sex with them. Often, they bring gifts: a $100 gift certificate from Amazon.com; a nice bottle of wine (she Googles the label afterward to determine the value); and, once, a new MacBook. The men sweet-talk her, and compliment her looks or the decor. They treat her, in many ways, as men are expected to treat their wives but often don’t.
Most women of Allie’s pay grade call themselves “escorts.” When Allie discusses her friends in the business, she simply calls them “girls.” But she isn’t fussy. “I like hooker, I like whore, I like them all,” she says. “Come on, I know what I do, so I’m not trying to butter it up.” Allie mentions one friend whose fee is $500 an hour. “She thinks she’s nothing like the girls on the street giving blow jobs for $100, and I’m like, ‘Yes, honey, you’re the same damn thing.’”
About this, Allie is likely wrong. Although she views herself as similar to a street prostitute, she has less in common with that kind of woman than she does with a trophy wife. Allie is essentially a trophy wife who is rented by the hour. She isn’t really selling sex, or at least not sex alone. She sells men the opportunity to trade in their existing wives for a younger, more sexually adventurous version—without the trouble and long-term expense of actually having to go through with it. For an hour or two, she represents the ideal wife: beautiful, attentive, smart, laughing at your jokes and satisfying your lust. She is happy to see you every time you show up at her door. Your favorite music is already playing and your favorite beverage is on ice. She will never ask you to take out the trash.
Allie says she is “a little more liberal” than some prostitutes when it comes to satisfying a client’s unusual request. There was, for instance, the fellow back in Texas who still flew her in regularly and asked her to incorporate some devices he kept in a briefcase in a session most people wouldn’t even recognize as sex per se. But she categorically insists that her clients wear a condom.
What if a client offered her $1 million to have sex without a condom?
Allie pauses to consider this question. Then, exhibiting a keen understanding of what economists call adverse selection, she declares that she still wouldn’t do it—because any client crazy enough to offer $1 million for a single round of unprotected sex must be so crazy that he should be avoided at all costs.
When she started out in Chicago, at $300 an hour, the demand was nearly overwhelming. She took on as many clients as she could physically accommodate, working roughly thirty hours a week. She kept that up for a while, but once she paid off her car and built up some cash reserves, she scaled back to fifteen hours a week.
Even so, she began to wonder if one hour of her time was more valuable to her than another $300. As it was, a fifteen-hour workload generated more than $200,000 a year in cash.
Eventually she raised her fee to $350 an hour. She expected demand to fall, but it didn’t. So a few months later, she raised it to $400. Again, there was no discernible drop-off in demand. Allie was a bit peeved with herself. Plainly she had been charging too little the whole time. But at least she was able to strategically exploit her fee change by engaging in a little price discrimination. She grandfathered in her favorite clients at the old rate but told her less-favorite clients that an hour now cost $400—and if they balked, she had a handy excuse to cut them loose. There were always more where they came from.
It wasn’t long before she raised her fee again, to $450 an hour, and a few months later to $500. In the space of a couple of years, Allie had increased her price by 67 percent, and yet she saw practically no decrease in demand.
Her price hikes revealed another surprise: the more she charged, the less actual sex she was having. At $300 an hour, she had a string of one-hour appointments with each man wanting to get in as much action as he could. But charging $500 an hour, she was often wined and dined—“a four-hour dinner date that ends with a twenty-minute sexual encounter,” she says, “even though I was the same girl, dressed the same, and had the same conversations as when I charged $300.”
She figured she may have just been profiting from a strong economy. This was during 2006 and 2007, which were go-go years for many of the bankers, lawyers, and real-estate developers she saw. But Allie had found that most people who bought her services were, in the language of economics, price insensitive. Demand for sex seemed relatively uncoupled from the broader economy.
Our best estimate is that there are fewer than one thousand prostitutes like Allie in Chicago, either working solo or for an escort service. Street prostitutes like LaSheena might have the worst job in America. But for elite prostitutes like Allie, the circumstances are completely different: high wages, flexible hours, and relatively little risk of violence or arrest. So the real puzzle isn’t why someone like Allie becomes a prostitute, but rather why more women don’t choose this career.
Certainly, prostitution isn’t for every woman. You have to like sex enough, and be willin
g to make some sacrifices, like not having a husband (unless he is very understanding, or very greedy). Still, these negatives just might not seem that important when the wage is $500 an hour. Indeed, when Allie confided to one longtime friend that she had become a prostitute and described her new life, it was only a few weeks before the friend joined Allie in the business.
Allie has never had any trouble with the police, and doesn’t expect to. The truth is that she would be distraught if prostitution were legalized, because her stratospherically high wage stems from the fact that the service she provides cannot be gotten legally.
Allie had mastered her domain. She was a shrewd entrepreneur who kept her overhead low, maintained quality control, learned to price-discriminate, and understood well the market forces of supply and demand. She also enjoyed her work.
But all that said, Allie began looking for an exit strategy. She was in her early thirties by now and, while still attractive, she understood that her commodity was perishable. She felt sorry for older prostitutes who, like aging athletes, didn’t know when to quit. (One such athlete, a future Hall of Fame baseball player, had propositioned Allie while she was vacationing in South America, not knowing that she was a professional. Allie declined, uninterested in a busman’s holiday.)
She had also grown tired of living a secret life. Her family and friends didn’t know she was a prostitute, and the constant deception wore her out. The only people with whom she could be unguarded were other girls in the business, and they weren’t her closest friends.
She had saved money but not enough to retire. So she began casting about for her next career. She got her real-estate license. The housing boom was in full swing, and it seemed pretty simple to transition out of her old job and into the new, since both allowed a flexible schedule. But too many other people had the same idea. The barrier to entry for real-estate agents is so low that every boom inevitably attracts a swarm of new agents—in the previous ten years, membership in the National Association of Realtors had risen 75 percent—which has the effect of depressing their median income. And Allie was aghast when she realized she’d have to give half of her commission to the agency that employed her. That was a steeper cut than any pimp would dare take!
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