WEEKEND READ: Red light burns bright

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There are some people who might just benefit from the current turmoil in the financial markets. One probably won't surprise: lawyers. The other might: sex workers.

In the late 1990s, New York and other large American cities witnessed the rise of a so-called indoor sex-work trade. Women either left the streets for strip clubs and escort services, or they started their own businesses by advertising on the Internet or cruising hotels and corporate centres to find clients. You may recall "Kristen" (aka Ashley Dupr), the young woman whose tryst with Eliot Spitzer helped bring down the New York governor. "Kristens" might earn $US1,000 per evening, which places them toward the higher end of the indoor sex market.

I came across these women when I began studying New York's sex industry at the end of the 1990s. Mayor Rudy Giuliani, in an effort to clean up Manhattan's neighbourhoods, forced sex off the streets of Times Square and other Midtown neighbourhoods. In the process, his administration created a new economic sector. I've been following the lives of more than 300 sex workers – in New York and Chicago, in high and low ends of the income spectrum – since 1999.

One thing I've learned is that economic downturns can be boom times for high-end sex workers. Sex workers of the past waited on street corners, outside bars, and around parks, and their transactions were fleeting and usually for a few dollars. Today's high-end sex workers see themselves as therapists, part of a vast metropolitan wellness industry that includes private chefs and yoga teachers. Many have regular clients who visit them several times per month, paying them not only for sex but also for comfort and affirmation.

The cost may be thousands of dollars for an evening of leisure. Few people outside of the corporate work force can afford this price tag. And, in good times, Wall Street came calling.

But bad times seem not so bad either, at least in the short run. After the dot-com bubble burst and again in late 2006 when the housing market began to flatten, the high-end women I interviewed in New York and Chicago reported upticks in business. Their clients were coming to them for a mix of escape and encouragement. As Jean, a New Yorker and a 35-year-old former paralegal turned "corporate escort" (her description) told me, "I had about two dozen men who started doubling their visits with me. They couldn't face their wives, who were bitching about the fact they lost income. Men want to be men. All I did was make them feel like they could go back out there with their head up." (Like most of the sex workers I interviewed, Jean was concerned about her participation in an illegal trade and asked that only her first name be used.)

That's probably not all Jean did for her clients. But, as I reported in Slate a few months ago, about 40 per cent of high-end sex transactions do not involve a sexual service. It's not difficult to imagine that a man's need for positive reinforcement is amplified when a pink slip lands on his desk.

In my study, approximately half of the sex workers I have been following (150) work in the high-end sector. Nearly all of them tell me that this pattern of increased activity following an economic downturn lasts about six to eight months. "They get tapped out," Caroline told me. Caroline specializes in "internet stiffs," her term for folks who work in Manhattan's high-tech sector. "They party with me. Or I listen when they tell me they can't face their kids. When the money runs out, they go back and they deal with it."

Caroline learned quickly that she had to diversify in order to survive these cycles. Now, she never has more than half of her clients in one economic sector. "I always have lawyers, very dependable. And I never have too many stock brokers. They're a real pain in the ass. I've never heard anyone whine more than them." But Caroline may be an exception. Most high-end workers find their clients via word of mouth. They can easily become lodged in one sector, rising or falling with the economic tide.

As the women I interviewed spoke to me about the strategies they used to manage risk during hard times, it became quickly apparent that Caroline's adjustment was one of many strategies that higher-end sex workers have used. Women get used to the lifestyle – fancy apartments, nice clothes, a vacation now and then – and they need to keep income flowing, especially in recessionary periods when men run out of cash. It is quite common for sex workers at the high end to take men "on credit," giving them freebies for a few months or longer until they can get back on their feet. Equally common is the willingness to reduce rates.

A smaller percentage of high-end sex workers are more innovative and find ways to distribute their risk. These women draw on techniques that are more common in legitimate economic spheres. Marta, for example, said that she took inspiration from the revolving-credit associations that her mother once belonged to in New York's Spanish Harlem neighbourhood. These modest savings accounts – some only a few thousand dollars – helped the women make ends meet between paychecks. In some cases, they provided capital to start a new business. Marta asked five of her friends to put a few hundred dollars in a money-market account. A week ago, Marta told me the story of one of her friends who lost three clients (two of whom reportedly worked as investment bankers) and who withdrew funds to help make ends meet. I've known Marta for almost a decade, and while I didn't meet her friend, I've seen others in her social network use such strategies to ride out bad times.

Of course, it's not always as simple as that. If too many women draw on the account, each may not find the money she needs. And participants will not always agree on the rules for membership. Some of these accounts charge interest as a means of penalising women who make repeated withdrawals, although this is not the norm. Others may place restrictions on the number of withdrawals allowed in any time period. Such formal rules are quite rare, but these days I've been finding an increasing number of sex workers seeking ways to respond to their vulnerable position. Ultimately, however, access to cash is a great benefit. Even in the high-end sector, women may not have bank accounts or credit histories – this makes access to loans (and credit cards) difficult. It takes only a few client cancellations to make next month's rent payment a source of concern. Knowing that cash is available is a source of comfort.

I've even seen a small number of women, flush with cash from sex work, use their resources to play the role of insurance broker. Unlike Marta and her friends, who must pool their money, a small percentage of women invest their own savings to insure the risk of other sex workers. Recall that sex workers face a number of risks, from men who do not pay for their services or who steal their money to the sudden loss of their entire client base. Savvy individuals will volunteer to assume such risks, in effect contracting with sex workers to insure them against misbehaving clients or unforeseen drops in business. Jean was so successful as a sex worker that she decided to use some of her income to insure 10 high-end sex workers against potential losses. Each woman gave Jean 5 per cent of her earnings each month. In exchange, the women could take out $1,000 per month for five months a year if times were tough. I met most of the women in Jean's insurance pool. Each one volunteered a story of how the cash disbursements helped them avoid a personal crisis.

On first glance, a sex worker could probably do better by simply putting some money aside in a cookie jar. But sex workers are not the best savers (who is?). And a sudden loss of clients means no cash comes in the door. If they lack credit cards or have no room to borrow, a cash payment from Jean is invaluable.

Escort-service managers, strip-club owners, pimps, and other entrepreneurially minded people often approach sex workers with similar proposals to assume some of the risks of the trade. The majority of sex workers I have studied admit feeling trapped when these offers come along: they can try to make it on their own or pay someone to provide some protection. Of course, not all insurers pay up – and the government is not around the corner to bail anyone out.

The trick to surviving lean times, says Caroline, is to be patient and do everything it takes to keep your clients. "They are going to come back. I mean, c'mon, it's Wall Street! These guys are never out of the game for that long. That's what's so great about what I do. If you can keep your cool, it's pretty rare that you lose money. Just make sure you keep the man happy."