“Human trafficking is the only industry in which the supply and demand are the same things: human beings. People are demanding the sale of people.”
UNICEF USA
Overview
Human trafficking is a form of slavery with new manifestations brought about by industrial globalization and sexual tourism spots. Slavery was then seen as the root of the emergence of human trafficking (Syamsuddin, 2020), which was seen as commonplace and accepted by society. Upper-class groups made transactions with slave dealers and made those who were bought as workers in fields, houses, or industrial factories. The treatment of slave buyers to slaves, from the current social and moral perspective, is an act that castrates fundamental human rights. Slaves are not named, with poor health and sanitation facilities and limited food availability (Syamsuddin, 2020).
The term ‘human trafficking’ initially included white women turned into prostitutes and groups of children and women forced to work as prostitutes. Then, only in 1999, The Global Alliance Against Traffic in Women (GAATW) add forced labor to sexual exploitation as a form of human trafficking (Kathryn 2009; Syamsuddin 2020). Thus, human trafficking in both labor and sex industry workers violates human rights to be exchanged for materialistic commodities such as money. The Polaris Project, a non-profit, non-governmental organization that works to combat and prevent sex and labor in North America, defines trafficking human trafficking as a business in the form of theft of liberty for profit. Furthermore, the United Nations Protocol 2000 defines human trafficking in the broader spectrum. Human trafficking includes starting from the process of recruitment, transportation, transfer, smuggling, and sending people, using threats or coercion, and using power to suppress people, the position of vulnerable groups of people. Exploitation includes the exploitation of prostitution or other forms of sexual exploitation, forced labor or services, slavery or other equivalent practices, and illegal organ trafficking.
The global estimation report by the International Labor Organization (ILO) and the Walk Free Foundation, in collaboration with the International Organization of Migration (IOM), estimates that around 40 million people globally were trafficked during 2016 as labor and forced marriages. Cumulatively during 2011-2016, as many as 89 million people have been trafficked worldwide. Modern slavery in forced labor and forced marriage mainly occurs in Africa and the Asia Pacific. They find that 7.6 people per 1,000 people are trafficked in Africa, slightly lower than Asia Pacific’s 6.1 people. The area of Europe and Central Asia is about half that of Africa, which is 3.9 people per 1,000 inhabitants. Developing countries are still the leading supplier regions for victims traffickers bring to destination countries: mainly are developed countries. However, in the same estimation report, it is emphasized that the tendency of human trafficking in Africa and the Asia Pacific region needs a more profound examination, given the availability of data that is difficult to obtain in some areas.
Human trafficking can target various elements of society ranging from women and men; children and adults; and certain races and ethnic groups. This type of crime does not originate from a single factor, but many complex factors spread from social, political, to environmental dimensions. Aronowitz (2009) explains the difficulty of measuring the scale and implications of human trafficking due to various conditions such as; lack of legislation and inadequate definitions of human trafficking, lack of political will, lack of experience in dealing with issues, corruption, and the inability and unwillingness of victims to cooperate. Even so, the emergence of human trafficking in an area will undoubtedly impact victims and the wider community. For example, the implications of human trafficking in the economic field target the public and taxpayers. Trafficking represents the loss of domestic opportunities from the country’s human resources, including the loss of individual maximum potential and productivity in the long term (US Department of State, 2011).
What Fuels Human Trafficking?
Every year, human trafficking is growing and appears in increasingly diverse variations. The US State Department (2011) explains that at least three primary factors have led to increased cases over the last 15 years: the global economy and globalization. Globalization’s openness and ease of exchanging resources and information have become an opening route for the transfer of groups of vulnerable people to regional groups who want low-cost labor. UNICEF USA then explained more broadly why human trafficking is continuing and growing until now.
First, human trafficking is driven by high rewards and low-risk dynamics. Profit is the main motive in the practice of human trafficking (Wheaton et al., 2009). The International Labor Organization (ILO) estimates that the profit generated from human trafficking and forced labor is 150 billion USD annually. In the case of international transactions, there are economic and political factors that open up opportunities for traffickers to seek profit. It is explained by Chuang (2004), who defines human trafficking as an opportunistic response to the tension between the economic need to migrate and the emergence of political motivation in the prohibition of migration policy.
High illegal profit opportunities combined with low-risk dynamics of detention and arrest support the increase in the occurrence of activities trafficking (Dank et al., 2014). In other words, traffickers can make the profit highest possible with minimal fear of punishment or legal consequences. There are still many countries in the world that lack preventive and repressive efforts from human trafficking. In a US Department report entitled Trafficking In Persons 2015, the estimated number of prosecutions and trials is minimal, and policymaking tends to be slow. The estimated number of individual prosecutions and constitutions in the report is much higher than the actual cases that can be identified. Law enforcement in countries that have laws is anti-trafficking described by Salt (2000), who argues that there is a tendency for lack of law enforcement in these countries.
Second, human trafficking is driven by the economic principle of supply and demand. Wheaton et al. (2009) modeled the human trafficking market with supply and demand, each determined by the decision-making of market participants. In terms of demand, employers or parties who employ victims of human trafficking are the determinants of demand, which can be associated with an increase in demand for certain goods by consumers. Higher demand leads to higher supply. An increase in the demand for an item by consumers raises the motivation for companies to hire workers with low wages, often even up to the lowest wage limit to exploit workers. The same thing happens with commercial sex. The increase in demand increases incentives for sex entertainment establishments to recruit and exploit minors. In terms of supply, the victims of human trafficking are the determinants of the demand side. Labor supply decisions then rest at the level of vulnerable individuals.
Third, systemic inequality and disparity make certain groups more vulnerable to exploitation through illegal migration. Othman (2006) then grouped several indicators of inequality and disparity into push and pull factors. Push factors are factors that affect the individual’s desire to leave or move from the country and or community, such as inadequate job opportunities; poor living conditions; corruption and conflict (Ejalu, 2006; Wheaton, 2009); lack of access to basic needs; economic and political insecurity (Derks, 2000; Hughes, 2000; Wheaton et al., 2009); loss of livelihood; gender (Ehrenreich & Hoschild, 2006; Klueber, 2003); and natural disasters (Cormark, 2011). Then, the factor pull is a factor that influences an individual’s decision to move to a particular place or community, such as ease of moving; more significant levels of wages and opportunities (Bales, 2000); stability of the migration path in the destination area; and the active demand for migrant workers and high expectations underpinned by global media, the internet, and the experiences of previous migrants (IOM, 2008; Aronowitz, 2009; Danailova-Trainor and Laczko, 2010).
Research conducted by Mahmoud (2009) on 5,513 households from Belarus, Bulgaria, Moldova, Romania, and Ukraine regarding the relationship of illegal migrants to trafficking shows similar results. This study’s findings are those migrant families in crowded areas of migrants and large migrant networks are more likely to become victims of trafficking than other community groups in the same place.
The Economic Impact of Trafficking in Persons
Lost Resources
Human trafficking targets people who, in economic analysis, are seen as human resources. The impact of human trafficking is the loss of all or part of the production capacity of the production process that these human resources should have carried out. Victims are employed illegally and are not registered in economic activity. Furthermore, the victim’s recovery process takes a long time and is complex, with no definite guarantee of recovery (UNODC, 2008). Trauma and psychological damage then affect individual behavior, making returning individuals to the labor market challenges. As a result, the accumulation of human capital will be lower than it should be, and the labor force participation rate will also decrease.
In a broader scope, the country where the victim is located will experience the potential to lose some of the tax revenue that should be used for development purposes. Activities related to trafficking that are not recorded are not taxable. UNODC (2008) even reported potential net income losses due to tax evasion and money laundering. In addition, the burden of rehabilitation and repatriation of victims borne by the origin country requires the public, in general, to pay more taxes to bear the additional burden.
Remittances
One of the direct impacts of human trafficking is the minimal and no receipts received by migrant victims. No income means no remittances from migrants to the country of origin. Legal transfers of funds by migrants, including individuals, businesses, and other non-market sources, have evolved and represented international capital flows. The Committee on Payment and Settlement Systems and the World Bank, in a publication related to the general principles of international payments, explained that in 2007, the international flow of payments from foreign workers was 232 billion USD, with developing countries receiving 160 billion USD, while the remaining 50% was informal and domestic. Remittances have the most significant positive impact on women, children, and the elderly (UNODC, 2008). The direct effects of human trafficking then eliminate the benefits that these groups should receive.
The Human Trafficking Market
Markets in economics are defined by Wheaton et al. (2009) as a place (physical or virtual) that connects buyers “demand” and sellers “supply” either directly or indirectly. The hallmark of the market for human trafficking is the existence of intermediaries who connect supply and demand. In Wheaton’s model, the market consists of several participants who shape the dynamics of the market through the decisions of all individuals. Markets are shaped by: labor supply decisions determined by vulnerable populations; labor demand decisions by employers; and intermediation decisions by traffickers.
In contrast to Wheaton, Besci (1999), in “Economics and Crime in the State” builds an economic model by taking into account the direct or indirect role of the government. The actors in the model include criminals, non-criminal actors (at household and private levels), and government. Government influences supply and demand, directly on the demand side and indirectly on the supply side. According to Kyle and Dale (2001), the government’s role and acts of corruption are often the main discussions in the criminal enforcement literature. However, factors such as cultural norms, corruption, and household time allocation of each individual in the family are difficult to include in the economic model (Wheaton et al., 2009).
The assumption used in the market is the rational-choice theory which assumes that individuals will use all available information and compare cost-benefit to obtain the highest level of profit. In addition to using several assumptions that will be explained in the next section, the economic model also contains several shortcomings, especially in the case of human trafficking. The economic model simplifies reality and excludes several variables, so it cannot perfectly reflect the complexity of the human trafficking market.
The human trafficking market is described by Wheaton (2009) in the form of a monopolistic market. The market consists of many sellers (traffickers) who offer differentiated products (vulnerable individuals) for sale to many buyers (employers). There are several reasons why the human trafficking market is monopolistic. First, human trafficking is carried out by organized criminal groups or by networks of small entrepreneurs (Kwong, 1997). Lower barriers for sellers to enter and exit the market provide more incentive for potential sellers to enter the market. Second, buyers exploit vulnerable individuals for various forms such as exploitation of workers, forced marriage, sexual exploitation, illegal organ trafficking, and others. Third, products are differentiated goods with personal attributes that have been attached to individuals. The negotiation process between traffickers and employers is based on price, which gives more control for traffickers to determine the price level (Wheaton, 2009).
Demand
Demand for victims of human trafficking has a negative relationship with the price of victims set by the seller (traffickers). The employer’s action in buying victims is an illegal step by the company to keep costs as low as possible and obtain maximum profit. The wages for workers is a cost component that significantly affects the whole business. For example, The Bureau of Economic Analysis reports that 56.5% of the United States’ GDP in 2006 was a form of compensation for workers.
The lower the traffickers put the victim price, the more demand increases. At the level PHIGH, the price of victims is at a level equivalent to that of legal workers, so there is no advantage for employers to employ victims of human trafficking. Therefore, the accepted price level in the demand model is the point below the level PHIGH.
Employers also face other costs as a result of using illegal workers. These costs include: lodging, clothing, food, and additional charges such as payments to police or other law enforcement officials to cover their illicit practices. In addition, there are non-monetary costs, namely physical, psychological, and criminal costs (Wheaton, 2009). If the company is known to the public to use trafficked labor, it will lose its social status. Companies must also be prepared for the possibility of prosecution from the authorities. Although, the risk is relatively small due to the lack of law and law enforcement (UNICEF USA, n.d.) and human trafficking activities that are difficult to track (Wheaton, 2009).
Supply
Rational-choice in crime is described by Beckers (1995) as a decision-making process by comparing the benefits and costs of committing a crime. Individuals will decide to enter the criminal world if the benefits outweigh the costs. Furthermore, Beckers identifies illegal income and physical gain as indicators of profit.
Traffickers face variable and fixed costs in running their operations. Variable costs in human trafficking are transporting individuals through different travel routes. The more victims, the higher the cost of transportation accommodation to move victims. Meanwhile, the fixed costs that traffickers must pay are pretty high. Traffickers must pay to establish stable and secure routes, pay bribes in layers, and falsify travel documents (Wheaton, 2009).
Becker (1968), in “Crime and punishment: an economic approach,” explains the costs associated with the decision to commit a crime. Among them are spiritual costs, opportunity costs, and costs expected punishment. Spiritual costs include guilt, anxiety, fear, aversion to risk, or other emotions associated with committing a crime. Opportunity costs consist of the net benefits of legal activities lost in planning, committing, and concealing a crime. Expected punishment consists of all costs of formal and informal sanctions and costs arising from the litigation process.
At the beginning of starting a business, traffickers will incur large costs, in addition to the low commodity sold. The average fixed cost will decrease as the commodity increases, so the average total cost (ATC) curve will decrease. At some point, an increase in the commodity will increase the cost of ATC, and the ATC curve will move up again. The curve faced by traffickers in the short term is then illustrated as follows.
Maximum profit or minimum loss occurs when marginal revenue equals marginal cost.
Why is Human Trafficking Market is Demand Derived Rather Than Supply Derived?
Reviewing preventive and repressive efforts in human trafficking from the supply side (human trafficking victims and traffickers) is a complex and lengthy effort because there are too many victims (ICAT, 2014), and efforts to arrest traffickers are futile given the highly organized organization. Arresting one or more traffickers will only result in a change in the functional position of the perpetrator by another person regulated by the organization. The ICAT Report adds that if the program at the individual level is successful, the program is more likely to move the problem to another location than to reduce the size of human trafficking.
The analysis on the demand side focuses on the discussion of profit which is the primary motive for trafficking. Profit is the main incentive to enter the human trafficking market and take away the fundamental rights of other human beings. Breaking the chain of human trafficking from the demand side means eliminating the human trafficking market, and there is no place for traffickers to seek profit. More focus on the demand side will help the preventive strategy design process more effectively.
In the case of prostitution, global demand is always there (Aronowitz & Koning, 2014). In the same study, Aronowitz added that the demand for adult men is the primary driver in demand for prostitution of women, girls, boys, and even against fellow adult men. Elimination of the demand for adult men became the primary key to eliminating the overall demand for prostitution. Raymon (2004) emphasizes stopping demand from adult males means cutting off the flow of profits for pimps, recruiters, and traffickers and even destroying the market itself.
Apart from being influenced by prices, incomes, and preferences, individual and market demands are also strongly influenced by social and cultural contexts. This includes unequal power relations in society, which can then be linked to patriarchal culture. It was validated by Goward (2003) in the Stop the Traffic 2 Conference,
“… the unequal power relations that exist in patriarchal societies, power relations that sexualize women and objectify them for consumption.”
The role of the banking system in tracking trafficker’s activities.
Recruitment process
Before traffickers transfer the victim to the destination country, there is an illegal recruitment process that requires the potential victim to pay a certain amount of money. Traffickers use the excuse of the money as training costs, processing fees for temporary visas, visa extension fees, contract fees, and residence deposits (Polaris, 2018). In a Centro de Los Derechos del Migrante (CDM) study, 53% of workers surveyed paid USD 590 before departure. Meanwhile, The National Domestic Workers Alliance’s 2017 report said the average cost of the recruitment process was $3,000 – USD 9,000. The high cost of recruitment requires potential victims to borrow funds from other parties, which increases the relationship between recruiters and potential victims. Potential victims seek funding sources through family, friends, and loan sharks (informal), as well as formal loan institutions. According to CDM, 47 percent of respondents have taken out a loan to meet recruitment needs, with interest rates ranging from 5 to 79 percent (Ibid, nd; Polaris Project, 2018). These activities are carried out at certain bank branches to the recruiter’s destination account. In the United States, the Polaris Project (2018) found that the agriculture, land cultivation, and hotel industries employ many workers who use temporary visas associated with debt bondage.
Operational Process
Analyzing trafficking activities through financial institutions requires complete guidance on potential actions exhibiting trafficking characteristics. In 2014, the Financial Crimes Enforcement Network (FinCEN) issued a guideline, which caused suspicious activity reports (SAR’s) related to trafficking activities to increase by 900 percent (United Nations University, 2017; Polaris Project, 2018).
Financial institutions play an important role in detecting trafficking activities because they store data on traffickers and victims. Data stored in financial institutions is very vital in the process of seeing trafficking activities. In an interview with the Thomson Reuters Foundations (2017), Nigel Kirby from the UK’s National Crime Agency said financial institutions hold important information regarding perpetrator data, operating processes, and funding processes. This role is the main key in facilitating the police investigation process, which usually only stops at the status of a suspect. Collaboration with various sectors, anti-human trafficking non-profit organizations, and the police can maximize the crucial role of financial institutions.
Guide in Preventing Trafficking
Education and knowledge about trafficking in persons for all individuals in society is the primary key in eradicating human trafficking (Chutikul, 2011). Prevention from the demand side relies on education because of its ability to influence behavior. The Office of The High Commissioner for Human Rights (2002) explains that preventive efforts must also include factors that affect the vulnerability of a community group, such as poverty, inequality, discrimination, and other forms of injustice. The process of knowledge transfer and education itself cannot be separated from the role of the mass media. Mass media, including newspapers, radio, articles, magazines, books, films, and the like, are the key to handling human trafficking in the long term. According to Straubhaar et al. (2011), a change in the knowledge, attitudes, emotions, or behavior of each individual or person who consumes the media results from continuous exposure to mass media. All countries can then carry out preventive efforts through education, both source and destination countries.
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