Monday, March 20, 2006

The wages of sin...about $3.30 an hour, then death

The economics of drug dealing drawn from the records of a gang of crack dealers in the 80s:

[T]here were indeed some drug dealers who could afford to live large, or—in the case of the gang’s board of directors—extremely large. Each of those top 20 bosses stood to earn about $500,000 a year. (A third of them, however, were typically imprisoned at any time, a significant downside of an up position in an illicit industry.)

So the top 120 men on the Black Disciples’ pyramid were paid very well. But the pyramid they sat atop was gigantic. Using J. T.’s franchise as a yardstick—3 officers and roughly 50 foot soldiers— there were some 5,300 other men working for those 120 bosses. Then there were another 20,000 unpaid rank-and-file members, many of whom wanted nothing more than an opportunity to become a foot soldier. They were even willing to pay gang dues to have their chance.

And how well did that dream job pay? Here are the monthly totals for the wages that J. T. paid his gang members:

So J. T. paid his employees $9,500, a combined monthly salary that was only $1,000 more than his own official salary. J. T.’s hourly wage was $66. His three officers, meanwhile, each took home $700 a month, which works out to about $7 an hour. And the foot soldiers earned just $3.30 an hour, less than the minimum wage. So the answer to the original question—if drug dealers make so much money, why are they still living with their mothers?—is that, except for the top cats, they don’t make much money. They had no choice but to live with their mothers. For every big earner, there were hundreds more just scraping along. The top 120 men in the Black Disciples gang represented just 2.2 percent of the full-fledged gang membership but took home well more than half the money.


Along with the bad pay, the foot soldiers faced terrible job conditions. For starters, they had to stand on a street corner all day and do business with crackheads. (The gang members were strongly advised against using the product themselves, advice that was enforced by beatings if necessary.) Foot soldiers also risked arrest and, more worrisome, violence. Using the gang’s financial documents and the rest of Venkatesh’s research, it is possible to construct an adverse-events index of J. T.’s gang during the four years in question. The results are astonishingly bleak. If you were a member of J. T.’s gang for all four years, here is the typical fate you would have faced during that period:

A 1-in-4 chance of being killed! Compare these odds to being a timber cutter, which the Bureau of Labor Statistics calls the most dangerous job in the United States. Over four years’ time, a timber cutter would stand only a 1 -in-200 chance of being killed. Or compare the crack dealer’s odds to those of a death row inmate in Texas, which executes more prisoners than any other state. In 2003, Texas put to death twenty-four inmates—or just 5 percent of the nearly 500 inmates on its death row during that time. Which means that you stand a greater chance of dying while dealing crack in a Chicago housing project than you do while sitting on death row in Texas.

(Freakonomics: A Rogue Economist Explores the Hidden Side of Everything By Steven Levitt and Stephen Dubner :102-104)

Unfortunately, those who actually deal the crack will probably never have the opportunity to know such information. It's like the lottery, all the poor people think that they will be the one to win no matter the odds. The opiate of the masses is often reasoning based on blind faith and hope, which is often part of why they are poor. The poor want faith without reason while the rich want to reason without faith.

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