Media stories on the sugar daddy / sugar baby phenomena are quick to assume that there’s an economic story behind the rise in this type of arrangement, and in that they are right. The question is; are they telling the right economic story? Are these types of relationships on the rise simply because of poor macroeconomic conditions or is there another story that explains the increase in supply of willing participants?
Its convenient to tell a story that goes something like this. Families across the US took a big financial hit with the financial crisis that has, seemingly, been ongoing since 2008. This has made it difficult for parents to help their children pay university tuition at a time in which tuitions are increasing faster than the rate of inflation. This has encouraged young women to look for alternative ways to pay for their education – essentially the state of the economy has forced them into the sex trades.
[While Seeking Arrangements, one of the services that promote these relationships, may not see themselves as promoting the ‘sex trades’ (the founder has been quoted as saying that he thinks prostitution is “disgusting”) they themselves admit that 80% of the transactions involve sex in exchange for payment.]
To me true economic stories that explain the increased willingness of women to participate in this industry are far more complex, and more interesting. The most obvious explanation is the gender imbalance on college campuses. The college years used to be a time when men and women would meet someone that would later be their spouse. With women significantly outnumbering men on campuses today, traditional dating has disappeared and been replaced with a hook up culture. In this environment women who don’t use this time to find a husband have far less to lose – they were unlikely to find one anyhow.
If one of the costs of participating in the sex trades is a missed opportunity to find a husband, then when the probably of finding a husband falls (because there are fewer men available) the cost of being a sugar baby is diminished and the supply of women into this industry increases.
A second story that is not entirely independent of this first argument is that the increased acceptability of casual sexual relationships is a change in social norms that has made the transition to the sex trades easier for women. As Dan Ariely said in an interview with the Daily Finance on the rise in sugar baby supply, “I wonder how much of it is financial need and how much of it is the perception of social acceptance that comes from these kinds of services.”
The third explanation is the technological advance created by the increase in services that anonymously match buyers and sellers on this market. Participation of women in all forms of sex work has increased with the availability of online matching services. These services reduce both transaction costs (the costs of finding a buyer) and the costs associated with being caught working in what is still a heavily stigmatized profession.
This only explains the supply side story, of course, but the demand side story is much easier to tell – thanks to the increase in supply, sugar babies are now extremely cheap relative to other forms of sexual services. So, no real explanation is needed for the increased in demand other than starting the obvious – that consumers are responding to what appears to be a 50% drop in prices in a few short years.
I am going to return to this issue in my next post to answer a different question: Is there any reason why women might think twice about finding a sugar daddy to help pay the bills?