The relationship between education and earnings for sex workers

In the basic supply and demand model of the labour market (as I teach in my ECONS102 class), workers with more education (or human capital) are more productive for their employer, and so they get paid a higher wage. That's because more productive workers generate a higher value of the marginal product of labour, which is the value generated for the employer, which determines the wage that the employer is willing to pay. This would also hold (perhaps even more strongly) in the case of self-employed workers. Search models of the labour market (which I teach in my ECONS101 class) also suggest that workers with more education (or human capital) get paid a higher wage. In this case, it is because more educated (and productive) workers have a better outside option, which gives them slightly more bargaining power in negotiating their wage with the employer.

Is it generally the case that more educated workers have higher earnings? Are there occupations where this doesn't hold? You might cite the case of jobs where luck is a big determinant of earnings, such as hedge fund managers. But what about unskilled jobs, where it is plausible that education won't make much of a difference to earnings (at least not within the occupation)?

One occupation that might fit into the latter cases is sex work (although, as I note a bit later, it may be incorrect to label it unskilled, and not for the reasons you may think). However, there is little in the way of analysis on sex workers' earnings and education, because of a paucity of good data. One exception is this 2017 article by Scott Cunningham (Baylor University) and Todd Kendall (Compass Lexecon), published in the journal Review of Economics of the Household (ungated earlier version here). Cunningham and Kendall use survey data on 685 sex workers from the U.S. in 2008-2009, and look at the relationship between education and earnings.

However, first they outline a theoretical model that shows that the relationship between education and earnings from sex work is ambiguous. This ambiguity stems from the marginal disutility of sex work. All work generates disutility (negative utility) to some extent, since working more involves giving up some leisure time, and workers would generally prefer to have more leisure (so, working more makes them worse off on one dimension, which they trade off for higher income). An important question is how much disutility is associated with sex work and, in this case, whether that disutility differs by education. Cunningham and Kendall note that:

Human capital may reduce the disutility associated with prostitution for several reasons. Better-educated women may be preferred by higher-quality clients who have lower disease and violence risks. In addition, better-educated women may be able to reduce arrest, violence, and disease risks by engaging in greater and more sophisticated screening of clients.

So, because sex work is lower risk for more educated sex workers, perhaps the disutility of sex work is lower for them than for less educated sex workers. Cunningham and Kendall then go on to show, theoretically, that:

...education has three separate potential effects on the propensity to engage in prostitution. First, if education is associated with higher legitimate market wages... and/or higher monogamous coupling returns... then education reduces prostitution participation, ceteris paribus. Second, if education is associated with lower marginal disutility from legitimate employment... and/or monogamous coupling... then education further reduces prostitution participation, ceteris paribus. Finally, if education is associated with lower marginal disutility from prostitution... then education increases prostitution entry, ceteris paribus.

And also:

...if education reduces the marginal disutility from prostitution work... and has no material effect on the marginal utility of consumption or leisure, then, conditional on participation, educated prostitutes will work more hours than those with less education.

So, based on the theoretical model, education either reduces engagement in sex work and the number of hours that sex workers will work (if education is not associated with lower marginal disutility from sex work), or education has an ambiguous effect on engagement in sex work but increases the number of hours that sex workers will work (if education is associated with lower marginal disutility from sex work).

Cunningham and Kendall then analyse their survey data, comparing college-educated and non-college educated sex workers, and find that:

...college-educated workers appear to work roughly 13.7% fewer weeks in the prostitution market... [and] conditional on working, college-educated workers see nearly 25% more clients.

...college-educated sex workers earned approximately 33% more in the last week than those with less education, conditional on working, but approximately the same amount unconditionally, accounting for the fact that they are less likely to work at all.

Those results seem to support a lower marginal disutility from sex work for sex workers with more education. Cunningham and Kendall then investigate why. Focusing on data from longer sessions with clients (which are more common among more educated sex workers), they find that:

...college completion is associated with a roughly 15% wage premium for these longer sessions. In other words, while college is not associated with statistically significant wage effects on average it is so for the longest sessions.

This leads them to conclude that:

These longer sessions... likely involve bundling of sexual services with non-sexual services such as companionship, for which college completion may be associated with higher productivity. Because sexual favors presumably form a smaller share of the total work time in these longer sessions, and because... college-educated workers are able to provide longer sessions, these results provide one means by which “job amenities” may be better, and therefore, the disutility of prostitution labor supply lower, for college-educated sex workers.

Cunningham and Kendall also note that:

...college-educated providers appear to be able to attract 33.5% more regulars... Regular clients generally involve lower violence and arrest risk since they are already known; moreover, sex workers may be able to form warmer, less “transactional,” relationships with regulars that may mitigate some of the disutility associated with prostitution labor supply. 

Taken altogether, the marginal disutility of sex work is clearly lower for more educated sex workers. These results also demonstrate that there are essentially (at least) two market segments here. High educated sex workers provide a meaningfully different bundle of services, of which sexual acts are only a part, than do low educated sex workers. This isn't an unskilled labour market for all sex workers. 

Overall, this research demonstrates that education does increase earnings, even in one occupation where a priori you might think that it wouldn't.