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Crime doesn't pay, except for upper management

In An Economic Analysis of a Drug-Selling Gang's Finances, Levitt and Venkatesh analyze the business of a local crack gang with revenues of a few hundred thousand dollars.

An individual’s rank within the gang is of critical importance for his personal remuneration. The local gang leader is the residual claimant on drug profits. As shown in Table II, the gang leader retains between $4,200 and $10,900 a month as profit, for an annual wage of $50,000–130,000. This value is well above what leaders could hope to earn in the legitimate sector given their education and work experience. For instance, a former leader of a rival gang is now employed in the legitimate sector at an annual salary of $16,000. His legitimate sector wage may be lower than ito therwise would have been, however, due to his intervening years spent in prison {Lott 1992; Nagin and Waldfogel 1995}. […]

Official monthly payments to each foot soldier are low: only $200 per month or less until the final year. Based on observation and discussion with the gang leader, we estimate that the typical foot soldier worked four four-hour shifts per week selling drugs, and performed approximately four hours of other tasks for the gang, for a total of twenty hours of work per week. […] Based on these estimates of hours worked, the hourly wage earned by the typical foot soldier was below the federal minimum wage.

posted at: 2003-08-31 21:55 UTC | permanent link to this entry | comment