This example is indeed listed in "Freakonomics" and was contributed to the book by a sociologist called Sudhir Alladi Venkatesh. What this paragraph fails to say, however, is that the chapter in the book makes it clear the "soldiers" slinging on the corners either had the option of taking a minimum wage job working 9-5 plus overtime or taking the minimum wage "job" slinging and have a chance at making it big time PLUS the gang provided certain social services and security to their members and their families - something the minimum wage 9-5 job also did not have to offer. So while they were clearly in a tight spot, they took the more economic of the two options. And the guy leading the gang was described as very capable, social, if I remember correctly he even had finished school or was working on a degree and was capable of handling all financial matters of the gang. So his skills, qualifications and killings got him the job but ultimately his performance kept him there - otherwise he would have been replaced long ago. Clearly he had something more to offer over his soldiers.
A point this chapter was making was that these jobs take practically zero skill, have no entry-level barriers and there is an abundance of people willing to do them who don't have other options - that's why they the pay was so absolutely terrible while the job of being injured or killed on the job was ten-folds more likely than the most dangerous, "regular" job in the States.