Since the beginning of the year, there has been an increasing number of references to the “unfairness” of unpaid internships. This op-ed in yesterday’s New York Times by Ross Perlin, a researcher at the Himalayan Languages Project, summarizes that view:
“Colleges and universities have become cheerleaders and enablers of the unpaid internship boom, failing to inform young people of their rights or protect them from the miserly calculus of employers. (…)”
The uncritical internship fever on college campuses (…) is symptomatic of a broader malaise. Far from being the liberal, pro-labor bastions of popular image, universities are often blind to the realities of work in contemporary America.”
First things first: arguments that go “How can you claim to be a [conservative/liberal] if you are [for/against] [policy that conservatives/liberals hate/love]?,” immediately raise red flags. This is the group think fallacy, which indicates that the person making the argument really does not have good arguments and must rely on emotions instead.
(Interestingly enough, my colleague Don Taylor and I had a conversation this week about how tired we both are of these types of arguments. We both speak from experience: Don researches, teaches, and blogs about health policy; I have lived in Ithaca, NY for five years.)
Second, one goes to college to acquire education (i.e., to build a broad base of knowledge upon which to build expertise). Education, however, is not the same as experience. To acquire experience, one needs to spend time working in the real world. But just as there is an opportunity cost to education, there is an opportunity cost to acquiring experience. In this case, the opportunity cost is borne by the employer, who must supervise and train the employee.
The apprenticeship system goes back to the Middle Ages. When faced with a number of prospective employees who claimed they really wanted to become stonemasons, what did a master stonemason do? He would tell them to put their money where their mouths were and have them undertake something that was costly to the potential employees but which brought little value to the master craftsman — an apprenticeship.
This is just like when a modern business is faced with a number of prospective employees who claim they really want to be investment bankers, the investment bank can tell them to put their money where their mouths are and have them undertake something that is costly to the prospective employees and brings little value to the investment bank — get a college degree.
And when every prospective employee has a college degree as a result of the Nash equilibrium that ensures, it is only natural to ask for a little bit more. Undergoing an apprenticeship is that little bit more.
In economics, this phenomenon is referred to as signaling, and Michael Spence shared the 2001 Nobel with George Akerlof and Joseph Stiglitz for his theoretical investigation of this topic. In short, signaling is the result of an informational asymmetry between employers and prospective employees. Everyone can claim they really want to work for you, but only those who are really, really interested in your line of work will accept to work for free for a time or give up four years of their lives to get a college degree.
Banning Unpaid Internships Is Not the Answer
Mr. Perlin would probably argue that there were no labor laws in the Middle Ages. This is true, but banning unpaid internships, as Mr. Perlin suggests, is still not the way to go.
To see why, suppose we were to ban unpaid internships starting this year. Once employers have to pay for their interns, there will be a considerable drop in the number of internships are available. That is the direct effect of a ban on unpaid internships.
A more insidious and indirect effect of a ban on unpaid internships would be the creation of two classes of workers: those who have acquired actual work experience before the ban on unpaid internships, and those who have not had that luxury after the ban.
Given the current rate of unemployment, which causes college graduates from a few years ago to still be looking for that elusive first job, I doubt this generational rift — the skilled versus the unskilled — is what the labor market currently needs. Chalk it up to path dependency, but banning unpaid internships is not the answer.
As Judge Posner notes in his Economic Analysis of Law, one must not confused willingness to pay with capacity to pay. If one insists on confusing the two, however, a much more fruitful avenue would be to go after higher education in the United States, in which colleges actually charge for tuition, rather than after unpaid internships. Mr. Perlin could take his arguments against unpaid internships and apply them to paying tuition. It probably wouldn’t sell as many books, however.