Are Unpaid Internships Immoral?
By David Henderson
Derek Thompson at the Atlantic blog argues that unpaid internships are immoral. His case? The essence of it is that because the employer gets valuable services, the employer should pay for them. Of course, the employer does pay for them, if not in money, then in the form of training and work experience. But that doesn’t satisfy Mr. Thompson. The following toward the end of his post summarizes a big part of his case:
The broader effects of unpaid internships are (a) a tendency for employers to take advantage of young labor by offering the currency of experience in lieu of actual currency, and (b) a widening of the social inequality gap as lower-income students are implicitly barred from this so-called “educational” experience, which is their gateway to full-employment in the field of their choosing.
So his basic argument is that because lower-income students are at a disadvantage in that competition because they need to make money during the summer, that form of contract is immoral. Most of his argument is about why unpaid internships are immoral, not about why they should be illegal. But he seems to imply the latter. After admitting that unpaid internships are mutually beneficial for both sides, he writes:
But not every mutually beneficial relationship should be legal, and not every one is. An easy example is: It is mutually beneficial for a 17-year old to offer money to a bartender in exchange for a vodka shot, but we have collectively decided that this sort of thing ought not to happen, because we don’t want to live with its broader effects.
So Mr. Thompson seems to be getting at the idea that unpaid internships should be illegal too.
He’s right that students from lower-incomes are at a disadvantage. I was one of those. As far as I knew, unpaid internships weren’t even around, or at least weren’t common, when I was an undergrad between 1967 and 1970. But even if they had been, I wouldn’t have taken one because I needed to make money every summer.
But I wouldn’t have regarded it as immoral for kids from higher-income families to work for free for employers who wanted their services. And I certainly wouldn’t have wanted a government to threaten people with fines and, ultimately, harsher penalties, for having unpaid interns.
Mr. Thompson says that if “internships are indistinguishable from education,” then it’s “perfectly permissible that they be unpaid.” It seems as if we’re getting somewhere. It seems that it would follow that if they’re better than education, then for sure it’s permissible that they be unpaid. But after admitting that some internships are better than college, he writes, “that’s not a good reason to deny millions of workers salaries just because they’re young.” That’s confused thinking. The argument he was addressing was whether it’s permissible not to pay because of internships’ educational value. But then he switches reasons in mid-sentence, saying that it’s “just because they’re young.” But it wasn’t just because they’re young. It was because employers are getting something in return.
A little economics would have gone a long way in helping Mr. Thompson, who, according to the bio on the Atlantic web site, “oversees business coverage for the website.” Consider this excerpt from his case:
Plenty of entry-level positions better prepare people for work than college. If it is relevant that an unpaid internship is “useful”, does it follow that only useless internships should have salaries? Of course not. Utility and salary have nothing to do with one another.
Actually, utility and salary have a great deal to do with each other, as economists from Adam Smith on have pointed out. The more disutility there is on a job, then, all other things equal, the higher the pay on that job. Economists call this difference in pay a “compensating differential.” Here’s what Adam Smith wrote on the issue in The Wealth of Nations:
First, The wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness of the employment. Thus in most places, take the year round, a journeyman taylor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours as a collier, who is only a labourer, does in eight. His work is not quite so dirty, is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part of the reward of all honourable professions. I.10.5
What’s missing from Mr. Thompson’s reasoning is the concept of equilibrium. There’s a reason that some jobs pay the minimum wage or more and other jobs pay zero. It has to do with the pluses and minuses of the job (from the worker’s viewpoint) and the pluses and minuses of the worker (from the employer’s viewpoint). The price (wage) is what equates the amount of labor supplied and the amount of labor demanded.
Is there a way around this so that more young people from low-income families could find internships? Yes. Allow them to be paid internships but allow the pay to be somewhere between 0 and the minimum wage. As I wrote in 2011, “The government is saying, in effect, you may pay $7.25 an hour or more or you may pay 0 an hour but don’t let me catch you paying more than 0 and less than $7.25.”
If an internship paid, say, $4.00 an hour, then some kids from lower-income families could more easily afford to take such jobs. That would solve some of the problem that Mr. Thompson identifies. But it would do so with a reduction in coercion, not the added coercion that he seems to advocate.
UPDATE: Belated HT to Ken B.