David R. Henderson  

Stossel on Jobs

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While watching the last 15 minutes or so of the latest Stossel program on Fox Business last night, I became aware that I had a smile on my face and was feeling positive and optimistic. Why? Because during those minutes, he interviewed a number of his Fox colleagues and a few others about their early work experiences, typically their first jobs. I enjoyed both the fact that the colleagues were enjoying telling the stories and the stories themselves. Many of them learned so much from their jobs, whether it was simple things like showing up on time or more-complicated things like how to do specific tasks. It reminded me about a lot of my own experiences, some of which I've discussed here, here, and here.

The earlier part was good too. He had on Steven Greenhouse a long-time reporter for the New York Times. Greenhouse's beat is the workplace. Greenhouse was defending the federal government's attempt to get rid of many internships that pay the interns zero. Greenhouse made some of the same arguments that Derek Thompson made and that I responded to here and here. So I won't cover that same ground here to the same extent. I will point out, though, that Greenhouse moved fluidly between two positions: (1) unpaid internships are wrong because the interns get exploited and (2) unpaid internships are wrong because the interns get valuable things in return but, because interns aren't paid, interns from wealthy families have an advantage. Those positions are not literally contradictory because some internships could involve "exploitation" and some could give the interns valuable experience. But there's a simple solution to the cases where the interns feel exploited and Stossel pointed out the solution: quit.

In response to some of Stossel's criticisms, Greenhouse, of the New York Times, retreated to the argument: "It's the law." Funny thing, I don't remember the New York Times emphasizing, during the Clinton/Monica Lewinsky scandal, that Clinton, by perjuring himself, had broken the law. Of course, it's possible that Greenhouse thought Clinton's crime was important but simply kept it to himself.

When Stossel turned to the minimum wage, Greenhouse revealed his ignorance of the origins of that law. He claimed that the minimum wage was imposed because the federal government wanted to make sure that low-paid people were better off. In fact, a big part of the push for the federal minimum wage law in 1938 was by northeastern unions, composed mainly of white workers, who wanted to price out their lower-wage competitors in the South, many of whom were black. Gunnar Myrdal wrote about the devastating effect of the minimum wage on black people in his classic book, The American Dilemma, and Senator John F. Kennedy pushed for an increase in the minimum wage in the late 1950s on the grounds that it would price out competition from "colored workers."

It's interesting that Greenhouse appeared to know none of this, even though he has covered the labor and workplace beat for 16 years.

If you want to know more than Greenhouse knows on the minimum wage, though, check the Encyclopedia's article on it.

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CATEGORIES: Labor Market

COMMENTS (8 to date)
KLO writes:


I am curious what you think explains the rise of the unpaid internship. It does seem much more common now than even, say, 10 years ago, and it is certainly more common than it was 50 years ago. This also corresponds to a large drop in the availability of paid work for young (ages 16-24 I am thinking) workers. It does seem to me that the labor market for these younger workers is now quite soft, by which I mean that there are many more workers than there are jobs available, which would naturally depress wages. Obviously, forcing employers to pay interns is not going to change the situation overly much. Some may drop their interns, while others will offer them a modest wage. But I must say that I am distressed by the fact that wages have been driven so low that people are now working for the mere possibility that a position will enhance one's future career. I don't know what to do about this. I simply offer it as an observation.

Hasdrubal writes:


But I must say that I am distressed by the fact that wages have been driven so low that people are now working for the mere possibility that a position will enhance one's future career.

Do you see any difference in working for free in order to increase future job prospects and going into tens of thousands of dollars of debt in order to increase future job prospects?

Aren't most unpaid internships short term, and don't they seriously increase an intern's prospect of getting hired at the type of company where they interned? Doesn't that make the expected return on investment for an internship far, far higher than for college?

KnowPD writes:

@KLO - I'd say that paid internships are highly sensitive to the economy as a whole whereas unpaid are not. Paid internships are most prevalent in service industries such as consulting firms, accounting firms, and law firms where the firm can reap the financial benefits of billing interns out. The number of positions available depends on the growth and turnover at the firm. The performance of the firm is driven by the economy so in a down economy you'd expect the number of intern positions to shrink. I don't know if it's representative or not (maybe as representative as press coverage on unpaid interns) but I've seen a large number of lawyer interns here in downtown Houston this summer. The bottom line is that young workers who are less efficient than experienced ones depend on a growing or changing economy to improve their prospects so I doubt that policy interventions on pay can address this fundamental constraint. Without growth or creative destruction, good jobs could become sinecures of the wealthy.

KLO writes:

@Hasdrubal - Now that internships are a dime a dozen, I don't think they dramatically improve one's odds of working in a specific industry much at all. What they do is give people something to do to avoid a gap in their resume. It really doesn't matter what the internship is as long as there is something quasi-respectable.

@KnowPD - I work in law and paid internships have been an integral part of the recruiting process, but only for elite firms. Most places do not pay anything at all.

I would disagree that firms count on recapturing the cost by billing out the interns. While there is some of this, the reason that many partners like working with interns is that, unlike with real associates, partners don't really have to explain writing off the time of a summer associate (the term for interns in law firms) to firm management. This allows partners to keep a client's bill small by effectively passing on the cost of the work to the other lawyers in his firm. I would guess that firms may recapture no more than 25% of the cost of their interns. The rest is just the cost of recruiting.

Emily writes:

I think some significant number of college grads who have unpaid internships could find paid work, but not in the field they want to be in. They're taking unpaid work in hopes that it'll later lead to the type of paid work they'd prefer to do. They're able to make that decision because they have income from other sources (their family, or part-time paid jobs), and that's a good thing.

Shawn writes:

Was not Monica Lewinsky an unpaid intern at the White House?

Floccina writes:

Interestingly if you pay above minimum wage out of charity/benevolence and then get better employees, you have done nothing. You would have to raise the wages that you pay and then actively seek the same type of employees would have gotten paying the lower wage. Or you would have to secretly slip money into their pockets.

Steve Sailer writes:

I wondered what would have happened in 1861 if the South announced it was abolishing slavery and instead instituting permanent internships in the fast-growing field of cotton production.

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