Bryan Caplan  

The Happy Hypocrisy of Unpaid Internships

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Our Rights versus Government "... It's worse than it looks...
Let me begin, like virtually every writer on unpaid internships, by blockquoting the Department of Labor's rules about such positions' permissibility.  Unpaid internships in the for-profit sector are allowed as long as all of the following are true:
1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Unlike virtually every writer on unpaid internships, I'm not going to suggest that many unpaid internships in the for-profit sector are illegal because they run afoul of one or more of these rules.  Instead, I'm going to categorically state: No unpaid internship in the for-profit sector ever has or ever will satisfy these rules!  Why?  Because Rule #4 is absurd beyond belief.

Simple question: Why on earth would a for-profit firm hire interns from whom the firm derives "no immediate advantage"?  Imagine you're a human resources officer at a firm and you want to launch an unpaid internship program.  How would the Board of Directors respond if you declared, "I propose hiring unpaid interns from whom we derive no immediate advantage whatsoever"?  What would they think if you added, "Oh, and these interns will occasionally impede our operations"?  The Board's obvious reaction would be, "We're a business, not a charity."  No profit-maximizing firm would want to hire unpaid interns under the written rules.

The absurdity of Rule #3 isn't quite as blatant, but no firm complies with it either.  Anything useful an intern does could have been done by a regular employee.  Don't believe me?  Fire the interns and see who picks up the slack.  Of course, if it's compliant with Rule #4, no intern can do anything useful for the firm anyway.

Mainstream writers on unpaid internships take it for granted that rule-breaking internships must be stopped.  Many would be delighted to use my observations to ban unpaid internships altogether.  My point, of course, is the opposite: Rules this stupid are made to be broken.  Hypocrisy and double-talk shield us from the malevolent folly of the Department of Labor. 

What makes these rules so stupid?  Simple: Internships are vocational education.  If schools can educate students in exchange for their tuition, why can't businesses educate students in exchange for their labor?  No reason, just anti-market bigotry

The real problem with unpaid internships is that we're not hypocritical enough.  Regulators look the other way when businesses train college students for college-type jobs in exchange for their labor.  But the rest of the labor market is out of luck.  If McDonald's set up unpaid internships for high school dropouts, regulators would come down on it like a ton of bricks.  As a result, the only people who can get on-the-job training are those who need it the least.  Instead of banning unpaid internships, we should make them available to everyone.

P.S. Does this mean we should abolish the minimum wage?  Well, if there's a good reason why trainees should get either $0.00 or $7.25 but nothing in between, I'd like to hear it.

P.P.S.: Nathaniel Bechhofer points out that John Stossel made a related point some years ago...




COMMENTS (14 to date)

Our system of minimum wages alongside unpaid internships is silly, I agree. Replace the minimum wage with a wage subsidies or a basic income. That said...

I don't think rule #4 is actually absurd. Why? Because many internships are basically *very long job interviews.* The point isn't the "immediate" benefit to the company, the point is the long-term benefits of being able to hire the best interns after the internship is over.

I don't know if this is true in every company, but it's certainly true of the internship I did at the financial firm in New York. It was a paid internship; I'm not sure any of my fellow interns did enough work to justify the cost of supervising us but we *definitely* didn't earn our salaries. We were still learning how to do the job. However, the company in question had a track record of taking people who started off as interns and eventually training them to make lots and lots of money for the company. That was the point.

Kevin Erdmann writes:

I hope you don't mind if my comment is in the form of a blog post. This post on internships was one of the first posts I did.

It seems like businesses could create unpaid internshps or below-minimum jobs by saying they are selling entertainment - "virtual work" - charge a nominal fee for it, and make up the difference with some combination of fringe benefits. Maybe there is a legal reason they can't do this. Or maybe money illusion would create a backlash or a lack of loyalty, which would remove some of the value of internships to the firm.

If there is a legal impediment to that, maybe they could have the interns pull down their pants as they leave the building each day and take a picture of them, then claim a first amendment protection on the basis that the arrangement was a part of BDSM pornography, featuring people with a fetish for clerical work.

That is really dumb and absurd. The absurdity is American jurisprudence, which I think would have to treat that arrangement with more legal deference.

Robert Simmons writes:

You're wrong about #4. At my old firm we used a few interns this Spring/Summer. They worked on a project that was not useful to us, and the work we had them doing might prove useful in a few months, after they're gone, so definitely not immediately useful.

secret i writes:

Profit-maximizing firms do many things that are of no *immediate* advantage, and in fact impede operations. They do them for long-term advantage.

Does a Christmas party confer some immediate advantage? Funding college and high-school scholarships? Donating to charitable organizations? Inventing the transistor?

Perhaps you use an overly broad definition of "immediate advantage".

AS writes:

Funny, at my firm, our manager made it explicitly clear that our summer interns should be put on "useful projects". I guess I should have reported him for breaking rule #4? I imagine this practice is common.

The irony of unpaid internships is despite their complaints, people are still accepting them.

Brad writes:

Yeah, #4 is wrong. Our group has had paid interns the last 6 years and I don't think any of them have provided real value.

We did hire one of them, so the long interview is probably correct. Although I think there is also a good bit of charity/nepotism built in. Most interns have had a conspicuous connection to someone working at the company.

Another long term value is that while we have not had a strong track record of hiring our interns, committing to sponsor interns can get you connected to programs that will produce the kind of students you may be looking for,

Martin writes:

Why a discussion on a minimum wage being $0.00...why not a discussion on how a negative wage rate might open up additional benefits? I can think of how many aspiring actors would pay to be extras in a film. I can think of many software developers without loads of experience would pay to collaborate on work apple or google is doing in exchange for being able to put that on a resume. For those that don't believe me, I show you the example of the last superbowl where Katy Perry paid to sing at the venue rather than the other way around.

Jack PQ writes:

Every position has a mix of salary and perks (or compensating differentials if you prefer). By banning positions between $0.00 and $7.25 (min wage) we are eliminating a wide range of perk-salary combinations, many of which would be desired by many workers and firms.

(Here I conflate "intern" with "worker" because an intern is simply a worker who takes all of his or her remuneration as perks -- or if you prefer, they implicitly earn $X but pay precisely $X for the vocational training they receive, netting 0.)

Njnnja writes:

Topher Hallquist is absolutely 100% correct. I get summer interns and view it as a long job interview. There is only so much you can learn from 30-45 minutes, but seeing someone work over several weeks provides invaluable insights as to the person's actual work ethic and how the person reacts to instruction, as well as gives the firm a chance to "sell" itself to the intern (and the intern's classmates since word tends to get around). The long term cost of a bad hire is way worse than having to spend 30 minutes with somebody every day for a few weeks, making a good internship a classic short term cost/long term gain trade.

Nathan Smith writes:

Re: "Well, if there's a good reason why trainees should get either $0.00 or $7.25 but nothing in between, I'd like to hear it."

I'll take the challenge.

An important problem for upper-middle-class people is intergenerational class anxiety. They're afraid their children won't rise as far as they did, or even close.

It's nice to have ways to reduce the competition.

That's where the unpaid internship comes in. People from poor backgrounds are less likely to be able to afford to take an unpaid internship with chances at career advancement, rather than working at McDonalds. For upper-middle-class people, subsidzing a kid who's doing an unpaid internship is easy.

If employers could pay $3/hr or $4/hr for upwardly mobile jobs, more poor kids would be able to take those jobs, creating more competition. Some upper-middle-class kids to get crowded off the first rung of the ladder of success.

So unpaid internships + a minimum wage is a shrewd strategy for elites to inhibit social mobility.

I'm not sure if that's true, but it's an argument.

Chris Clark writes:

I agree with several of the other commenters that you're definition of immediate advantage seems to be rather broader than the standard used in the corporate environment.

The unpaid interns at one of the places I worked were a pain to deal with and were given projects that provided no immediate value, and in some cases, no long-term value either. We had them around b/c the CEO had ties to their school and wanted the university in question to improve their program enough that we could legitimately hire some of their graduates.

Having the students come back to campus and verify that the training and coursework we'd told their faculty they were missing on was actually important to our work got them to make changes (eventually) to their program and we later started hiring some of their graduates. Since the university in question is in the same town as that company, it provided a long-term advantage for the business to put up with the short-term loss from time spent on the unpaid internships.

I expect other individuals could give other examples, but I don't think this situation or other, similar cases are as unique as the post implies.

Nathan W writes:

I thought the idea of hiring interns was that you could have a pool of potential future recruits and you'd know which ones were useful. You could use them for oddball projects that you couldn't really justify allocating paid resources to, but which would provide useful training opportunities without having to pay them regular wages.

I'm of the opinion that if you have them doing regular work which benefits a for-profit organization, then you should have to pay them the minimum wage.

Bardhyl writes:

Depends how much you stretch "advantage". Profit-seeking firms have CSR programmes and hiring an intern can confer a human capital benefit to them. My argument is that CSR programmes improve or can improve a profit-seeking firm's reputation.

Eli writes:

A for profit company may take on an intern without immediate benefit if there's a serious possibility of later hiring the intern long-term.

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