Don’t ban unpaid internships

by Walter Olson on April 24, 2014

Unpaid internships are standard practice at the White House, on Capitol Hill, and in political campaigns. Should they be banned for private-sector employers? I answer “no” in a new U.S. News “Debate Club” also featuring a contribution by Dan Rothschild of R Street Institute as well as contributions by three advocates of a ban. Excerpt of mine:

With eyes wide open, students with many options have long sought out voluntary unpaid internships because they’re an arrangement that can rationally benefit both sides.

In an Auburn University working paper last month (via), four economists reported on a study that found internship experience was associated with a 14 percent increase in the rate at which prospective employers request interviews of job seekers. As a predictor of the rate of callbacks, an internship on the resume actually worked much better than a business degree itself.

Yet class-action lawyers and labor activists now attack internships as — in the trendy, elastic new term — “wage theft.” These same lawyers and activists go to court demanding millions of dollars retrospectively over arrangements both sides understood perfectly well at the time to be unpaid — and think shakedowns like these should *not* be called “theft.” …

In modern America, it’s never more than a short jump from “this set-up isn’t for everyone” to “let’s ban it.”

I go on to discuss the sclerosis of the European job market, especially when it comes to youth employment, and observe that the “campaign against internships is part of a wider campaign against low-pay work options in general — call it a campaign to get rid of any stepping stones in the stream that aren’t sturdy enough to support a whole family.” And I note the curious contrast with higher education pointed out by my colleague Andrew Coulson: “Paying to Learn Nothing = Legal. Paying Nothing to Learn = Illegal.” Earlier coverage here. And adapted with additional material into a longer Cato version here.

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04.25.14 at 4:27 am

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1 andy 04.25.14 at 10:50 am

I would at least put a limit on the hours. The problem is most of them are taken by people who are being financed by mom & dad, and the poor kid has to get a job at mcdonald’s so he can eat. so the well off kid gets “valuable real world experience” (in making copies at least) and the fast food worker’s resume goes in the trash.

2 Allan 04.25.14 at 12:13 pm

Unpaid internships are only good if you have the means to work unpaid for a period of time. Consequently, they are something that only the wealthier amongst us can do. Thus, they create a barrier for those with less money to advance and are not a proper part of a meritocracy. That, IMHO, is simply un-American.

3 Walter Olson 04.25.14 at 12:37 pm

Better yet, the new panel to investigate crimes of co-operative production among consenting parties can call itself the House Un-American Activities Committee. I understand that title’s available.

4 Allan 04.25.14 at 1:18 pm

Touche. (IMHO, you win the political internet today).

However, I don’t think the House as currently configured would bring this up. I would think that only a Senate committee (or a presidentially appointed Blue Ribbon Panel) would be a possibility.

I would prefer it be called the Senate Stick it to the Man Committee.

5 Ron Miller 04.25.14 at 2:06 pm

Allan, if we are going to try to set up a regularly scheme to tr to limit the benefits of being rich, this will be issue #2352421 that we tackle.

Wealthy kids are going to have all sorts of advantages in life. Let’s not try to cut them off at the knees to level the playing field. The better strategy is to look to cost efficient ways that the private sector and, yes, government, can find to lift up the poorer kids.

6 DEM 04.25.14 at 2:21 pm

Let’s apply Allan’s logic to other unpaid means of self-improvement:

[Studying is] only good if you have the means to work unpaid for a period of time. Consequently, [studying is] something that only the wealthier amongst us can do. Thus, [studying] create[s] a barrier for those with less money to advance and [is] not a proper part of a meritocracy. That, IMHO, is simply un-American.

7 Ethan Glover 04.25.14 at 2:23 pm

These are adults looking for a work by their own choice, the government doesn’t need to babysit anyone.

8 David Schwartz 04.25.14 at 4:25 pm

Allan: Nothing is more unAmerican than arguing that the government should restrict consensual behavior just because because peopel consider it unAmerican.

9 Allan 04.25.14 at 4:52 pm

1. Although I believe unpaid internships are wrong, I do not necessarily think that the government should eliminate them. I guess the question is whether the market is working as intended. Those who “employ” the interns are (theoretically) giving experience, which, perhaps is a form of payment in and of itself.

2. The children of the rich have advantages. That is true, but it belies the fact that the US is supposed to be a meritocracy. I am aware of reality. I don’t have to like the inequities.

3. there are more un-American things out there. But we should be clear, I am not saying that the government should restrict behavior because it is un-American. I am saying that those who take in interns without paying them are un-American. They should be eviscerated, snubbed, and ostracized by society, not fined or put in jail.

3. Few get paid to study. Many get paid to work. Studying is not generating outside income from the school. Interns do help provide outside income for the employers. If one’s studying does provide income for the school, the student should be paid. For example, NCAA football players should be paid.

10 Denise 04.25.14 at 5:45 pm

Allan – You hit it on the head with your last point. If you’re generating value for the company, why not be compensated for it?

11 David Schwartz 04.25.14 at 6:21 pm

Allan: I think your concept of a meritocracy is horribly pernicious. It has at its root the notion that no amount of merit justifies being able to pass on an advantage to one’s children. Speaking for myself personally, a huge motivator for me is being able to pass on benefits to my children so they can have a better life than I did. What benefits can your notion of a meritocracy provide to an 80 year old? A bigger private jet? Rarer caviar?

12 gitarcarver 04.25.14 at 10:59 pm

Interns do help provide outside income for the employers.

Yet there is an associated cost for the employer as well. Having to train, teach and supervise an intern takes time away from other jobs employee could be doing. Whether the time lost by the company balances out against the work gained may be in dispute but if both the company and the intern are happy with the agreement, why should the government step in?

As an aside, my sister was a teacher. The year of her student teaching she thought it was unfair that not only was she “unpaid” by the school in which she was teaching, she was also paying the college for the privilege being a student teacher. After being a teacher, getting her masters and accruing over five years as a full time teacher, she was given a student teacher of her own. The paperwork, the distraction, the instruction of the student teacher, etc, added far more time to her day than any “break” from teaching she got with the student teacher present.

For example, NCAA football players should be paid.

You mean scholarships are not enough?

Overall, football and men’s basketball are the only sports that make money for universities. That money is used to fund other sports and other endeavors.

If your criteria is that a person who plays in a sport that ends up generating revenue for the program that keeps that program in the black should be paid, it follows that men and women in non profitable sports should not be paid which would mean the end of compensation in the form of scholarships in other sports.

(Good luck with Title IX on that.)

If you really believe that football players should be compensated, I have no problem with that. There will be plenty of money to give them when scholarships for them and from other sports are revoked.

13 Matts 04.26.14 at 12:32 am

“What benefits can your notion of a meritocracy provide to an 80 year old?”

Getting mugged by the IRS?

14 Timothy E. Harris 04.26.14 at 6:57 am

The U.S. isn’t “supposed to be a meritocracy”. It was intended to be a Republic of free men who could arrange their economic & personal affairs as they chose.
Economic freedom can indeed lead to a sort of meritocracy where making good decisions is usually rewarded – but meritocracy was not the intent. Freedom was. A more meritocratic society is one of the results.

15 Cecil 04.26.14 at 3:29 pm

Does this mean that volunteering for public service is outlawed too? How do you make a law that prevents companies from having unpaid interns and non profits that have unpaid volunteers? Why should campaigns have unpaid volunteers to get elected (or attempt to at least) just to take away that sort of choice from someone who wishes to work for a company instead? Does that not make it a conflict of interest, after all, if all these volunteers aren’t working for Xerox they can be Xeroxing campaign posters…

16 ilya@comon-sense.com 04.27.14 at 2:10 pm

A. employers advertise heavily the importance of having internships on applicants resumes

B. Which results in a steady pool of unpaid interns, letting employers benefit from free labor

C. Which allows employers to replace paid employees (especially low wage ones) with unpaid interns

repeat ad nauseum.

Yes, there is a chance that an intern will learn something useful but the company has exactly zero reason to let him/her learn (and has every reason to use that intern as free labor).. Basically, an intern provides economic value to the private company (otherwise why would he be hired?), so he/she should be paid (at least the minimum wage)..

Still not convinced? Replace the word “internship” with the word “unpaid work”. Should the companies be allowed to benefit from extended periods of unpaid work in general? (In the name of gaining experience, of course).. Keep in mind that existence of free labor pool is a *major* bargaining chip to drive salaries of the paid workers to the minimum and below it… (you know: you work a week for free, then you get a paid week).. This goes against a century of labor protection laws (and those laws exist for an extremely good reason).

Unpaid internships are extremely slimy. Both for private and public purposes.

17 Allan 04.28.14 at 10:44 am

Timothy,

That simply is not true. At the founding there was a definite bias against passing wealth from generation to generation. The constitution outlawed titles, i.e., a de jure aristocracy. The rule of primogeniture was generally repealed replaced by equitable distribution among children. The rule against perpetuities was widely adopted.

What is perniscious is the fact that a rich person’s child starts on third base and we tell everyone that the person hit a triple.

I would argue that a meritocracy leads to more freedom than not. Except for the richest in society.

18 Ron Miller 04.28.14 at 3:31 pm

I’m against passing wealth down from generation to generation. Unless it is my kids. I’ll come up with the logic for this exception at a later date.

Denise asks if you’re generating value for the company, why not be compensated for it? Because the value that person is creating is not enough to justify compensation. Why? The free market tells us that if there was enough demand for the intern’s services to justify payment, she would get payment.

It is the rare intern that is a victim. They go it by choice because they are getting something – tangible or intangible – out of it.

Should the NCAA pay football and basketball players? Someone raised that point and it is absolutely related to this discussion. I have no opinion on that. Let the free market decide. One thing that gets forgotten in this debate sometimes is that if the SEC lined up tomorrow and played football under the names “Louisiana Lions” and “Mississippi Rivers”, absolutely no one would show up. College football is an inferior product to professional football. No one disputes this. We only watch because of the names on the front of the uniforms.

In spite of all of that, if the market says we should pay players, they will get paid. I hate some of the byproducts of the free market economy. But this one works out exactly as it should both with interns and with college football players.

19 Allan 04.28.14 at 4:24 pm

Well… unlike interns (generally), there is no free market in college football or basketball. It is a monopoly.

do you think that, without athletic scholarships, we would have the interest in college football and basketball that we do? It would be an interesting experiment. There are many high schools in Texas that get a bunch of fans to football games, even though their teams are mediocre.

I would point out that all players at each school are equal in terms of “pay.” The best players with scholarshipos get exactly the same compensation as the other players on scholarship: a scholarship. The only difference within schools might be between in state (lower paid) and out of state (higher paid) and among schools between lower and higher cost tuition.

If you want a free market in college sports, let’s have a free market.

20 gitarcarver 04.28.14 at 4:36 pm

College football is an inferior product to professional football. No one disputes this.

I dispute it Ron. (and not just because you made the statement.)

When it comes to sheer passion from players and fans, college football has pro football beat. When it comes to loyalty to teams, college has pro football beat.

While it can be argued that the players are “better” in the pros, that doesn’t mean a better product. Speed and size are relative to the game, not the product.

Comparing pro football to the college is like comparing the WWE to greco-roman wrestling. One is entertainment, the other is a sport and a competition.

But to stay on point, I still say that if the intern is happy with the knowledge and experience they gain and the company is happy with the compensation and costs, why should the government interfere?

21 Walter Olson 04.28.14 at 5:05 pm

Now adapted with additional material into a longer version at Cato: http://www.cato.org/blog/are-unpaid-internships-fair-ask-our-political-leaders

22 David Schwartz 04.28.14 at 8:11 pm

“Yes, there is a chance that an intern will learn something useful but the company has exactly zero reason to let him/her learn (and has every reason to use that intern as free labor).. Basically, an intern provides economic value to the private company (otherwise why would he be hired?), so he/she should be paid (at least the minimum wage)..”

The company has a tremendous incentive to let the intern learn. The more the intern learns, the more valuable the intern is. Your economic value argument is absurd. You could equally well argue that Burger King should charge people to walk through their door. If walking into Burger King didn’t provide me with economic value, why would I do it?

23 Ron Miller 04.28.14 at 9:55 pm

Allan, my dad could have played college football anywhere in the country. He chose Vanderbilt. Do you know why? Because it was the most expensive school in the country at the time. He wanted to get his money’s worth. Seriously. But view the world this way. The competition in college football is not over scholarship value. Otherwise, no one would go to Alabama. But have 60,000 show up for a spring football game is the “money” for them. That is how schools compete.

Sure it is a monopoly but a natural one. Again, if you want to open up a minor league and pay these kids, feel free. The universities are what add the value to make the thing go in the first place. You can’t blame the school for the fact that no one wants to watch its players unless they are playing for a school.

Git, we don’t really disagree as much as this may sadden you. Some argue that the WNBA is a purer form of basketball then the NBA. You can’t argue this point. It is just an opinion. But here is what is fact. Americans will not follow any sport with much fervor unless they are watching the best in the world or watching players associated with a college. The only inferior sport that gets any play is soccer. But hardly anyone is really watching save some people in Seattle. So you purist college football would have no interest if you get rid of the college part.

If you took away all college scholarships? Interesting question. I think people would still watch. The quality of play would go down dramatically. But the quality of college basketball game has gone down considerably and people keep watching.

Paying Alabama’s players to play football for the Alabama Slammers would be impossible because you would have no fans. Same with Texas football. They may put people in the seats in high school games but semi pro get zero interest.

24 Amy Alkon 04.29.14 at 8:20 am

“Denise asks if you’re generating value for the company, why not be compensated for it? Because the value that person is creating is not enough to justify compensation.”

Actually, the truth is that the company can get away with not paying because the job market is so tough and kids are so desperate to get a leg up.

I am not for the government banning these internships. I just think it’s disgusting for a profit-making business to have “interns” who do anything more than observe.

I’m an author and a newspaper columnist, meaning I don’t exactly print money for a living. I have never had an intern and never will because I think it’s immoral. I have a part-time assistant, whom I both pay and mentor. Again, not because the government makes me. But because I think it’s the right thing to do. I’ve also found that when I hire well — as I’ve learned to do over the years — a person pays me back with a lot of hard work and integrity for my having integrity in how I treat them.

25 Ron Miller 04.29.14 at 1:07 pm

Amy, I appreciate the sentiment, I really do. It is easy to be against taking advantage of people, right? I am. But I think here you have to dig a little deeper.

If I have a job and I can either pay someone or not pay someone, it is hard to chose paying someone when the market says you do not have to do so.

People take these internships because they think it affords them opportunity. Thousands of people have taken unpaid internships and turned them into something. The best example probably is sports where it is the only way to get in without an athletic pedigree. The NFL commissioner was an unpaid intern.

I’m not trying to convince you. Few minds get turned in the comment section. But you imply having an unpaid intern does not jive with integrity. I think that is just plain wrong.

26 David Schwartz 04.29.14 at 4:47 pm

I am not for the government banning these internships. I just think it’s disgusting for a profit-making business to have “interns” who do anything more than observe.

You really don’t learn all that much by observing. You learn by doing.

I recently arranged an unpaid internship for a High School student. For him, the whole point of the internship was to use his knowledge to develop solutions to actual problems that would be used in the real world. If we had told him that he could only observe, it would have made the whole thing essentially pointless.

He’ll likely be offered a summer job at the company. I’m not sure on what basis that job offer would have been extended if he had only been observing. Perhaps he could have distinguished himself as an exceptionally capable observer, but that seems a bit unlikely. His skills more lie in his ability to do useful things.

27 gitarcarver 04.29.14 at 6:40 pm

Ron,

With all due respect, just because you say “it is indisputable” even if it is your opinion, does not mean that people cannot dispute what you have said. “Opinions” are disputable as you seem to flip flop and agree to.

As for your idea that your point is “factual” because if you remove the school from the product, no one would care, your own premise shows the weakness of your statement.

The name of the school and loyalty to that school is part of the product Ron. In essence you are saying “I can prove that the NFL has a better product because if we change the product colleges put out, no one would care.”

That is akin to saying “it is indisputable that Coke is better than Pepsi because New Coke was a failure.”

You cannot say that one product is better than the other due to a hypothetical that changing the product would mean a lesser product. That makes no sense whatsoever.

Here are some facts for you to consider: if you were to take the top 16 games in attendance each week for college and pro games, more people see a college game in person. If you look at viewership of college games versus that of pro games, more people watch college games. If you look at one area where pro and college compete in the same stadium, look no further than Jacksonville where the Jags have to cover the upper deck during Jags games, but the Florida – Georgia game is always a sell out and the upper deck is opened. Furthermore, of one thinks of the great football rivalries, one thinks of Army – Navy, Ohio State – Michigan, Oklahoma – Texas, USC – UCLA, Harvard – Yale, Florida – Florida State – Miami to name a few. There are countless rivalries that each year are played with greater passion and importance to the fans than anything the NFL puts out. Oh, you may have the rivalry of the Redskins – Cowboys, and the Bears – Packers, but even then the passion is not the same. It isn’t even close.

It is indisputable that opinions, by their very nature, are disputable. If you want to say that facts should decide this issue, I am fine with that because NCAA kicks the NFL’s butt in every metric.

Finally, while thinking about this and the talk of unionizing players, what about the student trainers and managers? Would they be able to unionize? After all, without them, the team cannot do as well so they are as much of a part of bringing money into the school as the players.

28 Allan 04.29.14 at 7:03 pm

David,

Did the intern help make money for the company? If so, on what moral basis can you justify not paying him (other than he agreed to give you his services for no pay?).

If someone contributes to a gain, is there not a moral/ethical obligaton to compensate?

29 Ron Miller 04.29.14 at 8:56 pm

Git you are wildly missing the point. Wildly. I’ve already conceded the point that you are trying to make: some like the college game better. The point, which no one has disputed, is that the reason people watch college games is because of the colleges themselves. It ties into Allan’s antitrust argument. How can you not see that this is the point? You can’t blame the colleges for having a monopoly over something that requires them as a necessary ingredient. How can this not be important in the context in which I’m using it?

1. Pro football generates many billions more than the college game.

2. Pro football is objectively better. You can like the college game more. The NFL players are far superior.

I guess you can say you love Johnny Football and he is better than all of the NFL players. But what I have stated is a fact to everyone here except for you.
You are pulling out in-game attendance as the key variable. I bet high school games beat out the colleges. Is the passion higher for colleges? Who knows? It has nothing to do with the conversation here.

The New Coke thing… I’m betting you are the only one following that goofy analogy.

No one remotely serious is arguing these point that I’m making. But you certainly can find a way to disagree about anything. It is quite a skill.

30 Ron Miller 04.29.14 at 9:00 pm

Allan the moral basis is that he choose to do it. It is a feel free world. Two people agree that it in their mutual interests to do an internship. Did the intern think it was immoral? If so, why did he agree to do it? If not, why would you want to intervene where parties find a relationship mutually beneficial?

Geez, I sound like the libertarian that I am not. I think your heart is in the right place. I agree with you on many things. But here I think you are just wrong.

31 David Schwartz 04.29.14 at 11:44 pm

Did the intern help make money for the company? If so, on what moral basis can you justify not paying him (other than he agreed to give you his services for no pay?).

People are not morally entitled to all the value they create, only what they can capture by agreement. We all do things all the time that make things better for others and do not believe we are morally entitled to capture all that value. I don’t eat at McDonald’s, but they make Taco Bell less crowded. Should I write then a check?

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