Unpaid Interns, Complicit Colleges

Ross Perlin wrote an op-ed in the New York Times to denounce the complicity of US colleges in encouraging the practice of unfair internships. I have few problems with the argument since it is indeed scandalous that anyone should support such an unfair practice (except Fox Business that hilariously suggests to use those parental connections!).

The op-ed made it to the top of the most emailed articles from the New York Times and has inspired a few reactions on the web. I chose to respond to a blog post by Marc F. Bellemare, Assistant Professor of Public Policy and Economics at Duke University, where he argues that Ross Perlin’s “crusade” is misguided. You probably better have a look at his argument first if you want to understand my response.

You deserve praise for attracting some more attention to the issue raised by Ross Perlin in his op-ed, but I’m afraid that you did not make a convincing argument against his case.

You’re right to point at the group think fallacy in Ross’ (pointless) argument about the perceived political bent of US colleges. This makes it all the more disappointing that you should try to justify the practice because it dates back to the Middle Ages. Are there many other practices that you would like to justify on that basis? Following your own link, it is called a traditional wisdom fallacy.

You rightly point that new entrants on the job market contribute less and deserve a lower pay, but you overestimate the cost. The system of pay raises already takes into account the fact that a less experienced employee is likely to contribute less and hence is paid less. Are you suggesting that new entrants contribute zero to their employer? That they are paid for their experience rather than their contribution to a company? Are you suggesting that certain unions are right to put seniority ahead of performance?

Also, you would be right to suggest that it would be ridiculous to ban unpaid internships (“(…) banning unpaid internships, as Mr. Perlin suggests, is still not the way to go.”) but Ross never suggests this. He rather says that the practice has long exceeded the limits of the Fair Labor Standards Act of 1947 and that credits are a fig leaf for an exploitative practice.  Here, you commit a “straw man fallacy” by attributing him an easily refuted argument.

The problem is “unfair internships” whereby an entry-level employee goes without pay just because it is slapped with the title “intern” — regardless of its actual responsibilities, obligations and contribution. Long live the unpaid internships whereby an intern receives proper supervision and training. But this is not what Ross Perlin has witnessed and is reporting upon. In fact, he says that unpaid internships are just fine “if the college plays a central role in securing the internship and making it a substantive academic experience.” He is criticizing the rise of an unfair practice whereby employers take advantage of a weak segment of the workforce, now with the complicity of colleges.

Later, you say: “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.” May that happen sooner than later. The existence of a practice and even its benefits does not justify it if the costs are greater. Should we lift speed limits, we’ll gain time and excitement at the price of safety and efficiency, so we don’t. But to revert to economics, what we have here is a collective action problem and it is the reason why it’s regulated against. The new entrants on the job market have little bargaining power, since they don’t yet belong to a collective bargaining arrangement and compete against each other, nor do they have a “signal” from the job market to prove their worth. The reason why unfair internships are already illegal (cf. FLSA, 1947) is to avoid this race to the bottom where workers are forced to give up even their pay to enter the job market, or have started to pay to work, as Ross demonstrates. When no one can do it, the playing field is leveled and no paid jobs are lost. Some may even be created as these companies would hire entry-level staff to perform those same tasks, stripped of their capacity to exploit the oversupply of labor.

Lastly, two quibbles. (1) You are right that taking an unfair internship is a form of signaling. I don’t see how it justifies it. You are descriptive, but stop short of making an argument to defend the practice. Unless you are concerned for employers who won’t be able to discern from GPA, extracurricular activities, interviews and tests which are the valuable candidates? (2) Your concern at the thought that we will create a generational rift if we enforce the ban on unfair internships (again, there is no ban on unpaid internships and Ross is not suggesting one) is very noble, but a bit thin. You correctly point to a path dependency problem. Are we stuck with this unfair and illegal practice just because we started? Is it clear that the new cohorts will lose more from missing on exploitative work experience than they would from having a fairer job market welcome them?

The “crusade” (the straw man, again!) is one for law enforcement to correct an unfair situation whereby the weak are exploited. The complicity of colleges deserves to be denounced, as Ross did.