People respond to incentives. When governments change incentives, people respond in ways that produce unintended results. The law of unintended consequences has come to the fore recently in a discussion over the legal status of unpaid internships. If you subscribe to Arts & Letters Daily, you probably saw a link to this piece, which reviews a recent book on unpaid internships. If you can look past the style that seems to be typical of articles and reviews that view the capitalist process as a plutocratic conspiracy, you see some very important points that remind me of an article I wrote a couple of years ago.
I expect that studies of the early 21st-century labor market will show that the rise of the unpaid internship is a direct consequence of labor market rules and regulations of which the minimum wage is only the most conspicuous example. The author–former Harper’s editor Roger D. Hodge–points out that unpaid internships have replaced summer jobs for a lot of teenagers and college students because a lot of summer jobs have simply disappeared. The reason for this is pretty straightforward. Labor market regulations make teenagers and college students prohibitively expensive to hire, which means that a lot of jobs that would otherwise exist have simply disappeared. In a recent article, I discussed new research by economists William Even and David Macpherson estimating that the 2007-2009 minimum wage increases caused more job losses than the recession among young African Americans.
At first, the fact that people are willing to work for a wage of $0 seems puzzling. When you recognize that jobs offer a lot more than wages, it becomes easier to understand. One of the benefits of having a job when you are young or when you are relatively unproductive is that it allows you to learn valuable skills that can translate into higher earnings in the future. There are a lot of things you can’t learn in school that you do learn by having a job. If you can’t get a paying job that allows you to learn these skills, an unpaid internship might be a viable option.
This raises the question of equal access to opportunity. As Hodge points out, prestigious internships almost invariably go to those who are well-to-do. The children of the relatively wealthy probably have the benefit of accumulated capital that will allow them to work for a wage of $0 for a while or even to invest heavily in competing for prestigious internships. The less fortunate among us are…not so fortunate.
We say that these are “unintended consequences,” but the history of labor market regulation and minimum wages has a dark side. As Thomas C. Leonard shows in his work on the intellectual climate of the Progressive Era, the disemployment effects of minimum wages and other interventions into the labor market were seen as desirable and intended consequences rather than undesirable and unintended consequences.
Earlier this week, I read Timothy Keller’s book Generous Justice, which makes a passionate plea for action by Christians on behalf of the poor. Today, John Tomasi proposed “A Research Agenda for Bleeding Heart Libertarians.” My research and popular writing is at the intersection of these. I’ve referred to Indiana University economist Justin Ross’s characterization of economics as “the art of not killing people with your good intentions;” the link is to a post in which he offers a link to the slides from his lecture “Why We Need Economics to Make Policy: An Introduction on How Not to Kill People.” There are plenty of policies out there that are doing active damage to the poor, often (perversely) in the name of “social justice.” Getting rid of these policies is the place to start.
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Unemployment statistics never control for the very high percentage of black people with criminal records. This automatically bars them from many jobs.
Re: billwald,
Who would you hire: The black teenager with a clean record or the black teenager with the Saint Quentin tatoo?
You’ll also have to control for the high percentage of black people with criminal records of “crimes” like possessing substances the state does not like or using one’s body in a way the state doesn’t like. Obviously violent crime is a problem /disclaimer
I read the article and saw the video in C-Span. The problem with the arguments levied against unpaid internship resides in their contradictory nature: On the one hand, internships are exploitation; on the other, they tend to favor the well-connected (!!!!)
interesting. Searches for summer jobs appear to be declining…http://www.google.com/trends?q=summer+job%2C+minimum+wage&ctab=0&geo=us&date=all&sort=0
http://www.google.com/trends?q=summer+job&ctab=0&geo=us&geor=all&date=all&sort=0
I have to say that where this may be most evident is in the world of science. When you graduate from college with some science degree and you want to do research, it is damn hard to find a job. The practical skills that you will have gained solely from your education are very, very low. The labs that are available to help you learn are great, but there are just not enough of them.
What most students do instead is to work during those undergraduate years inside a lab as a volunteer. They get college credit, but they do not get paid at all. Think this has anything to do with minimum wage?
So to continue on and get a career in research, you have to at least get a master’s degree. At least. Even then it will be hard to get a job. The schooling just seems like a waste of money for the most part. What labs want is practical experience, and the only way to do it is to take what amounts to an unpaid internship. Can you imagine the boom in research we would see if we allowed these young minds to work in labs? They represent new ideas and new techniques, yet they are kept out because of labor rules. It’s crazy!
Sincerely, a prospective researcher.
Unfortunately, as an undergraduate you are competing for positions with graduate students (masters and PhDs) that are being fed through the system regardless of their abilities. I also wanted to do research and I felt I was more than qualified but I had to resign myself to 5 years of PhD work to even get a sniff at the type of job I wanted. My experience at a supposed research university is that degree inflation is rampant. The professors simply don’t care about the quality of students coming through their labs. Therefore the research jobs are being filled by people that are willing to throw 5-7 years of their life away for menial pay regardless of talent. Most of which cannot synthesize a coherent idea.
Companies had better wake up, university as subsidized training is producing poorer and poorer results. Just what is the threshold where companies will ignore degrees?
In my expereince, the problem is that students get nothing but a theoretical understanding of concepts. They never get much of a chance to do real work. A class where you get to design experiments? Forget about it. A class where you get to actually do experiments and learn how to do things? Very rare indeed. The only way that students get this is to work in a lab for no pay. Where’s the incentive in doing that? Why not just get paid a little to do that?
Big science is to nerds what professional sports is to jocks. Engineering is a far better career bet, and you can get a decent job with just an undergrad degree.
Yup. There is much to do in engineering of all kind. You won’t get your name on the arxiv papers but you can blog…
Ultimately, you may get to work on a little itsy tiny piece of a Big Science Project, but you may be disgusted by the general porkery, bureaucracy, pig-headedness and often drifting of such projects.
One exciting factor that prospective job seekers have to deal with is that companies are basically prohibited from discriminating based on aptitude. If I want to hire someone, I can’t give them a test and only pick the good performer. That would be “unfair” to the lower performers. If you want to be able to be selected because you are better than someone else, help destroy the statist intervention that exists within employment law. And also, get an unpaid internship and show the company just how good you are. If you really are better, they will hire you. You don’t buy a $10000 car without a test drive… why would you spend potentially hundreds of thousands on a new employee if you don’t know what they can do?
A person can’t be “exploited” if they volunteer for it.
“A person can’t be “exploited” if they volunteer for it.”
A statement which assumes we are all free in our actions. Even if social pressures are resisted, an empty stomach eventually convinces.
Isn’t all action exploitation, then? We all need to eat and drink every day. For example, I make a huge amount of money in my job but if I quit, my income would drop to zero and I would burn through my savings, eventually winding up penniless and hungry. Does that mean that my employer is exploiting me?
Ultimately, isn’t it your fault for existing in a physical existence?
All kidding aside, consider the alternative: without said “exploitation” what would you rather they do? Starve?
Ahhh, so it’s one’s stomach that is doing the exploiting.
“One exciting factor that prospective job seekers have to deal with is that companies are basically prohibited from discriminating based on aptitude. ” — Are you serious? In what jurisdiction? In what context?
Ahh yes. That prohibitive minimum wage, which just happens to be lower in real terms than it was 30 years ago. Once again, the facts are biased against your “libertarian,” i.e. corporatist, view.
Since when are libertarians corporatist? And what exactly does your ‘fact’ prove?
They are corporatist when they favor the interests of corporations over workers using transparently specious arguments. (In my experience this is the norm for so-called libertarians.) My “fact” was a response to the blog post above (did you read it?) that argues that the rise of unpaid internships is a predictable response to the crushing burden of the increased *nominal* minimum wage and other unspecified labor market regulations. The minimum wage has, in fact, decreased in real terms over the time period in which unpaid internships have become more popular. If businesses respond to incentives, as the author of the post asserts, then my “fact” is inconsistent with the author’s argument about internships.
Libertarians favour property rights, and libertarians don’t believe in the corporate veil nor bankruptcy protection.
“That prohibitive minimum wage, which just happens to be lower in real terms than it was 30 years ago.” — Can you be more specific as to what you mean by ‘real’?
Thirty years is a long time, in which other factors can change drastically.
Steve, look up the word “corporatist”… it doesn’t mean what you think it means. Corporatism means giving government privilege to corporations, such a monopolies, subsidies, regulations that prevent the entry of new competitors, etc.
Libertarians are universally opposed to these things.
As for minimum wage, you don’t seem to understand that its only effect is to exclude people from jobs, leaving them destitute. While a low minimum wage is certainly better then a high one, any minimum at all is harmful to the poor. Try looking up “Minimum wage” here and reading an article or two. If you can think of a logical argument against the proposition that minimum wage harms the poor I would love to hear it.
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