Don't ban unpaid internships

For a new college graduate, finding a job is stressful. That first job is more than a paycheck. It represents the accumulation of hours of hard work and a start on a stable future. In a job market dominated by resumés, connections, and previous work experience, college students will often turn to internships, paid and unpaid, to gain a competitive edge.

While paid internships are usually seen as similar to other jobs, unpaid internships have come under increased scrutiny. Critics contend that since employers know students are desperate for experience, workplaces can abuse their interns with long hours and poor work conditions, all without compensation.

Two interns who worked on the film Black Swan recently sued their former employer. One claimed that unpaid internships "rob . . . people of the value of their labor."

In light of such concerns, some perhaps well-intentioned critics want unpaid internships outlawed. But there is nothing exploitative about these arrangements.

The charge that companies exploit unpaid interns is false and misleading. They do receive benefits. Economics teaches us that people engage in exchanges only when each party expects to come out ahead. Unpaid internships are not different. No one forces anyone to take an internship, so students must expect to gain even if unpaid. How so? They expect to learn on the job.

Prohibiting unpaid internships is a bad idea for many reasons. For one thing, it would make the competition for paid internships skyrocket. An estimated 500,000 to one million unpaid interns are employed annually, and there wouldn't be enough paid internships to go around if unpaid internships were abolished. Many companies may not be able to afford the added expense and wouldn't hire interns at all. This means many students would miss out on the opportunity to gain work experience.

Moreover, banning unpaid internships may generate or exacerbate racial and other discrimination. With so many people competing for a few paid positions, companies could afford to be particular when choosing whom to hire. While most companies would still want the best person for the job, banning unpaid internships would make it much easier for companies to indulge their prejudices.

Other factors would become more important in hiring as well. As opposed to hiring the candidates most likely to succeed, companies might favor interns with good connections, most likely with parents who have such connections.

A ban would also lower the wages of paid interns. A simple example illustrates why.

If a company had one unpaid intern and one paid intern, and unpaid internships became illegal, the company would face two options. It could dismiss the unpaid intern and keep the paid intern at the current rate, or split the wage between the two. Most likely a company would split the wage, since it would still need the services of both. The paid intern, anxious for work experience, would gladly take the pay cut if it meant gaining one of the few internships available.

Another problem with outlawing unpaid internships is that such a mandate would not stop people from pursuing similar arrangements under the table, just as prohibiting drugs produces black markets. Parents have reportedly paid for their children's "unpaid" internships. Banning unpaid internships outright would likely increase these transactions.

People will not necessarily comply just because a law is put in place, especially if an arrangement benefits both parties. Such a law is, however, likely to make conditions for truly unpaid interns worse. An illegal unpaid intern would probably not report mistreatment by an employer because the accuser might face repercussions. Outlawing unpaid internships would actually make it easier for companies to exploit young people.

While those who deem unpaid internships immoral and exploitative may be well-intentioned, they fail to understand basic economics. Interns expect to benefit significantly from their experiences even if unpaid, or they wouldn't take the positions. And if unpaid internships were eliminated, paid internships would be more difficult to find, would pay less than at present, and would have worse working conditions.

We should think carefully before taking such a valuable learning tool away from students.

Abigail R. Hall is an Independent Institute research fellow (Independent.org) and an assistant professor of economics at the University of Tampa. Jennifer Schneible is a freshman allied health science major at the University of Tampa. They wrote this for InsideSources.com.