Unpaid Internships Pay Much More than Minimum Wage

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Spurred on by high tuition rates and a concern for student financial welfare, a recent federal judicial ruling in New York State mandates that student interns be paid minimum wage by the companies hosting their internships in circumstances where those interns were deemed to be acting essentially as regular employees. Underlying this judge’s decision and the “minimum wage” laws he is interpreting is the premise that it is wrong for a company to employ someone without compensating them financially. Yet, despite this supposedly vicious practice so many companies readily engage in, students flock to unpaid internships in droves. Prior to effectively banning companies from engaging in what this law appears to deem morally dubious behavior, we must consider why students are taking these positions at all.

While the current economic environment is by no means superb, jobs paying the federal and/or State “minimum wage” required by New York law are readily available for many positions. Students have the opportunity to work retail, food service, and many other jobs for minimum wage or above. Why, then, do students opt for unpaid internships? Students must see value in these positions to take them on so readily, and even to compete for them. This is because internships offer critical experience and open the door to careers in fields that students simply wouldn’t have access to without the training and relationships made possible by these internships.

Instead, by forcing employers to pay interns a minimum wage, the state is disregarding the value that internships provide to students outside of financial compensation. Minimum wage laws are at best ignorant of the value students derive from unpaid internships and at worst outright hostile to the companies and organizations willing to provide these valuable experiences to students.  We all ought to be thanking companies for providing such learning experiences to young citizens rather than forcing them to give even more.

Further, employing unpaid interns is a risky business proposition.  Companies run a risk in relying on unpaid interns to perform functions that someone more experienced could do in an efficient and timely manner. Unpaid interns still have a cost associated with their employment as they take up company time and resources. Yet, many companies are willing to provide internships and undertake this risk not only for the benefit they receive from an intern’s work, but also for the opportunity to identify and hire new talent. The benefits employers derive motivate them to offer internships. Yet, many companies are only able to provide this experience because it is at a low cost to them, which enables them to justify the risk associated with hiring an unskilled and inexperienced worker. This judicial ruling, rather than assisting interns presently working, is more likely to drive down the number of internships available, thus reducing the number of opportunities students have to gain experience in their chosen field.

It goes without saying that not all students see value in unpaid internships, and instead elect to take on paid employment. All individuals regularly have to choose between long term and short term benefits, and weigh the costs and risks associated with their decisions independently. Students should be free to trade their time willingly to employers for whatever compensation they consider appropriate. After all, it is their time to trade. If an individual deems the benefits they gain from providing their time to others to be worth it absent financial compensation, it is no one’s place to interfere with that choice.

To the contrary, a law that forces employers to pay a student for an experience the employer itself provides disvalues those students who want an educational experience and who are willing to forego immediate financial compensation in exchange. Everyone has their own hierarchy of values, some would prefer minimum wage, and some would prefer an experience that has greater payoffs later.  The state can have no moral justification in confining students to a single set of values deemed by the state to be correct.

Creative commons-licensed image courtesy of Flickr user Dirk Tussing

Posted by on September 6, 2013. Filed under Business & Economics, Fall 2013. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry
  • Sol Kauffman

    It seems strange to me that an objectivist would condone a business refusing to pay its employees for their work. Don’t these interns have value as humans and deserve the income that is their due? The idea that work experience is as valuable or even more valuable than tangible wages seems little more defensible than the state demanding Hank Rearden produce his metal for no income. Perhaps it is time for unpaid interns to begin asking, “Who is John Galt?” If interns nationwide could band together and refuse to work for nothing, the market would demand corporations to pay a fair wage. Surely the work of thousands of unpaid interns speaks for itself in terms of economic value.

    The concept of unpaid internships also plays into the fallacy of merit by credentials. Many people who take on unpaid internships either find themselves doing valuable work they deserve to be paid for, or doing simple grunt work that doesn’t further their professional goals. Simply by accruing useless internship terms one can get a foot in the door at a large company when other, more qualified or better skilled people are unable to find a position because they are incapable of the social brinksmanship required to secure these internships, which are highly “competitive”.

  • DMagill

    Sol, the principle here is voluntary association. The interns have the right to work for free if they choose, just as the employer has the right to ask for “free” labor, though the word free is itself, misleading, as the interns in question are gaining valuable experience which will help them leverage their way into new, paid positions that would not be available to somebody without tangible experiences. Neither party is being forced to associate with the other though, and that’s the primary issue here.

    Moreover, the businesses in these instances are not “refusing” to do anything – such terminology is inappropriate – rather, they’re setting the value they wish to trade for the services of their interns (though the hidden value is experience, as I said) If this value is unacceptable, the interns have the right to ask for more, but not the right to force them through legislation to pay them.Objectivism does not necessarily take a position on the numerical value placed on associations between independent people, so long as these values, whatever they are, are agreed upon by both parties and honored as such.