Thursday, September 8, 2011

Unpaid Slave Labor

Paul Revere's famous engraving of the 'Boston Massacre.' It is literally whitewashed--the first person to die in the American Revolution was Crispus Attucks, a black and Wampanoag man who was either an escaped slave or a free-man.

Well, interview number two. I really like these Triangle guys; their work is hard not to be passionate about.

Sure the position is that of the 'lowly' intern, but slogging through the menial office work and being the 'coffee bitch' might just be how I get up and running. And I didn't learn to ride a bike before I could that holds some weight.

During one of my interviews—there were two rounds and five people coming and going to interview me—one of the interviewers said about the internship position, “I guess that's how we do it now.” She was referring to the increasing practice of having an intern and then pulling them on to work full-time.

This internship would be paid, that's a lot more than I can say for the majority of internships out there. And that seems to be the new track for people starting their careers. I'd like you to think about the implications of that.

First, for many firms out there (in an economic sense firms are all people who have a product or service to sell, and employees under their control) their productivity can be increased through the addition of an intern. And for interns, their level of experience and job potential can be increased for the future. It is basically a down-payment on a job later.

But the second part is potentially problematic. Interns, unpaid ones anyway, do work that has a value. And by 'loaning' out their work in the short term, they can depress wages across other positions as well. The threat of their job potential in a firm directly competes with the output of the other workers. Basically, a firm can pay less to all its workers because the intern will work for zero.

Third, firms that do not compete using unpaid internships are at a disadvantage against firms that do. That means that the practice is likely to increase as time goes on because it is an unregulated and cheap way to reduce labor costs. When unpaid interns 'loan' their labor for a future pay-off, a firm increases its competitiveness and pushes out firms that do not compete at that level.

Fourth, the labor that is supplied at a zero price point in the short-term means that only those that can afford a negative income from the experience are eligible to move forward in the industry. The prevalence of these internships on a wide scale effectively negates certain classes from partaking in this practice. In simple terms, the poor cannot compete at all. The barriers to entry are too high. Obviously there are other areas where initial economic costs are huge barriers as well, college education is a notable example. But very often there is an alternative to the initial cost, such as off-setting through student-loans and scholarships.

But in the private industry, there exists no such principle. People can be hired as unpaid interns without any way of making the experience affordable. The system is a perpetuation of an economic conflict and has the potential to exacerbate class disparities. The rich can afford the 'experience' and take the economic chance, while the poor are locked out, unable to surmount the barriers to entry.

Essentially, the argument makes a lot of sense to a firm because it provides an opportunity to increase output while decreasing cost (the basic definition of productivity by the way), but to the labor market it is a huge problem. In much the same way that illegal immigrant labor is said to hurt the demand for 'honest' paying jobs, these unpaid internships offer a much more disturbing trend to the labor markets. Instead of sub-minimal pay, the interns take on zero pay, causing a greater effect on overall labor markets (the classic supply and demand graph). Further, these interns are generally well-qualified, but inexperienced applicants; their existence drives down the overall value of an education at a higher institution as well as jeopardizing the existing prices for qualified and experienced labor. Firms now have to calculate in the problem of interns into their business model. Is it worth it to hire someone to replace Betty or would it be smarter to open two unpaid intern positions to fill in her work load, and when one is qualified enough to do the work, put him/her on staff full-time at 20% less than what Betty was getting paid?

This dilemma is playing itself out across the nation as firms become increasingly crunched by the elongating recession, intern friendly competitor firms, and an anxious supply of recent college graduates that can't find a job.

I find myself becoming increasingly weaker to the lure of an unpaid internship. I have just graduated college and know that 'loaning' out my labor will eventually pay-off. But I am not sure at what cost. Certainly my wages in the short-term would be zero. And with the cost of living being higher than that, I would quickly be bleeding money to an unsustainable point. In the long-term I could be given a full-time position with benefits, and even possibly more. A firm invested in my labor would almost certainly want to pay for me to get a higher degree if necessary.

It's hard to think of what the recent graduating class is doing to the established white collar labor, let alone to our counterparts of a less affluent nature, but the increasing use of unpaid interns should be discouraged because of its negative effects on our economy as a whole. It is little stretch to wonder when the unpaid internship will extend from a 3-6 month stint into a multi-year one. And internships aren't all bad; I did, after all, just interview for a paid one. But their usage should be limited to firms that have special circumstances: non-profits, underfunded government agencies, and similar organizations. So, I have one thing to say to all those thinking of taking on an unpaid internship: your labor has value, just because it's tough to get a job now doesn't mean that it is impossible, nor does it mean that there aren't plenty of firms looking for your set of skills. Demand equal compensation for your work; it's worth it.