The Minimum Wage Fairy Can’t Fix Everything

If a politician wants to ban something, chances are they will give themselves an exemption.

Over the past year, the rallying cry for many politicians has been income inequality. One of the solutions often offered is a substantial increase in the minimum wage. Ironically, though, a recent study found that 94 percent of the 205 politicians supporting an increase in the minimum wage do not pay their interns anything.

Hillary Clinton, who supports a higher minimum wage, has also been criticized for freezing hiring of paid staff and shifting to unpaid fellows to run her campaign, which would likely be a violation of the law in the private sector.  Someone should tell Hillary that her interns “do not need a lecture. They need a raise.”

Hillary’s contradiction aside, unpaid internships are a common way for young professionals to gain experience and connections in their respective fields. Nonetheless, the minimum wage has created an unwieldy system for the internship market that should be reformed.

The Department of Labor (DOL) provides exemptions to the minimum wage for the public sector, volunteers and trainees. A 2013 ruling upheld Fox Searchlight Picture’s use of unpaid interns on a movie set, saying that the crucial test is whether the “primary beneficiary” of the internship is the intern and that the internship should be part of the intern’s formal schooling.  This steers away from the DOL’s previous prohibition on an employer receiving an “immediate advantage” from the intern.

The decision by the court solved one problem but created a new one. Of course the employer should be able to receive some advantage from their intern. Otherwise, they are probably not simulating a true work environment and the intern is worse off.

At the same time, incorporating “formal education” into an internship to help shield employers from minimum wage lawsuits is a step in the wrong direction. Essentially, many internship programs may start requiring interns to receive college credit to participate.

  • First, this may lower internship opportunities for individuals who are not attending college, who perhaps stand the most to gain from unpaid internships.
  • Second, this will actually increase the opportunity cost for students considering an unpaid internship, especially low-income students. This is because they will be forced to pay tuition in order to work for free. Many low-income students may opt instead for low-paying jobs that do not offer career-building experience because unpaid internships are now even more unaffordable for them.

The minimum wage may in fact be contributing to the progression of unpaid internships. If the intern receives any monetary compensation, such as a stipend for living expenses, the intern could be classified as an employee and the employer will be forced to pay the minimum wage and back-taxes. The DOL’s guidance for nonprofits and businesses do not actually offer much guidance on this issue.

Thus, some employers may offer unpaid “educational” internships rather than risk the appearance that they are paying employees below minimum wage. Again, this particularly harms low-income individuals because there are less opportunities available to them they could conceivably afford.

Activists are rightly concerned with the accessibility of internships to low-income individuals. Instead of more convoluted wage and training requirements for internships, the movement should be toward creating private institutions that provide means-tested aid for living expenses to individuals seeking professional experience in unpaid or low-paying internships.

That said, there is not a wage crisis in internships. According to the National Association of Colleges and Employers (NACE), 97 percent of employers planned to eventually hire their interns and 98 percent of interns were paid.  NACE also found that the average wage for interns pursuing a bachelor’s degree is $17.20, with higher salaries for computer science and engineering majors, and lower salaries for liberal arts, education and social sciences majors.

This suggests that the problem is not unpaid internships, but perhaps that there are too many young people in certain fields, which cannot be corrected through the minimum wage magic wand.

 

 

 

Comments (1)

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  1. Jacob Kohlhepp says:

    It is always important to consider the incentives, as well as the seen and unseen effects generated by a policy. Unfortunately, populism and feel good politics seems to have murdered that practice.

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