The Obama administration’s top law enforcement officer at the Labor Department, M. Patricia Smith, is targeting companies that give young people unpaid internships. She claims that internships are rife with abusive practices and that serious violations of labor law are widespread. Arguing that interns should get paid at least minimum wage, Ms. Smith and the White House risk destroying a valuable steppingstone that gives many young Americans training they need to get jobs they want in the future.
Unpaid internships are valuable for many reasons. Most simply, they help people test whether they are a good fit for a particular industry. If interns like the type of work at particular companies, internships can help them get the training and contacts they need to make their career aspirations a reality. The short time that interns spend at jobs - often just two to three months - makes it difficult for firms to both train these young people and get much work out of them. From manufacturing to nonprofits to media companies such as The Washington Times, hands-on opportunities open through internships are almost endless.
Basic economics teaches that if the price is raised, demand falls. If companies have to pay wages, they will take on fewer interns. If these youngsters were actually benefiting companies more than it costs to train them, companies would pay them. Profit-seeking companies compete against each other for employees. If untrained students were such valuable workers, firms would gladly offer money to beat out the competitor next door to get them.
Some statements by the administration suggest that their actions are not simply motivated by the welfare of the kids who get internships. The O Force worries that unpaid internships might disadvantage less-affluent students, who might not be able to afford to spend their summers at unpaid jobs. But the administration’s solution risks eliminating many internships at for-profit companies so that no one gets them.
The Obama administration, which is full of rhetoric about improving education, actually views education extremely narrowly. In the real world, people gain a lot of practical knowledge on the job. Eliminating training opportunities will only mean worse careers and lower future earnings for those President Obama’s team is claiming to protect.