Unpaid internships: Do they crowd out work or school?

Internships vs. School

Internships vs. School

A blog about business and economics.
March 7 2013 10:31 AM

Do Internships Crowd Out Work or School?

Unpaid internships would be more accessible if college were free.

Photo by AHMAD AL-RUBAYE/AFP/GettyImages

Wednesday's conversation about writing for free on the Internet naturally segued into the hot topic of unpaid internships. One aspect of this that's often important in D.C. is unpaid internships at mission-driven nonprofits. If you're running a mission-driven nonprofit, then obviously you have to ask yourself what your mission is. If you think your mission includes promoting upward economic mobility and an economically and ethnically diverse talent pipeline, then obviously part of your expenditure profile should be making sure that people who can't afford to spend their summers mooching off their parents can get a shot at the valuable experience your internship program offers. This—like the question of whether your internship program actually is a valuable experience—is really a question of whether you want to live up to your mission.

When it comes to greedy for-profit firms, obviously the goal is to get useful work out of people for as little money as possible, and thus you have a different issue. And the relevant analytical issue is to ask what do unpaid internships crowd out?

To a lot of people, it seems to go without saying that they crowd out paid labor, but that's not clear to me. In my industry, for example, there are no formal credentialing requirements, but in practice just about everyone has a bachelor's degree. What's interesting is that some people also have a master's degree. Spending a year as an unpaid intern sounds like a financially unattractive option. But spending nine months getting a master's from Columbia Journalism School costs $53,346. So you have one firm that's cynically offering you the chance to provide a year's worth of free labor in exchange for valuable learning and connections, and you have another firm that's cynically offering you the chance to provide More than $50,000 in exchange for valuable learning and connections. It's at least not obvious to me that the zero-salary option makes less sense than the negative-salary option.


Now the real-world issue here is that financing options are relevant. If you actually have $50,000 in the bank, then I think it's a no-brainer. You set $25,000 aside as savings to make a down payment on a house someday, and you work for free for a year spending down your $25,000. If at the end of the year you get a paying gig, good for you! If you don't, then you go into some other line of work. But who has $50,000 in the bank? The government will help make sure you can get a loan if you spend it on graduate school but not if the issue is that you just need to eat. So it's not just that young people from privileged backgrounds have access to potentially more attractive career opportunities—they have access to them on a more attractive financial basis.

If college were free (so people exited with no debt) and everyone got a $50,000 graduation present for finishing, my bet is that we'd see more internships and fewer graduate schools.