Banning unpaid internships will harm, not help, the disadvantaged
Let’s suppose that, in our world, there are minimum wage rules across the economy. And let’s also suppose that a few employers try to get around minimum wage rules by taking on unpaid ‘interns’ but offering to cover their ‘expenses’. That could fairly straightforwardly be addressed under minimum wage legislation. Presumably there are very few training courses that last five years, for example, so minimum wage enforcement rules might challenge whether a very long-lasting ‘internship’ was in fact on-the-job training or work experience at all, as opposed to being work. Similarly, minimum wage enforcers might challenge whether ‘expenses’ were really disguised wages.
But let’s suppose that someone thought the problem wasn’t the circumvention of minimum wage rules. Suppose that person was assured that free internships were indeed principally a form of on-the-job training, but thought that such positions ended up being taken up more often by those from more affluent backgrounds because those people could afford not to be paid for an internship. The ‘solution’ proffered –e.g. by Ed Miliband — is to ban all but the very shortest-term internships. What will happen next?
Well, since these free internships are, by definition, quasi-training courses (if they were true jobs then firms would be obliged to pay the minimum wage, as we have noted above), they are typically going to be of greater value to the trainee than to the trainer. So if Ed Miliband bans companies from offering them for free, the response will be fairly straightforward: firms will charge for them instead. They may have to change the name from ‘internship’ to ‘on-the-job training course’, but the substance of the role will be much the same apart from the charge to the trainee. That will, of course, make them less accessible to those from less affluent backgrounds, not more.
Now perhaps Ed Miliband will regard charging for on-the-job training courses as an attempt to circumvent the ban on free internships. So soon after (or perhaps about the same time as) introducing the ban on free internships he will then need to introduce some new regulations and inspectors to monitor any training courses firms offer, perhaps mandating that they have to include a certain proportion of formal set-piece training sessions or be conducted by those with formal training or teaching qualifications. In that way he might succeed in banning even charged-for on the job training – except, presumably, for ‘apprenticeships’ or other such positions funded by the state, which one assumes would then be expanded extensively to make up for the ‘market failure’ of the lack of on-the-job training provided by the private sector.
These state apprenticeships would be unlikely to extend into the higher-status jobs that were the original policy concern. So what would firms do then? Well, if those interested in working in the sector were forbidden from obtaining on-the-job work experience, firms would have to rely more upon their formal training. Since, particularly early on in a new career, issues of how one had been brought up would be very important (e.g. how reliable one was, how likely one was to stick at things, how much responsibility one was used to taking on for oneself), the only indicators firms would have of such things would be the status of the educational institutions one had attended, any personal recommendations or references one could obtain and one’s family background. This process would therefore inevitably mean it became harder for intelligent, highly motivated people from poorer backgrounds to obtain entry positions into high-status sectors. They would be more and more dominated by those from well-known schools and universities, with reliable families and known connections to make personal recommendations.
At the end of this, of course, Ed Miliband and his supporters would proclaim that the increasingly exclusiveness of these industries demonstrated exactly why they had needed to intervene in the first place, and that the only problem is that they had not yet been able to go far enough. Doubtless they would then produce some other scheme, the effect of which would be to remove even more opportunity from those from poorer backgrounds. But we’ll have to wait to analyse that future misguided idea when it is announced.