Tuesday, December 10, 2013

Why Obama Shook Raul Castro's Hand, in One Graph

The media is in a tizzy over Obama shaking Raul Castro's hand.  John McCain called it "appeasement." The New York Times is looking for signs of an American-Cuban rapprochement.  Here at 4:17 A.M., however, we prefer a more empirical approach.  Click the picture for a graph that explains everything:

Wednesday, December 4, 2013

Unpaid internships are a bad deal for workers, unless you're rich

I have to admit, I was fairly horrified by Yglesias's recent piece in defense of unpaid internships. He seems to think that opposition to the practice is primarily rooted in a desire by currently-working unpaid interns to improve their compensation and standing:
Critics of the unpaid internship seem to assume that tighter regulation would simply mean today’s interns would magically become paid employees. In some cases, that might happen. But many positions would simply be eliminated. More to the point, those positions that were converted into paid ones would likely be given to different people than the unpaid interns of today. There’s a reason there are lots of paid internships and salaried entry-level jobs in the world—you can recruit better people by offering money, so if you have to offer money, you’ll go after those people rather than the current pool of underexperienced students and recent graduates. 
 Matt's way, way off the mark here. Everyone knows that many working interns would lose their jobs if the practice were curtailed; in many ways that would be exactly the point of reform. The concern over unpaid internships is not just over the interns themselves. Sure, they get a pretty raw deal, but that's not the real issue. The deeper problem is that unpaid internships effectively screen out people who can't work for free, distorting the labor market in favor of those who already have some degree of economic security. In the meantime, capable-but-economically-disadvantaged workers are forced into less-competitive, higher-paid positions where employers have to provide compensation in order to attract qualified applicants.

Before getting into the fairness issue, it's also worth mentioning that unpaid internships do hurt low-end workers as a class. One way to think about this is to think about who loses what if unpaid internships go away. Potential interns lose nothing financially, but do lose the opportunity to earn job experience which could eventually translate into financial gain. But of course the interns only receive the financial gain if they do ultimately find their way into a paid position. Since killing off internships would probably actually increase the number of paid positions available (though not at a 1:1 ratio), the financial opportunity available to this class of workers would increase, just in a different distribution than before.

Employers, however, would unequivocally lose out. They'd have to pay to get something they were previously getting for free. That payment would represent a net transfer of wealth from employer to employees, even before distributional consequences are examined.

And what about those distributional consequences? Matt sort of implicitly handwaves away this concern by presupposing that employers will replace internships with higher educational requirements, effectively recreating the same dynamic where the wealthy are favored, but I'm not sure there's any real evidence that this is the case. After all, employers seeking interns still make an effort to hire the most-qualified applicant, so it's not like unpaid internships necessarily reduce the problem of overcredentialing or competitive advantages conferred by a degree. Rich kids aren't skipping college or grad school in order to take an imternship; they're just doing both. What's more, while Matt correctly speculates that a post-internship world would favor more-experienced applicants over less-experienced applicants (a dystopia otherwise known as "meritocracy"), employers still need to fill their lower ranks eventually. Getting rid of unpaid internships would simply remove the windfall employers receive by hiring affluent young workers who don't demand pay. There are obvious problems with a system where employers can benefit financially by giving their most sought-after entry-level positions to workers already possessing significant financial resources, and yet that's precisely the system unpaid internships create. The rich kids are getting enough help already, thanks.