Why are unpaid internships on the rise?

Suppose that the following things are basically true:

  1. Good jobs go to those who have the most credentials, be that degrees, experience, or otherwise.
  2. The supply of good jobs in our economy is scarce and basically not growing.
  3. The number of people amassing credentials to compete for those jobs is growing.

If these are true, what would you expect to happen? It seems probable that those competing for one of the limited number of good jobs will find themselves in a spiraling race for ever-greater credentials. If your peers start getting high school degrees, to out-compete them you need a college degree. If your peers all start getting college degrees, you will need a degree plus a few unpaid internships. If your peers have that too, then maybe you need a masters degree. And so on.

We have a phenomenon that describes this already: it’s called degree inflation. As more and more people get degrees, the credentials necessary to get good jobs rise higher and higher. Just as more dollars chasing the same goods causes price inflation, more degrees chasing the same jobs causes degree inflation. Few seem to understand why degree inflation happens, but even fewer seem to realize that the rise of unpaid internships is very likely caused by the exact same dynamic.

As the overall level of credentialing increases, unpaid internships are a natural outlet to expand the credentialing arms race. If two people are identical except one did an unpaid internship in the field for a year, that person will probably win out. If the other person accumulated two unpaid internships, then the other person will probably win out. The competitive pressures push people to accumulate more and more unpaid experience just as they push people to accumulate more and more degrees. In a market with few people competing for good jobs, being the top candidate may require 0 unpaid internships. In a market flooded with competitors with increasingly greater credentials, being the top candidate may require 3-4 unpaid internships. This is internship inflation.

The important takeaway here is to realize once again that cramming more people through college or other credentialing programs is not a solution to larger distributive problems. I harp on this because this is seriously what people think. They see that those with a certain level of credentialing have good jobs and wrongly conclude that if everyone had that credentialing, we’d all have good jobs. This doesn’t work. All that happens is that the credential threshold required for good jobs moves higher and higher.

If you wonder why in the past people could get a good job straight out of college with no experience, it is because so few people had that level of credentialing. They were the top of the heap. When you triple college attainment in 4 decades, as we have done, this no longer holds true. The top of the heap just escalates higher and higher and that fantasy land where we are all making handsome salaries as executives, doctors, and lawyers never comes.

Ultimately it is the supply of comfortable economic positions that will determine how many people are living comfortably. If we want to get serious about improving the lives of people, we need to stop focusing on the credentialing arms race to nowhere, and start focusing on creating more comfortable economic positions. That means making jobs that exist pay more than they already do. That means a social wage or a basic income. That means a negative income tax or an expanded Earned Income Tax Credit. Anything less than that wont actually solve our distributive problems. It will just move them around.