The UofA recently announced an inventive, exciting scholarship. Dubbed the “Unpaid internship Scholarship,” it would provide a stipend to cover the living expenses of qualified students who chose to take an unpaid internship while they are UA students.
This bold idea seems progressive on its face. Unpaid internships do provide valuable experience that can help students later in their careers, but the lost wages often deter students from taking them. In addition, they’re often exploitative.
While federal labor law prevents the use of interns to replace the labor that a firm would otherwise pay for, it is impossible to police every single workplace, and as such, most cases will go unpunished. These opportunities also exclude students who can’t afford to go without pay, entrenching existing power structures that favor the wealthy.
This subsidy would ostensibly expand the educational opportunities available to students. While the recipients would absolutely benefit from it, this type of scholarship creates moral hazards and perverse incentives that have substantial negative impacts on the entire labor market.
Unfortunately, the scholarship shifts the cost of employment from employers to the public. If a firm is deliberating whether to offer paid or unpaid internships, the knowledge that a prospective intern could qualify for a scholarship that provides them a similar amount to total wages eliminates any ethical dilemma they face. There’s no moral incentive to offer genuine pay.
There isn’t an economic incentive either. As Milton Friedman famously claimed, a corporation’s sole responsibility is to maximize the return to its shareholders. No sane profit-seeking entity would choose to pay an intern from the UofA if they knew they could pass that cost off to someone else. From a corporation’s perspective, the UofA might as well be offering them $2,500 and a free employee.
While it is not clear which monetary sources pay for the scholarship, none of the possible methods are appropriate for the task. Whether the source of the money is from tax revenues, private donations or university revenues, employers still receive intern labor for free. Public institutions should regulate the labor market and ensure its welfare, not subsidize extractive labor practices.
This decision is even more baffling considering all the other great ways that money could be used. The UofA already offers direct business experience through the student-run framing business S.A.K.E. Why not expand it, or use those dollars as seed money for another student venture in another industry? This provides students with real-life experience and hands-on education in the exact same way a quality internship does but without encouraging predatory labor practices. In fact, these methods could even be profitable, which could help reduce the overall cost of a university education.
It is admirable for the UofA to support its students pursuing an unpaid internship, and the benefit to direct recipients is very real, but the broader losses outweigh the gains. We shouldn’t pay for private gains with public losses.