Adam Smith Institute

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Asking questions about minimum wage

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Bryan Caplan asks two questions to minimum wage supporters:

1. If the minimum wage is a good idea, shouldn't unpaid internships be illegal as well? If not, why not?

2. Name the main arguments in favor of the legality of unpaid internships. Aren't all of them equally good arguments for allowing people to work for wages greater than zero and less than the minimum wage?

I suspect that quite a few minimum wage supporters actually do oppose unpaid internships. The nonmonetary returns from work – experience – are intangible, leading many to assume that one party is being exploited. This is incorrect. Wages are a product of skills, so if an unpaid intern gains valuable skills they may be increasing their future earnings. Consider how competitive unpaid internships with financial companies are – getting one almost guarantees high earnings in the future.

To Bryan's questions, I would add two more:

– An excess of supply in labour is usually called unemployment; minimum wage supporters deny that minimum wage laws create unemployment. What other goods can have a price floor set above the market price without creating an excess of supply?

– Why don't you want minimum wage to be £20/hr, or £100/hr, or £1,000/hr? If wages can be set by government without any ill effects, why not solve poverty simply by raising the minimum wage?