Unpaid Internship: an Emerging Market Failure

332 Words2 Pages
In recent years, America has been affected by a worldwide depression and its unemployment rate skyrockets until this January. As a result, competition for internship opportunities increases. As more young people attend colleges, an increasing number of graduates are competing for the same jobs and internship experiences may help them to outshine their peers. Therefore, a large fraction of graduates are willing to take unpaid internships. This puts employers in the position that if one student cannot work unpaid, there are many candidates who can. This is where market failure comes in. Internships are regarded as “merit goods”, which generally benefit society as whole but if the market is left on its own, they tend to be under consumed. Besides, the market failure in providing paying internships inhibits generation of young people from moving up the social ladder. To solve this market failure, government intervention seems to be the only feasible solution so far. The government can either subsidize or ban unpaid internships. However, subsidy is not reasonable because based on cost-benefit analysis. It costs the government too much to solve this market failure. On the other hand, banning unpaid internship opportunities is not effective because if business could not afford to provide internships, young graduates cannot gain experiences and provide positive externalities to the society. This contradicts to government’s initial intention. Upon analyzing this market failure, I will focus on other possible methods to solve it and maximize the potential benefits of these merit goods in my final paper. Clifford, Winston, “Government Failure vs. Market Failure: Microeconomic Policy Research and Government”, Jstor. Web.1 Ebook. March.2012. http://0-www.jstor.org.oasys.lib.oxy.edu/stable/31026458. Ross, Eynesbury, “Unpaid internship: A scourge on the labor market.”

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