Thursday, October 23, 2014

Income inequality forces people to work for free

I just read a fascinating article by Paul Petrone, Communications Director at VoiceGlance, on He's written a great piece about free internships, you know, working for free to get that first job. There is at least one billionaire who supports the idea that if people really want a job, they should be willing to work for free to get it. That would be Mark Cuban, investor extraordinaire.

What is interesting is that I don't see too many billionaires willing to offer their services for free. Sure, they may do volunteer work, but if it came down to their financial survival, they're going to find a way to get paid for their work. Besides, no one gets to be a billionaire without being willing to at least ask to be paid for their work.

Bernie Sanders has been quoted as saying, "The top 1% owns 41.8% of the wealth in this country, while the bottom 60% owns just 1.7%". The 1% own 40% of the wealth in this country, but at least some of them think it's pretty cool to have other people work for them for free. Few of them are willing to admit that with 41% of the wealth, they have enormous power and influence over public policy. Such a concentration of wealth can allow a small minority to essentially buy laws that create advantages for them, while putting everyone else at a disadvantage.

When given the opportunity to talk about the state of the economy, the same 1% will blame the government on the state of the economy without mentioning their influence on government and public policy. If the economy is great, hey, the 1%, the captains of industry have steered us in the clear. But if the economy is bad, then it's the government's fault. This is a very discrete form of cognitive dissonance.

But as Mr. Petrone notes, when corporations take advantage of an economy that is so bad that people are willing to work for free, that says a lot about how they perceive their employees or even future employees. If a company is not willing to pay for work, does it really value that work? If an employee is willing to work for free, what does that say about his or her other options?

This reminds me of an argument against pirating software. It goes like this: if you pirate Windows, then you never really know the true costs to you of pirating the software. When you pirate Windows, you invite all sorts of vendor lock-in onto your computer. This is because Microsoft is aware that piracy is a problem, so if they can't make you pay for the license, directly, they can at least impose costs on the use of the software. These costs come in the form of vendor lock-in over communications protocols, file formats and digital rights management. Eventually, you become dependent on Windows and when you need to upgrade, you will pay. That's what Microsoft is counting on.

A similar situation exists for free work. If someone decides to volunteer for a charitable cause, he understands the transaction very well. He is in a position to donate the time and effort to the cause. he understands that all service is spiritual. The charitable organization is committed to directing that effort to the benefit of the less fortunate, the people who really need the help. Everyone involved understands the transaction as well as the value of the same.

Now contrast that with a company that is using the dearth of jobs in a bad economy as an excuse to offer free internships to college kids who want to get their first job. The company is using this effort to extract a profit. The same company may not get the quality of work they want for free, and since nothing is paid for the work, the true cost of the work to the company cannot be easily assessed. The same is true for the employee. This activity perverts economic incentives on both sides and creates vagueness in the relationship between the company and the intern.

Sometimes, a paying job can be setup so that an employer can extract free labor from employees. Jeff Bezos, CEO of Amazon, has an interesting labor arrangement at the warehouses he maintains for his customers. His employees at the warehouse are contractors, which places some legal distance between him and them. Them employees are paid, but not for all of their time at the warehouse. Why? Employees must endure a 20 minute search to ensure that nothing is stolen from the warehouse. There is a class action lawsuit happening right now, winding it's way through the courts. It is such a contentious issue, that Amazon is willing to fight all the way up to the Supreme Court to win.

Yes, my dear readers,, that imaginary place of wonder, where many of us have shopped, and will shop again sometime soon before Christmas, believes in slavery. They are willing to fight this battle up to the Supreme Court to maintain their right to unpaid employee time. Remember, the economy is still pretty bad, but Jeff Bezos, also a billionaire, thinks its really cool that he can get employees to wade through a 20 minute search without being paid for it, after a long day at work. Every day of the year, for hundreds of employees.

Remember Ronald Reagan's campaign for president? They weren't kidding when they called it "Trickle Down Economics".
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