Canada’s top central banker, Stephen Poloz, has sparked some controversy by suggesting that unemployed youths should offer to work for free (gasp!).
When I bump into youths, they ask me, you know, ‘What am I supposed to do in a situation?’ I say, look, having something unpaid on your CV is very worth it because that’s the one thing you can do to counteract this scarring effect. Get some real-life experience even though you’re discouraged, even if it’s for free.
With youth unemployment in Canada twice the national average (14% vs. 7%), many are starting to worry about a lost generation.
Of course, Poloz’ suggestion is pretty extreme. Why work for free when you could work for a low wage? Oh yes, minimum wage laws stop workers from offering to work for less than (in Canada) $10 to $11 an hour (depending on where one lives). That’s a lot of money to pay some unskilled youth on his or her first job.
Any student who has taken an introductory economics lesson can see in fairly short order where the problem lies – the disconnect between the supply of jobs available at that price, and the number of people who would like to work at them.
When Stephen Poloz tells young Canadians to go get an internship and work for free he skips an important alternative. Why not just scrap the minimum wage so that workers can be hired at some price between $0 and $10 an hour? Surely earning $7.50 or $5 or even $1 an hour is preferable to nothing.
Interestingly enough, even the most ardent supporter of the minimum wage should support scrapping it under this reasoning. After all, if the law is put in place to ensure access to a proper living wage, it’s clear that some people are not able to earn it and turn to the volunteer (internship) market to bide their time. To these people, $5 an hour might not seem like much of a living, but it sure beats working for free.
(Cross posted at Mises Canada.)
