Jobs don't pay what they used to

VIA Tyler Cowen, here is a look at instances where the going wage rate appears to be zero:With nearly 14 million unemployed workers in America, many have gotten so desperate that they're willing to work for free. While some businesses are wary of the legal risks and supervision such an arrangement might require, companies that have used free workers say it can pay off when done right."People who work for free are far hungrier than anybody who has a salary, so they're going to outperform, they're going to try to please, they're going to be creative," says Kelly Fallis, chief executive of Remote Stylist, a Toronto and New York-based startup that provides Web-based interior design services. "From a cost savings perspective, to get something off the ground, it's huge. Especially if you're a small business."In the last three years, Fallis has used about 50 unpaid interns for duties in marketing, editorial, advertising, sales, account management and public relations.  She's convinced it's the wave of the future in human resources. "Ten years from now, this is going to be the norm," she says.In the current labour market, it isn't too difficult to understand why a worker would do this. When long spells of unemployment are common, temporary unpaid work provides a means to maintain and improve skills while building contacts. Given stiff competition for new positions, unpaid labour allows a worker to signal his or her fitness for the job relative to applicants.Is it likely that worker productivity is such that only zero wage hires are justified? I doubt it. If it's worth taking on someone to do a job, it's probably worth paying them something. the problem is that there's a discontinuity in the wage spectrum. Pay above the minimum wage is legal, and no wage at all is (probably) legal, but a positive wage less than the minimum is not. Market clearing job matches at wages between zero and the legal minimum can't take place.The linked piece doesn't provide a sense of the scale of zero-wage work, so it's hard to know how big a phenomenon it is and, therefore, what the potential lost employment due to the minimum wage is. I'd guess that it's not nothing, but it's probably not much. Still, if you could get rid of the minimum wage and instead adopt a policy in which the government simply subsidises the incomes of sub-minimum wage workers up to the minimum wage level, you'd unambiguously increase employment without forcing anyone to take home less pay. There would be a cost to the government, but it wouldn't obviously be larger than what's currently being spent on those workers while they're unemployed. Sadly, this is the kind of policy that has something in it for everyone to hate.