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Paid and Unpaid Labor

July 30, 2009

Tags Free MarketsEntrepreneurshipInterventionismProduction Theory


Legislation has outlawed "child labor" in the United States in various manifestations for decades, yet child labor persists for several reasons and through many different channels. While children no longer work in factories or in other occupations, they still work in family businesses (on farms, in family restaurants, etc.), and less obvious forms of child labor persist in the form of nonprofit fundraisers.

Anyone who has ever been a child in the United States has, in some form or fashion, participated in potentially useful labor for the benefit of some nonprofit organization like a sports league, a church group, or a school. I remember in middle school selling magazine subscriptions for the benefit of my school (and for prizes, like pens and mugs). I sold candy for youth baseball (and got a ticket to a Cincinnati Reds game in the bargain). I sold stationery to win a fishing tackle box. I washed cars for the National Honor Society. I sold fruit for the marching band. Et cetera. But I wasn't "paid" for these efforts in the usual sense.

This gives me a thought which has recurred in several contexts. First, a few years ago my wife and I went to a Wal-Mart in Holly Springs, Mississippi and passed a group selling hot dogs and soft drinks to raise money for what appeared to be their cheerleading squad. Suppose there had been fifteen people involved. Suppose they had earned $300. Suppose they had worked eight hours each. That would have been 120 man-hours (not counting prep time) for $300, far less than the federal minimum wage. On my way into and out of grocery stores, I have passed numerous groups selling baked goods, candy, or Krispy Kreme donuts to fund various trips or humanitarian ventures. People have raised funds by bagging groceries at local stores. Boy Scout troops in Tuscaloosa offered $10 parking spaces the weekend of the Alabama-Ole Miss game in October 2006. My high school had a "community service" requirement. Forms of low-wage, quasi-compulsory labor abound.

These individuals' dedication is admirable. However, there is a startling inconsistency between their efforts and national labor policy. In particular, volunteer labor and fund-raising labor is, by definition, uncompensated. Are the volunteers and the boy scouts offering parking spaces being "exploited?" Absolutely not. The transaction is entirely voluntary, and few would question the integrity of the boy scout troop offering parking spaces (and specifically offering the uncompensated labor of members of the troop). Nor would anyone look askance upon the high school student tutoring low-income children in an after-school reading program. These transactions do suggest, however, that many aspects of labor market regulation may be unneeded.

Consider again the case of the cheerleading squad or church youth group doing a carwash fundraiser. These are usually fun for the participants, but they may not be particularly lucrative. A group of people selling hot dogs outside of Wal-Mart may be earning little relative to what they could earn in gainful employment, but gainful employment would be illegal. For a cheerleader to sell hot dogs for an implicit wage of $1 an hour outside of Wal-Mart is a fundraiser. For the same cheerleader to go inside and get paid by Wal-Mart to bag groceries for $2 an hour (in an air-conditioned environment, I might add) may subject Wal-Mart to criminal prosecution.

Extracurricular activities build character. That much is for certain. A 2006 study showed, for example, that college students who participate in college athletics tend to earn more in team-oriented occupations than their counterparts who do not participate in sports. However, the same skills — punctuality, teamwork, discipline — that can be learned on the athletic field, the sidelines, or in the marching band can also be learned "on the job." Indeed, as labor economist David Neumark has argued, one effect of the "minimum wage" (or any mandatory wage above equilibrium) has been to reduce labor force participation and employment among unskilled workers and, therefore, to reduce their lifetime earnings.

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It may very well be that fundraisers, on net, earn more money than participants could earn by participating in the low-wage labor force. It is also certainly the case that there are advertising and goodwill-building aspects of fundraisers that are difficult to capture in strictly monetary terms. Finally, abuse and fraud should be rooted out and prosecuted wherever they occur. However, the prohibition on "child labor" (or low-wage labor more generally) should be understood not as a prohibition on child labor as such but as a prohibition on certain types of child labor.

What, one might ask, would be the effect on these worthy activities if one were to mandate OSHA-style regulation of working conditions or a "living wage" for participants in fundraisers? Many of these activities would dry up, first of all, and second, one might see that the particularly hardest-hit would be low-income households without the means to pay for cheerleading uniforms, trips out of state, or band instruments out of pocket. Such a policy would surely be absurd. If it is absurd for this instance, then is it not absurd in traditional labor markets where far more is at stake?

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