How to tell if you’re working in a ‘tournament’ job – starting with whether you ever took an unpaid internship

When economists talk about the labour market they tend to generalise. They say it’s strong, or that it’s weak. They identify “slack”, or “tightness”.

The reality, however, is that there is no single labour market, but lots of different ones – like tiles of a mosaic that together form the overall image.

Jobs are different. And there are different levels of demand and supply for each one. If you have trained for seven years to become a qualified architect, you are pretty unlikely to be looking for a job as a hotel manager. And if you are a trained chef, you will probably not be searching for work as a lorry driver. University graduates don’t tend to take jobs cleaning office blocks.

The state of the overall economy certainly matters for all these individual markets. Most firms are more likely to invest and hire more workers when the overall economy is growing and aggregate demand is strong.

Yet particular factors may have more of a profound influence on your own job market than any macroeconomics trends. Consider what a slide in the global oil price means for oil-rig engineers, or what a major cut in state funding for universities means for the employment prospects of lecturers.

One of the main features of the fragmented jobs market is that there is always a much higher level of demand among young people for jobs deemed to be glamorous or creative.

Think of actors, footballers, pop stars or fashion models. Ask a child what she or he wants to be when they grow up and you can predict pretty well which sectors will have a high structural rate of demand.

But this is also true for jobs in less overtly “showbiz” sectors such as politics, publishing, advertising and the media. In Freakonomics, Steven Levitt and Stephen Dubner call entry-level positions in these sectors, where demand grossly outstrips supply, “tournament jobs”.

What characterises them is that you must be willing to work long and hard for wages that are very low relative to what you could probably earn elsewhere. And in order to progress up the ranks, you must prove yourself not merely competent or reliable but especially talented.

Markets like these inspired the economists Edward Lazear and Sherwin Rosen to devise “tournament theory”. They argued that in some industries, quantifying the value of a worker’s output is difficult or expensive so management instead, rather crudely, rank workers and promote those ranked highest.

Promotion effectively becomes the tournament’s prize. This has been posited as a reason why the rewards for those at the summit of some creative industries are very large multiples of those at the bottom: the size of the prize supposedly motivates the rest of the players.

But people get knocked out of tournaments. There is a high rate of workforce attrition as people realise they are not making progress, and are unlikely to, and so they quit the sector to do something else.

If all this roughly describes your job, you are probably in a tournament.

A tournament is always going to be tough. But can it be fair? The problem with entry-level jobs that pay very low wages is that it can be hard to survive on them. For many, it can be an unacceptable financial risk even to enter the tournament.

If you have other financial resources to draw on – such as a trust fund or subsidised living costs from living at your parents’ house – you are more likely to tolerate the conditions of the tournament. You may also have more sticking power through the twists and turns of the competition.

Such is the level of demand for certain jobs that even getting a foot in the door is a challenge. Unpaid work experience and internships are often the entry point – or a prerequisite on the CV for securing a permanent position.

And if insiders in the industry then hand out these positions to family and friends on an informal basis, the injustice is obvious. It means that entry to the tournament is rigged.

This is hardly a novel argument. But ministers are, again, making noises about doing something about it. The work and pensions minister, Damian Hinds, at the weekend said the Government is considering banning unpaid internships on the grounds they favour the rich and well-connected – something that was previously proposed by Nick Clegg during the Coalition years but blocked by David Cameron.

There are practical problems. Banning unpaid internships means someone has to pay for them. That will likely impose a cost on employers. It’s possible employers will respond by creating fewer internships as a result (fewer tickets for the tournament). Or perhaps they will re-label internships as work experience. Defining when one becomes the other will be a headache. Who will police it?

Nevertheless, the Government’s desire to level the playing field is commendable. And it’s certainly worth seeing if employers can be nudged into formalising their entry systems.

The tournament can probably be made fairer.

But those young people who are determined to enter these games should bear in mind that to the extent such reforms successfully expand the competitive field they will ultimately make the tournament itself still more brutal.