The High Cost of Unpaid Internships

Free can be expensive.

Both to the buyer and the seller.

One manifestation of the Experience Economy is that we have come to recognize the power of reputation. We are willing to invest time and talent - without hope of financial reward - in the belief that it will be repaid with future benefits based on the allegedly enhanced skills implied by the association with a functioning organization.

One is reminded of Popeye the Sailor's sidekick Wimpy whose signature line was "I will gladly pay you Tuesday for a hamburger today." As if.

The problem is that the data are far from convincing that either the intern or the company creating make-work for them really benefits in the ways they may hope. Recent research suggests that unpaid internships provide no advantage in terms of paid job offers - and may actually put the applicant at a disadvantage in salary negotiations.

Companies traditionally underestimate the cost of managing interns. Even those practicing benign neglect when providing space for the offspring of important clients must devote some time to thinking about what to do with them. Those that actually hope to derive value from the supposedly free labor frequently find that the distraction outweighs whatever simple tasks can be completed in four to eight weeks.

The larger issue is that by devaluing such experience, companies frequently miss out on the opportunity both to receive real value for effort expended - and to learn about how their organization works - or doesnt - from a fresh, unbiased and intelligent source. There was a time when working construction or life-guarding was considered evidence of appreciation for value of a dollar. In today's economy, that is often regarded as laughably naive. But it may be that the real cost of unpaid internships is the lost knowledge that ties effort to value received. A lesson our global economic competitors have taken to heart - to our disadvantage. JL

Tim Price comments in the Next New Deal blog:

Summer is almost upon us and college students across the nation eagerly await vacation and graduation. But once they finish their term papers and pass their final exams, they face a far more daunting challenge: finding a job. That won’t be easy with the unemployment rate for young adults at 13.2 percent, but staring down the barrel of $1 trillion in student debt has them desperate to find an in.

As Steven Greenhouse of the New York Times recently reported, undergraduates – and even newly minted baccalaureates – are turning to unpaid internships in droves. Unfortunately, their free labor isn’t doing much good for them or our economic recovery. Greenhouse notes, “experts estimate that undergraduates work in more than one million internships a year, with Intern Bridge, a research firm, finding almost half unpaid.” This represents a steep increase from just a few years earlier. How do all these companies get away with paying their young workers nothing? Federal law lays out clear requirements for such positions, which amount to vocational training opportunities that don’t displace paid employees and from which the employer “derives no immediate advantage.” Moreover, the law states, “on occasion the employer’s operations may actually be impeded” by the intern’s presence.

So take heart, unpaid interns: the next time your boss scolds you for showing up late, transposing the numbers on a spreadsheet, or accidentally jamming the copy machine, just explain that you’re doing your part to help keep your company on good terms with the Department of Labor.

The rules that separate an unpaid intern from an employee who’s being denied a wage are flouted so routinely and enforced so rarely that they might as well not exist. The proof is staring us in the face: if unpaid interns truly provided no benefit to employers, why would companies bother to keep half a million of them around? Eric Glatt, who was hired as an unpaid intern at the age of 40 and wound up doing the job of an accounting clerk, says, “This culture of expecting to be able to get free labor if you slap the title intern on it has become so pervasive that people don’t question whether it’s ethically wrong or legally acceptable.” He and others like him have brought this issue to light recently through a series of lawsuits, but we don’t have to wait for a court ruling to know there are serious practical and moral problems with giving young workers all the responsibilities of a “real” employee with none of the benefits.

The most basic reason that young Americans take these positions is to build their résumés and make connections that will get them a full-time job offer. But unpaid internships fail even on that level. As EPI’s Ross Eisenbrey notes, a 2011 study by the National Association of Colleges and Employers found that “[u]npaid internships… provided no advantage in terms of full-time job offer rates or starting salary” and “in every category were a serious disadvantage in terms of starting salary.” So not only are these interns not getting paid for their work, but they’re actively harming their future prospects. In other words, they would literally be better off doing nothing at all than taking an unpaid internship.

If unpaid interns were just wasting their own time and not harming anyone else, this might seem unfortunate but relatively unimportant in the grand scheme of things. However, unpaid internships create much broader problems in the workforce with ripple effects throughout our society. For one thing, as useless as they may be in general, unpaid internships are nevertheless a luxury. Not everyone can afford to work for free, so when that risk does pay off and lead to a steady job it privileges young workers whose families have the financial resources to support them while they’re biding their time. Given America’s soaring inequality and deepening class divisions, the last thing we need is to have our so-called job creators running rich kid recruitment programs. (Besides, we already have Ivy League schools for that.)

While giving the privileged a boost, unpaid internships also hold other workers down. As Generation Debt author Anya Kamenetz has pointed out, unpaid interns “create an oversupply of people willing to work for…literally nothing,” allowing companies to eliminate low-level paid positions and reduce the bargaining power of their paid employees. On the flip side of the coin, these positions inculcate a mindset that may stay with young workers for the rest of their lives: don’t demand what you deserve; just settle for whatever you can get. Kamenetz writes that they also “promote overidentification with employers: I make sacrifices to work free, therefore I must love my work.” Together, this adds up to a power dynamic in which employers hold all the cards and lowly workers feel lucky just to be doing something, no matter how little it benefits them. Fostering these beliefs harms the labor movement and efforts to bargain for more equitable pay and working conditions.

The question is: if we eliminate unpaid internships while the economy remains too weak to provide college students and recent grads with real job opportunities, what do we expect them to do with their lives? They could stay in school longer, but that’s not an affordable or particularly useful option for everyone, and it only delays reckoning with the real problem. They could also take shelter in their parents’ basement and wait for the economy to pick up on its own, but there’s no telling how long that will take, and unless future employers place a lot more value on Mario Kart skills, we’ll be allowing an entire generation to atrophy and deal a permanent setback to their future earning potential.