Unpaid internships: A scourge on the labor market

I was happy to see the New York Timesonline debate about unpaid internships, sparked by the latest lawsuit against a major corporation for exploiting an unpaid workforce. A recent graduate of Ohio State University, Ms. Xuedan Wang, is suing the Hearst Corporation for its failure to pay her during four months of work at Harper’s Bazaar, work that allegedly included directing the work of other interns, in addition to record-keeping and overseeing the pick-up and delivery of fashion samples.

As Steven Greenhouse reported in April 2010, it has become common for profit-making businesses to ignore the minimum wage and overtime laws and employ young workers without compensating them and, as Ms. Wang’s lawyers point out, without paying Social Security taxes, unemployment taxes, or worker’s compensation premiums. This not only deprives the so-called interns of coverage under these important programs, it deprives the trust funds of needed revenue. Four months of minimum wage work would cost a New York employer more than $400 in payroll taxes and several hundred dollars in worker’s compensation premiums.

Despite the magnitude of the tax losses nationwide, few state governments have tackled these illegal unpaid internships, and the federal government has failed to litigate a single enforcement case, although it might have settled enforcement actions without litigation or publicity. Given the hostile budgetary and oversight environment in Congress, I suspect the Labor Department has decided to avoid taking on the corporate interests that profit from this tax avoidance and unpaid labor. The chronically underfunded Wage and Hour Division still does not have a Senate-confirmed administrator, and the Republican members of the House Education and the Workforce Committee have made it clear that they frown on zealous enforcement of the law.

An earlier lawsuit against Fox Searchlight, another profit-making enterprise that exploited unpaid interns while making the movie Black Swan, reveals just how pernicious this practice really is. One plaintiff was a 2009 Wesleyan University graduate, but another was a 42-year old accountant with an MBA. The lesson? Once businesses get away with exploiting young people, it isn’t long before they treat older workers just as badly.

I first saw signs that the unpaid internship had slid far down the greasy slope when the Times and Wall Street Journal reported several years ago that adult dislocated workers, 30-somethings who had held jobs for many years, were reduced to doing significant, skilled work for free as “interns” in for-profit businesses while surviving on unemployment insurance.  Everything was wrong with this: there was no educational component, the “interns” worked for several months without pay, and the employers escaped all of their normal obligations to pay wages and taxes.

Back in 2006, Anya Kamenetz nicely summarized the key ways that unpaid internships damage the labor market and the ability of the 99 percent to earn a decent living. They undermine the meritocracy that allocates jobs and rewards people for their skills and gumption rather than for the wealth of their parents; they depress wages by creating an oversupply of people willing to work not just for low wages, but literally for nothing; they depress expectations and create an over-identification with employers; and – as compared with paid internships — they damage the career prospects of the young people who take them.  More recently, Kamenetz argued that the responsible institutions need to drag the unpaid internship mess out of the shadows and clean it up: “It’s time for employers, in cooperation with the government and colleges, to step up and create higher-quality apprenticeships, paid jobs, and co-op programs to replace the ill-defined, unpaid internship.” Given that many colleges and universities reportedly require students to take an internship before graduation, they do bear some moral responsibility for the educational content and legality of the experience. Apparently, however, they will be reluctant partners in this effort. When the Labor Department issued guidance on the six principles for a legal unpaid internship, a group of university presidents fired off a protest letter to Secretary Hilda Solis. The universities have a cozy deal collecting tuition for semesters in which their students get farmed out as free labor to employers, and they don’t want the government to interfere, no matter what the law requires.

Kamenetz suggests another approach would be for corporations or the government to fund paid internships for low-income students, as proposed by EPI researchers Kathryn Edwards and Alexander Hertel-Fernandez. Because governments can legally accept volunteer labor, it is common for legislators and executive branch offices to employ unpaid interns, who do everything from sorting mail and making coffee to writing research reports, preparing presentations and answering constituent mail. These internships might open doors to political jobs and are, at least, resume-builders, but they are less available to poor kids whose parents can’t afford to house them and feed them while they work for nothing. Unpaid internships might be one more obstacle to social and economic mobility. Means-tested stipends would even the playing field (as would simply paying for the work the interns do).

The good news, ironically, is that unpaid internships apparently do very little for the job prospects of the students who take them.  In 2011, the National Association of Colleges and Employers, which conducts an annual survey of graduating seniors, made an attempt for the first time to measure the effectiveness of various internships—for-profit, non-profit, state or local government, and federal—by whether they were paid or unpaid. Unpaid internships, it turns out, provided no advantage in terms of full-time job offer rates or starting salary, while paid internships provided a substantial advantage. In fact, unpaid internships in government proved to be a disadvantage in terms of job offers and in every category were a serious disadvantage in terms of starting salary. The average student who had taken an unpaid internship in a for-profit firm earned $18,000 less than students with paid internships and $3,700 less than the average student who had never taken an internship. Students who had had paid internships in the federal government received salary offers averaging $48,668; their colleagues with unpaid federal internships were offered only $33,127, on average.

Unpaid work is exploitation. It is illegal, and colleges and universities should reexamine their role in promoting it. And as Ross Perlin, the author of Intern Nation bluntly puts it, “It’s time to enforce the law.”

  • Kevin Michael Graham

    How does Federal Work Study (FWS) factor into this story–if at all?

    • amberdru

      Work Study is paid work.

  • Liane T

    The NACE survey doesn’t seem to be available online in its entirety, but I would be very interested to see if it controlled for applicant strength. It is possible that the people taking unpaid internships were unattractive as employees, meaning both that they were unable to obtain a paid internship and they did not receive stellar offers after the internship was over. 

  • BS

    Are you aware that in the U.K., the Coalition government is requiring people getting unemployment benefits to work for free for profitable corporations as a condition of getting benefits? The exploitation of these individuals aside, it’s a completely unneeded subsidy, and worse still, does nothing to solve the U.K’s high unemployment. In fact it makes it worse, because it gives companies the incentive to lay off workers and replace them with unemployed people on “work experience”, paid for by the taxpayers.

  • amberdru

    Workers are definitely replaced. Nicholas Rastenis…His first job out of school in 2008 was a good one in the design field earning $20 an hour. But after several months of work, the company found someone who was willing to do the job without pay and let Mr. Rastenis go.

  • FiredCareerCounselor

    Make no mistake that unpaid internships are advocated by institutions of higher education as a means of generating huge revenue by exploiting students.  The college where I work recently mandated internship for ALL students. When I expressed concern about the legal and ethical ramifications, I was replaced. Even at our small, public university, students leave with staggering student-loan debt.  To think we’re MANDATING work-for-free policy, is shameful.  Here’s hoping for precendent-setting in the Hearst case, so students can earn tuition money via internship, and career centers can return to the business of getting students jobs, not volunteer positions!

    • Jimson

      Unpaid internships are pure exploitation. There is no guarantee that you will ever get a paid job in your career field after working an one of these unpaid jobs. It doesn’t surprise me they would replace you for voicing objections to it. But frankly I find it shocking that so many college students would agree to work for free.  I’d rather work at Taco Bell.

  • Violawoman224

    Thank you for writing this.

  • Wps32axe

    Thank you for your research. W

  • Wps32axe

    I would like to know what affect unpaid internship have had on high school students? Thank you for your response in advance. W

  • Courtney

    Fantastic article! Unpaid internships have become so commonplace in our society (especially in universities), and, frankly, I never considered their implications or requirements to obtain/fulfill one. Like many other facets in American culture, these are truly “luxuries” of the economically stable. It simply puts forth another disadvantage for impoverished children who might be forced via university policy to obtain one of these internships, when, in reality, they need to work for wages out of necessity. It is incredibly callous, elitist, and stereotypically American to assume that all parents have the financial resources to sustain their children through months of unpaid work.

  • Sfitzwil

    Just saw this guy on Colbert, very interesting, as an unpaid intern on one hand I wholeheartedly agree however the issue is more complicated than it may appear, at least as it relates to healthcare internships. I currently am an unpaid intern therapist at a community mental health center that primarily serves individuals on Medicaid. We are one of very few such centers in a heavily populated Chicago suburb and we usually have a several month waitlist for people to be seen, people often in great distress. The lack of funding is so severe that even with a staff of almost entirely unpaid interns our center would not be able to operate without additional generous grants from the United Way. If they started paying their interns, even minimum wage in spite of the fact that many interns already have masters degrees or are halfway through PhD programs the center would go bankrupt and the already lacking mental health services in that area would start becoming a veritable “black hole” of mental health services for the poor. It’s not merely a problem of private companies profiting off unpaid interns but also our, frankly, ass-backwards health care system being dependent on them. My example is only in mental health but this is an issue that effects the way Medicaid, Medicare, and other low-income health services are offered; as it stands now it is often through unpaid medical interns and almost exclusively through unpaid mental health interns.

  • Debra Sanders

    After seeing this on the Colbert Report I felt compelled to write.  I have worked in the non profit sector for the last 13 years.  My job is with a city government at an art center.  During my time as a city employee, I’ve seen my permanent benefited position eliminated and my pay cut to less than half of what I previously made.  I still work at this establishment because I am an artist, I like the people I work with and I need a job.  Unfortunately for me the art center runs on volunteers.  The more people are willing to work for free, the less permanent positions are created.  We do have some unpaid internships however the bulk of our unpaid volunteers are elderly retired folk who just like being near the arts.  I have seen many job possibilities disappear to those who are willing to do the work for free.  As an artist, the reality of making a living completely off of my art is not always realistic especially in todays economic climate.  I rely on paid jobs that I can get and it would be nice to think that my education was worthy of a paid position.  I agree that a free workforce undermines the true nature of our capitalistic ideals.  You might even say it borders on socialism. 

  • Shardstyle Rolfes

    Thank you for writing this and especially for promoting the cause on Colbert. I myself have done 3 unpaid internships now and, while educational and beneficial, none were valuable to the point that it would justify the lack of compensation. Never again.

    Federal Minimum wage is $7.25 an hour.   Look at the example of the 42 year old Accountant. In NYC an entry level Accountant at the bottom 10% makes a little over $42,000 a year (according to salary.com). That’s roughly $20 a hour. Many employers argue that they can’t afford to pay interns minimum wage.   At minimum wage an employer (in this example) is only paying a 1/3 of the going salary.  Plus if this worker is a Part time one they won’t be paying insurance either. There really is no excuse not to pay someone minimum wage.

    Here’s how things should work:

    An Employer hires an Intern.  They use them PT & pay minimum wage for 3 to 6 months.   During that time they show them the ropes by using them as an apprentice.   They do this this not for profit but to plant the seeds in the future work force that will make America strong.   Consider it a civil duty. 

    Here’s how things work:

    An Employer hires an laid off worker who already have 10 years experience or a college student as an unpaid intern.   The Intern thinks that the experience and networking will get them a paid job.   They spend their time doing the work of a exerpienced worker or running errands.   Eventually they wise up, leave and the Employer finds another sucker to take their place.

  • I’ve worked in higher ed career services for 13 years, including 9 as an internship program director. I agree with most everything in this article, except two points:

    1. “The universities have a cozy deal collecting tuition for semesters in which their students get farmed out as free labor to employers.” This is patently false. Professors typically *hate* having to deal with internship courses– the amount of administrative work far exceeds a normal course. Also– in most public universities at least, students pay a flat rate of tuition no matter how many credits they take, as long as they meet a certain minimum, during the school year; but during the summer, students have to pay extra for credits. Students and universities *hate* students having to pay tuition to work for free, which is what happens with unpaid internships for credit.

    The deal with college credit is not that it benefits universities. It absolutely does NOT benefit the universities. The reason students have to take credits for internships is that employers believe that it absolves them of the 6 prong minimum wage test– i.e. if a student gets college credit for their work, they are no longer an unpaid slave laborer, instead they are a “trainee” and the internship is proven to be a “learning experience” (i.e. college credit=proof the internship is not a job). So, the reason universities often allow/accept students’ getting credit for unpaid internships is that the university is being directly and loudly pressured by students who want desparately to get work experience and are being told by an employer that they can’t work for free unless they get credit. Universities, rather than telling their students that they are not going to be allowed to get relevant work experience, cave in and push their faculty to offer credit to avoid students (and their parents) from making a fuss that the university “is standing in the way” of the students’ career experience.

    2. The idea that unpaid internships don’t lead to jobs is a pure example of confusing correlation with causation. Nonprofit organizations, fashion and media companies, and government use unpaid interns, either because the supply of labor wanting to work for them vastly exceeds the demand for interns; or because they have no ability to pay. They also have fewer jobs available for students who intern. Companies with less-sexy internships–accounting, IT, etc.–have to pay in order to entice students to intern there; and they are more likely to also have jobs available after the internship. That doesn’t mean the unpaid internship doesn’t help your career. It means that you have chosen to pursue a career field that doesn’t have as many jobs, and you are going to have to do multiple unpaid internships before you get a job.

  • Cassandra Klos

    I can’t find an email to  thank you directly, so I’ll just leave this comment here.

    I saw your interview on the Colbert Report and I cannot thank you enough for this. I am a junior in college, in the prime age where I should be getting an internship this summer. Although my school does have listings of available internships, 76 out of 87 internships listed are UNPAID.

    With the bad economy, housing, and having the PAY for internship credit if I choose to go down that route, it’s become a extreme hardship that I cannot find a paying position that will help me in my career.

  • DCarpowich

    Having interned for hundreds of hours over a period of over 18 months within the California Legislature I can assure you that unpaid internships has done absolutely nothing to help me find a paid job.  Also, there is a HUGE difference in terms of mentoring, job duties, and experience between the unpaid interns vs the paid “fellows.”   Entry level jobs within government, lobbying, legislature, have been largely replaced by unpaid interns in Sacramento.  Your research has confirmed everything that I have experienced and suspected about interning.

  • Readers, thank you for your thoughtful and insightful comments. After Ross read some of your responses stemming from his Colbert Report appearance, he decided to highlight and address some of your points in a new blog post this morning: http://www.epi.org/blog/pushing-back-illegal-unpaid-internships/

  • I have been trying to get a job in the film industry, yet all the films positions that are offered in entry level non-union sector are unpaid. We are angry many of us are simply starved out of the field, but we have no idea how to force these producers to pay. Any suggestions?

    • Robertbruce

      Unions are the answwer

    • Jimson

      That is because there is no great demand for workers in the film industry. Get an engineering degree or medical license – and you won’t have to resort to unpaid internships.

  • point

    I’ve told my students to always be paid in internships. Only the best kinds of firms my students should work in would be paying interns. The ones that do not pay, are crappy outfits and I would not consider them as proper places to be mentored and do an internship. They are just exploiting the student. But the good firms care about the intern. They work them hard, sometimes too hard, but in the process, the student learns a great deal and a great deal is demanded of them. So being paid minimum or *more* is required and both intern and firm benefit. With often the student being hired FT after graduation or for more freelance work post internship.

  • JLM

    The fact of the matter is, this is capitalism at work. Why pay someone to work when there are hundreds, even thousands of people willing to do it for free or nearly nothing? It’s extremely unfortuntate that the bottom line is always first and foremost with companies. 

    • Lazo

      This is not capitalism at play… its a poor attempt at communism 

  • Guest

    I just got replaced by 2 unpaid interns. I had a low paying job and was doing frelance editing for a lawyer friend of a friend. He offered me an assistant job at a lower hourly rate but I thought it would last longer. Then he came in bragging one day about a New York Times story and how he could get everything done with unpaid interns. The week the book editing was done and the 2nd unpaid intern was starting he fired me for “lack of chemistry.”

  • theKNO

    Business owners are so evil, if it was up to them they would enslave us all…..i can’t imagine what would drive someone to want to own their own business,