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Unpaid Internships

Updated June 20, 2021
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Introduction

Internships were first apprenticeships from craftsmen and tradesmen, eventually developing into a way for students to get real-world experience in the industries they are interested in. Now, internships are seen as a prerequisite to full-time positions, and students are turning to unpaid positions to boost their resume for future career growth. Now, over 60% of current undergraduates are participating in internships, and that number will only go up as the labor market becomes more and more competitive.

This rise of internship participation also comes with an increase in unpaid internship positions for students. While many may argue that unpaid internships give students insight and access into the professional sphere, unpaid internships disproportionately affect lower-income students, as well as the exploitation of students as free labor. Unpaid internships perpetuate the cycle of poverty, and they do more harm than good, especially when there are cost-effective alternatives present.

Background and History

Internships began as apprenticeships in medieval times to learn a craft to gain access to a guild. The Industrial Revolution was when apprenticeships, which focused on more physical trades, began diverging from internships, which involved professional topics such as engineering and medicine.

The formalization of internships began In 1871, when the Land Grant Act was passed, giving funds to establish agriculture and engineering educational institutions. Students in these programs were able to work at different companies while in school, getting paid 8 to 10 cents an hour. The word “intern” was established in medicine at around this time as well, meaning a person who studies medicine but does not have a license yet. Overall, internships have been a method for students to gain experience in a field they were interested in. Compensation for internships varied drastically during this time — many would pay for their apprenticeships and internships, while others were paid for their labor.

In 1938, the Fair Labor Standards Act ruled for the right to a minimum wage and overtime pay. However, in 1947, the Supreme Court deemed that a company did not need to pay railway brakemen for their week-long training program. This decision has been utilized by companies to justify their unpaid internship programs today — unpaid internships are for the benefit of the intern, the internship is meant to be educational, and the employers do not gain advantages from having interns.

Throughout these times, the labor market has been rapidly changing. According to John Nunley, a labor economist, there were about 1 in 10 people who had a college degree in the 1970s. Now, it is 1 in 3. Over 300,000 students participate in some form of pre-employment apprenticeships or internships in the US each year, according to the National Association of Colleges and Employers, and over 62% of the Class of 2017 have reported participating in an internship, compared to 50% in 2008 and 17% in 1992.

As seen from these statistics, it is becoming more and more difficult to set oneself apart as a student merely based on higher education. More students than ever are turning to internships as a way to get a leg up from the competition. This is furthered by the 2008 financial crisis when fewer companies were offering entry-level positions for recent undergraduates. Many students faced the pressure that, without internships, one cannot even consider an entry-level position at a company. Students who are in competitive majors such as economics, pre-medicine, or computer science are more likely to opt for unpaid internships rather than minimum wage labor or service jobs, as these internships pad their resumes and differentiate themselves in the job market for future career growth.

There are six criteria from the FLSA that dictate when an unpaid internship is legal. They outline it as follows:

  • The internship, even if it includes the actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees but works under close supervision with the existing staff.
  • The employer providing the training derives no immediate advantage from the activities of the intern, and on occasion, its operations may be impeded.
  • The intern is not necessarily entitled to nor guaranteed a job at the conclusion of the internship.
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. (FLSA)

As the number of companies that offered unpaid internships grew, so did the lawsuits against them. In order to qualify to be an unpaid internship, the intern must be the primary beneficiary of the relationship, as opposed to the employer. Fox Searchlight was sued in 2016 by Alex Footman and Eric Glatt, interns for show Black Swan. They asserted that they performed work usually handled by paid employees, and their work had an unfair compensation. Fox settled, paying unpaid interns who worked in their office from 2005 to 2010 in New York. This case has led to allegations from other employees at entertainment companies such as NBCUniversal and CBS regarding their unpaid intern work.

Concerns Regarding Unpaid Internship

Student Inequity

Unpaid internships disproportionately affect poor and underprivileged students, and they are not conducive to an equitable educational and professional experience. According to Edwards and Hertel-Fernandez, holding a three-month internship in approximately $4,050, not including travel. Low and middle-class students cannot afford to work unpaid internships, as they oftentimes have to provide for themselves and their families. Instead, these students may opt for minimum-wage jobs that are not in the industry they are studying in. According to Intern Bridge, “High income students (>$120,000) were more likely to be involved in unpaid internships in for-profit companies than students from families with less than $80,000 in income.”

This sets off a positive cycle of inexperience and less preparation for those who do not participate in unpaid internships, as they have less relevant positions to list on their resume for future recruitment opportunities as well. According to a survey by the American Public Media’s “Marketplace” and The Chronicle of Higher Education, 79% of employers say that an unpaid internship has a positive impact when evaluating potential candidates — they even go on to say that internship experience is more important than major, university, or GPA when hiring candidates.

As financial aid decreases, tuition increases, and student debt rises, the presence of unpaid internships brings huge disparity in career development for students of privileged and unprivileged backgrounds. If you view this from a distributive justice perspective, this very clearly hurts the least advantaged group, low-income students, while benefiting the companies that profit off of unpaid labor.

Not only this, paid internships are often reserved for the students with the largest social network and the strongest resume, which are oftentimes people with privileged backgrounds who have time and money to develop professionally. Even if employers merely paid students minimum wage, hundreds of thousands of students would be able to gain valuable real-world experience in a career path they are interested in. In order to open doors for students of all socioeconomic backgrounds, internships must have some sort of monetary compensation.

Negative Effect on Labor Market

Additionally, unpaid internships are exploited by companies that utilize these interns as replacements for full-time employees. According to Nancy J. Leppink, former director of the Labor Department, “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.” Since unpaid internships have been increasing at an almost exponential rate, this has emerged as a grave problem presently.

Two individuals at an Oregon solar panel company received back pay of $3,350 because they did work beyond the role of an unpaid intern. Many unpaid internships consist of unskilled labor work, such as “packaging and shipping 20 or 40 apparel samples a day,” according to Steven Greenhouse in the New York Times. This defeats the purpose of the internship entirely, as it does not teach the student anything related to the industry. Interns in these circumstances are regarded as cheap, reusable labor, as students cycle through each summer or throughout the semesters.

This is not only damaging to the labor market as a whole due to these replaceable workers, but also because students are unable to advance their own skills to contribute to the workforce in the future. Not only that, but the fact that this happens also gives the impression that corporations are using students for cheap labor, which decreases morale as a whole within a company by taking tasks away from entry-level employees and giving them to students. Overall, unpaid internships devalue the labor of not only the students who are working these unpaid internships, but also the employees who would otherwise do these tasks.

Flawed and Outdated Criteria

Unpaid internships are also flawed in that the criteria for them follow a Supreme Court decision from 1947. This was a time when internships were often for blue-collar workers for trades or industrial labor; however, career trends have changed extensively since then. As seen by previous statistics, the amount of students who have applied and received internships have ballooned since then. Not only that, in order for students to learn in their internship roles now, they would also often have to do projects that benefit the company. Overall, students are not turning to internships in order to learn a trade or a skill; instead, students are going to these companies in order to apply skills that they have learned in school and extracurricular activities through meaningful projects within the company itself. Overall, these criteria do not provide a complete guideline into why unpaid internships are classified as they are, and the criteria are so outdated that it is inapplicable to the current state of internship work.

When comparing our unpaid internship policy to that of other countries, the disparity is clear. In Canada, unpaid internships are illegal unless they are part of an educational program and are under certain professions, such as architecture, veterinary science, and dentistry. Otherwise, the intern must be paid at least minimum wage. In Australia, unpaid work is only lawful if the person is not doing “productive” work, or if it is a formal part of an educational course. It is clear that the US is lagging behind in what it provides to its students in terms of unpaid internships, as other countries are giving students far more strict regulations in what is considered unpaid work.

Benefits of Unpaid Internship

Flexibility

Many people will argue that students who are willing to work these internships unpaid should be given the chance to do so. The number of unpaid internships is rising only because there are more and more students that want to take advantage of this opportunity to work with companies they wouldn’t have a chance to work at otherwise.

However, It is important to take into account what this choice of working an unpaid internship entails. Students lower on the socioeconomic ladder do not have this choice because they may need to pay for their own livelihood; thus, this argument perpetuates the cycle of poverty and makes the assumption that any student can work these unpaid internships.

Exposure and Accessibility

By forcing companies to pay their interns, these firms will also decrease the sizes of their intern classes, limiting the opportunities even further. Unpaid internships give students not only an exposure to the industry they are passionate in, but also help them develop their network within those industries, gaining insight into their potential career. According to Boston Globe journalist Melissa Schor, 37% of unpaid internships got entry-level positions after graduation. Without unpaid internships, companies will employ less students, and students who cannot get internships are severely disadvantaged going into the workforce.

One can argue that yes, the intern class will be smaller, limiting the number of opportunities given to students and making it even more competitive than it already has. However, because these interns will be paid, the employer will treat them more like employees, giving the interns substantial projects that will develop them much faster.

In regards to companies that cannot fund paid intern programs, such as nonprofits or government agencies, there are other options to pay interns back. For example, as discussed in Potential Alternatives, employers can offer college credit as a way to “pay” their interns, while costing very little on their end. In this way, the size of the intern class may be maintained.

Alternatives

Rather than increasing the income disparity and exploiting student labor through the flawed structure of unpaid internships, companies should opt for alternatives that benefit both the employer and the intern. While many companies, such as early-stage startups, do not generate enough money to be able to pay their interns, the government could grant subsidies specifically for this purpose. This stipend could cover living and travel expenses for the intern so they do not feel financially burdened. Otherwise, the government could also enforce that companies pay this stipend to their interns. This will open doors for lower-income students to be able to work in a sector they are interested in, as opposed to opting for minimum-wage labor jobs.

The current system that some companies have in place include giving college credit for student’s duration of their internship, possibly counting towards their major or other requirements. This is an acceptable option because otherwise, a student would have to pay for these units. At UC Berkeley, summer classes are $419 per unit, on top of a $349 campus fee. If a student got the same number of units for a 4-unit class through a summer internship, they would save upwards of $2,000. College credit also makes companies more liable to outline the exact responsibilities and education that the intern will undergo throughout the role, making the experience more fruitful and of higher quality, as colleges will require companies to submit this information in order to qualify for the credits.

It is imperative to understand why there are little protests from students in accepting unpaid internships. Students are less willing to report such practices because they often fear that, if reported, employers will blacklist them.

Conclusion

In conclusion, unpaid internships are an unethical business practice because they contribute to the cycle of poverty, deflate the value of labor, and its regulations are long outdated. While some may argue that they offer a valuable opportunity to learn more about a company’s culture and environment, as well as gain experience in the industry students are interested in, these unpaid internships also place a limit on how far lower income students can achieve in their career. It is crucial to provide cheap and actionable alternatives so the process of recruiting and gaining career experience is equitable.

Works Cited

  1. “Canadian Intern Association.” Canadian Intern Association, internassociation.ca/what-is-the-law/.
  2. Cullins, Ashley. “’Most Interesting Man’ Lawsuit Moves Forward Despite Appeal.” The Hollywood Reporter, 10 Apr. 2020, www.hollywoodreporter.com/thr-esq/interesting-man-lawsuit-moves-forward-909974.
  3. Dishman, Lydia. “How I Made Ends Meet as an Unpaid Intern (and Why It Was Worth It).” Fast Company, Fast Company, 15 Jan. 2019, www.fastcompany.com/90289973/how-i-made-ends-meet-as-an-unpaid-intern-and-why-it-was-worth-it.
  4. Dishman, Lydia. “Paid Internships Lead To More Job Offers Than Unpaid Internships.” Fast Company, Fast Company, 14 July 2016, www.fastcompany.com/3061841/paid-internships-lead-to-more-job-offers-than-unpaid-internships.
  5. Diversity. “Reducing Internship Inequity.” Association of American Colleges & Universities, 20 Mar. 2015, www.aacu.org/publications-research/periodicals/reducing-internship-inequity.
  6. “Do Unpaid Internships Exploit College Students?” The New York Times, The New York Times, www.nytimes.com/roomfordebate/2012/02/04/do-unpaid-internships-exploit-college-students/unpaid-internships-should-be-illegal.
  7. “Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.” U.S. Department of Labor, www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.
  8. Gardner, Phil. “The Debate Over Unpaid College Internships.” Intern Bridge Inc., 2015.
  9. Greenhouse, Steven. “The Unpaid Intern, Legal or Not.” The New York Times, The New York Times, 3 Apr. 2010, www.nytimes.com/2010/04/03/business/03intern.
  10. Hart, Melissa. “Internships as Invisible Labor.” Employee Rights & Employment Policy Journal, vol. 18, no. 1, Jan. 2014, pp. 141–157. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=119469063&site=eds-live.
  11. Hoder, Randye. “The Privilege of the Unpaid Intern.” The New York Times, The New York Times, 19 June 2013, parenting.blogs.nytimes.com/2013/06/19/the-privilege-of-the-unpaid-intern/.
  12. Knott, Morgan. “Intern or Employee in Disguise? The Rise of the Unpaid Internship and the Primary Beneficiary Test.” Missouri Law Review, vol. 84, no. 1, Winter 2019, pp. 177–197. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=138384264&site=eds-live.
  13. Taylor, Steve. “The Lowdown on Unpaid Internship Programs.” HR Magazine, vol. 55, no. 11, Nov. 2010, p. 46. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=f5h&AN=55196458&site=eds-live.
  14. Thompson, Derek. “In Defense of Unpaid Internships.” The Atlantic, Atlantic Media Company, 11 May 2012, www.theatlantic.com/business/archive/2012/05/in-defense-of-unpaid-internships/257000/.
  15. United States, Congress, Economics and Statistics Administration, et al. “Educational Attainment in the United States: 2015.” Educational Attainment in the United States: 2015, 2016.
  16. “Unpaid Internships: A Scourge on the Labor Market.” Economic Policy Institute, www.epi.org/blog/unpaid-internships-scourge-labor-market/.
  17. Waxman, Olivia B. “Intern History: How Internships Replaced Entry-Level Jobs.” Time, Time, 25 July 2018, time.com/5342599/history-of-interns-internships/.
  18. “Work Experience and Internships.” Fair Work Ombudsman, www.fairwork.gov.au/pay/unpaid-work/work-experience-and-internships.
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