The impact of unpaid internships on the labor market

For a long time, internships have been a way for young college students to enter a specific field or older students to develop their careers in a new direction. But the dramatic increase in unpaid internships in recent decades has sparked debate about their impact on the workforce, the overall economy, and the interns themselves.

Key points

  • Internship programs can benefit students, employers, and academic institutions, but only if they fulfill their promise of providing educational value.
  • Unpaid internships have become particularly controversial, often accused of exploiting students and exacerbating socioeconomic and racial inequality.
  • By providing free labor to employers, unpaid internships may also put full-time paid workers at a disadvantage.

Concept of internship

Internship is an evolved version of apprenticeship. Historically, the apprenticeship can be traced back to the Middle Ages, when an inexperienced person—an apprentice—would work for a period of time to learn a craft from a master. In this kind of early on-the-job training, apprentices often live a meager life in the master’s home or even in the workplace. The working hours are long, there is no salary, and the apprentices are at the mercy of the teacher. After working under the master for a few years and slowly climbing up the skill ladder, the apprentice will one day fulfill his obligation to the teacher and leave his industry.

Internships are based on learning the same concepts of skills or industries under the guidance of more experienced workers. However, compared to apprenticeship, it is more exploratory, less restrictive, and less time-consuming. The internship usually lasts one summer, rarely more than six months to one year.

Of course, apprenticeship still exists, but today, the term usually refers to courses taught in technical blue-collar industries, and internships tend to prepare college students for professional white-collar careers. They have even become requirements for graduation in some institutions.

Paid and unpaid internships

Internships can be paid or unpaid, and interns may or may not receive credits for their work. Even paid internships usually provide low pay.

The laws governing internships are enacted at the federal level. However, some states (such as California) also have their own regulations, such as requiring interns to obtain college credits.

According to court cases, the U.S. Department of Labor has listed many standards for determining whether unpaid internships by for-profit employers comply with the Fair Labor Standards Act (FLSA):

  1. Do interns and employers clearly understand the expectation of unpaid?
  2. Does the internship, even if it includes the actual operation of the employer’s facility, resemble the training provided in an educational environment.
  3. Whether the internship is linked to the intern’s formal education plan through comprehensive coursework or credits.
  4. Does the internship correspond to the school calendar.
  5. Is the internship limited to providing useful learning time for interns?
  6. Does the work of the intern replace the work of the salaried employee?
  7. Do interns and employers understand that interns are not entitled to a paid position at the end of the internship?

If the internship does not meet these tests, the intern will be considered an employee and is entitled to minimum wage and overtime pay, just like any other employee under the FLSA.

Please note that these rules apply specifically to for-profit employers. The Ministry of Labor stated: “Unpaid internships in public sectors and non-profit charitable organizations, intern volunteers do not expect to be paid, and are usually allowed.”

Whether the internship is repaid or unpaid, employers, interns, and usually academic institutions will benefit in some way.

Benefits for employers

Internships provide employers with many benefits at a very low cost. Employers can use the internship program as a recruiting tool and a way to evaluate which interns can be considered for full-time positions after graduation.

Employers usually seamlessly convert interns to full-time employees, thereby reducing or eliminating any training-related costs. Employees who started with internships are also more likely to stay than those who are not interns.

Interns also bring vitality, perspectives and new ideas to employers. The indirect benefit to employers is that interns keep current employees on their toes. Today’s employees may work harder because they are afraid of being replaced by younger, more enthusiastic, enthusiastic, and fresher people.

Benefits for interns

Students benefit from the internship program by gaining valuable real-world experience. They understand the career field they want from an insider’s perspective, which can help them decide whether it is appropriate. If they choose to stay in the field, the internship will provide them with the start of a professional network, which may be valuable for the rest of their careers.

Internships also give students a good start in the job market, whether it is an employer with whom they have interned or other potential employers. Having one (or more) internship opportunities on their resumes indicates that they have the opportunity to apply and improve their classroom knowledge worldwide. They may also be able to work with certain types of equipment, which can only be obtained through the employer.

If the internship is paid, then it will provide them with income to help pay for college expenses and avoid some student loan debt.

Benefits to academic institutions

Colleges and universities also benefit from internships, partly because their interns tend to bring their real-world experience back to the classroom. This interaction helps keep the curriculum relevant and keeps the curriculum in sync with current trends. This continuous improvement provides a richer learning experience for everyone.

Over time, the benefits may include:

  • More competitive and employable graduates
  • Increase the credibility of the plan
  • Closer connection with alumni
  • Closer ties with the interconnection industry

Internships can also increase graduation rates and make the institution more attractive to future students. When high school students and their parents compare schools, they usually give extra points to courses that have a good track record of converting graduates into employees.

If the internship is combined with university courses, then the institution will also gain financial benefits, because when students go out for internships, it will charge semester tuition. Finally, providing employers with a group of capable interns also helps the school’s corporate fundraising activities.

Best Practices for Internships

According to the National Association of Universities and Employers (NACE), to make an internship a “legal” internship:

  1. The experience must be an extension of the classroom: provide a learning experience that applies the knowledge gained in the classroom. It must not simply promote the operation of the employer, nor can it become a routine work performed by regular employees.
  2. The acquired skills or knowledge must be transferable to other employment environments.
  3. The experience has a clear beginning and end, as well as a job description with the required qualifications.
  4. There are clearly defined learning goals/objectives related to the professional goals of the student’s academic program.
  5. Supervised by professionals with professional knowledge and educational and/or professional background in the field of experience.
  6. Experienced supervisors will provide feedback on a regular basis.
  7. The host employer provides resources, equipment and facilities that support the learning goals/objectives.


Some students and educational institutions oppose unpaid internships for ethical and economic reasons.

Is unpaid internship unethical?

In recent years, unpaid internships have experienced exponential growth. So there are questions about the moral issues surrounding them. In particular, do some companies just use internships as a source of free labor and recycle them among interns without intending to hire them full-time? In addition, will free interns replace existing full-time employees and increase the overall unemployment rate? Does unpaid internship exacerbate racial inequality in the workforce?

For these and other reasons, some students believe that accepting unpaid internships is unethical and/or unethical, and some academic institutions do not support them.

Unpaid internships can exacerbate socioeconomic and racial inequality because they close the opportunities for applicants who are not from wealthy families and cannot afford free jobs. The racial gap between rich and poor means that black and Latino families may not be able to subsidize their children’s living and college expenses so that they can take unpaid internships. Since internships are the gatekeepers of many industries, this will not only affect the careers of these students, but may also mean that higher positions in the company will become more and more diverse.

Federal anti-discrimination laws generally do not cover unpaid internships, although some states do provide these protections.

In addition, research shows that unpaid internships are often ineffective in providing students with the benefits that internships should provide.

For example, a 2016 study by the National Association of Universities and Employers stated that “unpaid intern participation is negatively correlated with student salaries and employment outcomes.” Paid internships are also considered “important for the development of professional skills”, while unpaid internships are not. However, it turns out that unpaid internships are more useful in helping students “confirm or reject career interests.”

Unpaid internships can also have a negative impact on the labor market, especially during economic downturns. When jobs are scarce, students may flock to unpaid internships in order to transition to full-time paid jobs. An increase in the supply of free labor may replace full-time workers and increase unemployment, thereby further exacerbating a weak economy.

The replacement of paid workers by free workers will also reduce taxes and affect local, state, and federal budgets.

Bottom line

Unpaid internships are good for employers, students, and academic institutions—though not necessarily as many as paid internships. However, if employers use them as cheap alternatives to paid full-time employees, they may have a negative impact on the labor market and the overall economy.


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