Summertime is that part of the year where college students try to figure out what to do with that interim period of time. Some work at a menial job unrelated to their field just to scrape enough money to pay off some of their college debt. Others travel abroad or lay about for three months doing nothing. Then there are those who take on an internship to put that experience on their résumé. It's not as receiving on-the-job training in exchange for labor is a new concept. Back then, they were referred to as apprenticeships. Granted, unpaid internships differ in the sense that a) they're more exploratory than apprenticeships, b) they are more for white-collar jobs, and c) they don't guarantee a job like an apprenticeship did, but the general idea is still there: unpaid internships are a way that one can advance their career.
I was reading an article from the centrist Brookings Institution responding to a Second Circuit Court ruling that stated that as long as the intern derived more benefit from the internship than the employer (not sure how you would objectively measure that), unpaid internships are legal. The author from Brookings Institution went as far as calling unpaid internships a form of opportunity hoarding. They are not the only ones who have an issue with unpaid internships. The Center for Economic and Policy Research points out that not only is the internship a costly endeavor, but the vagueness and lax enforcement of the unpaid intern law creates a "race to the bottom" in which businesses can hire entry-level workers for no pay if they are desperate enough for the experience. The Economic Policy Institute thinks that unpaid internships are the "scourge of the labor market." The Roosevelt Institute believes we should create a modern-day jobs corps to deal with the unemployment issue. If unpaid internships are so awful, then why don't we ban them?
I think it would be prudent to delve into what sort of impact unpaid internships have on the labor market. Internships are an investment in one's human capital. Work experience is important. It is how we move up the ladder in our professional development. According to a survey (that consisted of hiring managers and executives), internships are the most important factor that hiring managers consider, followed by employment during college. Interestingly enough, a group of economists sent out 9,400 fake résumés to employers, about half in the business field and about half to nonbusiness employees (Nunley et. al, 2014). The main finding was that the internship experience played a much larger role in career development than the college degree.
Now to introduce some paradoxical data: According to the National Association of Colleges and Employers (NACE) 2014 student survey, paid interns were more likely to get a job than an unpaid intern (p. 40). That argument would work if all internships were created equal. Alas, they are not. Those who had unpaid internships disproportionately went into the non-profit sector, whereas those with paid internships were primarily in the private sector. According to that same NACE student survey, 63 percent of all unpaid internships are in the non-profit and government sectors (p. 40).
Not all markets are created equal, and some will pay better than others. If making money matters so much, this is why a college student should do research about their field prior to entering it. If the supply of labor exceeds the demand of labor (i.e., there are not enough jobs in the field for everyone who wants one), then it is easier for the industry standard to adopt unpaid internships. However, the fact that more college students are interested in non-profit or government sectors indicates that there might be more important things than money, such as work experience or a more meaningful career path.
Even if we want to assume that the NACE survey concludes that unpaid internships are bad or unnecessary (which it doesn't because it says "that internships are positively correlated with an improved chance of getting a job is virtually indisputable at this point" [p. 39]), let's not forget that it is still a voluntary arrangement. As another point of order, interns are untrained and often times temporary. From the employer's standpoint, interns are a liability. Nevertheless, they are willing to take them on at a low cost because there is [typically] some benefit derived from interns, not to mention that it is an opportunity to identify and hire new talent. The internship experience works for employers only because the cost of labor is so low.
Labor laws should be deregulated, not augmented even further. High levels of regulation are what got us here in the first place, and created that unintended consequence of making it more difficult for young people to advance their careers. We should really try to avoid European levels of youth unemployment. Labor law should stop requiring college credit for internships, for one. Having the Department of Labor require that interns "do not displace regular employees" or the employer "derives no immediate advantage" makes it more difficult for the intern to acquire meaningful experience (which could explain why interns often do menial tasks), so removing some or all of these internship criteria could do some good. Minimum wage laws (see here and here) also create this unintended consequence of reduced employment, so how about creating a minimum wage exemption (possibly with an added tax exemption) for internships so that it is more manageable for lower-income college students to take on an internship? While it might be easy to select certain egregious cases of employer abuse of interns (and while few in number, they do exist), internships are still first and foremost a way to gain work experience and network, as well as testing the waters to help make sure you actually enjoy that field before formally beginning a career in it. We can also create an apprenticeship program that would prepare students for work in all kinds of fields.
Not everyone has the luxury of acquiring a paid internship. After all, an employer only has so many resources before having to cut staff or raising prices. Sometimes, an unpaid internship in which one earns less is the best option one has. By banning or further constricting unpaid internships, it only becomes more difficult for young adults to pursue their ambitions.