Why Unpaid Internships Still Exist In Corporate America

Internship experience can significantly boost your chances of landing your first job. The problem? A significant number of internships in the U.S. are still unpaid. In 2021, nearly 50% of internships were unpaid, according to a survey by the National Association of Colleges and Employers. These types of internships have proven to further inequity, giving opportunities to a select few while isolating others. So why are unpaid internships still so prevalent in our workforce today?

For many young workers, an internship offers their first taste of the “real world,” and many interns take home a very real paycheck of $0.

According to a recent survey of 267 employers (including big-name companies such as Adidas, Dell and Wells Fargo) by the National Association of Colleges and Employers, the average hourly wage for paid interns in the summer of 2020 was $20.76 — an increase of $1.22 from the previous year and the highest rate ever measured.

But while competition at top employers may have led to good pay for some, a recent NACE survey of college students found more than 40% of interns surveyed said they were not paid.

Unpaid internships can be a controversial topic. Some argue they provide valuable exposure for young people trying to learn about an industry, while others critique the practice as an excuse to exploit free labor from young workers eager to get a foot in the door.

CNBC Make It spoke with experts to learn why unpaid internships exist — and why many feel these roles blur the line between opportunity and exploitation.

Legal precedence

The Fair Labor Standards Act, originally passed in 1938, requires for-profit employers and non-profit employers that generate $500,000 or more in business annually, to pay employees for their work.

This act was soon impacted by the 1947 Supreme Court case Walling v. Portland Terminal Company. At the time, the Portland Terminal Company offered an unpaid program for aspiring railroad brakemen that lasted for seven or eight days. When trainees sued the company, hoping to get paid, the case made it to the Supreme Court, which ultimately found participants did not need to be paid because they were “trainees” rather than employees, based on the court’s finding that “the trainee’s work does not expedite the railroad’s business, but may, and sometimes does, actually impede and retard it.”

This decision created a long-lasting precedent for the conditions under which it is legal for employers to not pay trainees and interns. Essentially, an organization does not need to pay an intern under the argument that the intern is receiving more benefit from the relationship than the organization.

As work has changed, so did the role that interns provide organizations.

“In the 1970s, internships became more common across various industries as the college population grew due to the inclusion of women and other groups,” says Joshua Kahn, NACE assistant director of research. “This expansion of the college population occurred during a tight job market, so unpaid internships became seen as a way to help get these folks some experience in lieu of a full-time, paying job.”

Over the next several decades, internships expanded among both for-profit and non-profit organizations.

“By 1992, about 17% of college students had participated in an internship, with that number increasing to about 50% by 2008. This year, in our most recent data, 75% of graduating seniors said they participated in some type of internship experience,” says Kahn.

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Why Unpaid Internships Still Exist

[andyfarquhar]

"that just sounds like slavery with extra steps"- Rick and Morty

[ShubhamSinghYoutube]

America: unpaid internships
India: Paid internships, but you pay to get the internship :)

[DarknessFalls]

They just need to call it volunteer work.

[SAnderson]

Young ppl know your worth. You don't need to be making 6 figures off the bat, but don't ever work for free!!!

[AE-nfnz]

before u say internships lead to a job… alot of companies say youre on a trial run of three to six months and then fire them and hire someone else as an unpaid intern on trial so they always have free labor

[mattwong]

If an internship requires a degree and 3 years of experience, it's not an internship, it's an actual job where employers want experienced people to get paid below minimum wage

[Eduardo_Frias]

Answer to the title: because corporations take advantage of people with little to no work experience to gain free labor.

[shivinunitholi]

This very culture of unpaid internships is widespread. I did a 6 month internship in one of the leading hotel chains in India and I was not paid for the same. Would work up to 12-14 hours in a stretch, would be ill treated by the employees but had to do it. For the guests the Hotel was "an awesome experience" but for interns like me it was awful and abusive.

[tiffanywong]

My first 'official job' was an unpaid internship. It was rough, knowing I was working for free with no promise of a job at the end of tunnel. I took on a side retail job just to pay for the transport, lunch and other associated costs to complete the internship. I'm grateful for the opportunity and I learnt a lot and it also helped me get my foot in the door.

But yes, this needs to change, people should be paid for the work they do and this culture or expectation of people doing internships in order to land a entry level job needs to change.

[unicornshampoo]

When I post a job for a business type role, I will see 150+ applications. My friend the carpenter puts out an ad, and if he is lucky to get 1-2 people. We need to change the stigma of blue collar work, it's good money and not all trades will leave you crippled and broken by the time you're 50.

[KS-clbr]

No mid sized or larger companies should be allowed to do unpaid internships.

[AlyssaTaylor]

I've been through the internship search (I've had 2). I find it funny when internships describe themselves as "paid" in job postings, and that pay is like a few hundred dollars a month for full time work. Thats not pay, thats a stipend.

[mosanso]

Unpaid internship is nothing more than free exploitable labour. Your time is the most valuable thing you have do not give it away for free.

[HaDao]

I was making $23/hr at my internship, then I learned that the 2 French interns there are unpaid. They were surprised to learn that I am paid since we all are interns. They have to pay rent in an expensive COL city, while I'm living with my parents while commuting 1hr from outside the city. Not everyone can afford to accept an unpaid internship.

[PaulHo]

My college required 2 unpaid internships just to graduate, the scam!

[DripGxd_Cam]

I think unpaid internships should just be out right banned, I’m still doing the work a paid employee would be doing so i should be paid. If it was under any other circumstances that wasn’t an internship it would be Illegal.

[TMM-N]

Come on guys..
Paying a minimum wage for 2-3 people would not bankrupt a large company
Paying $12/hr a full time staff with degree vs paying a full time staff $20/ hr is a huge saving

[ReginaGrace]

Unpaid internship is why I left the field of psychology and pursued a new career as a data scientist. Now I have no problem getting a job, is paid higher and have flexible hours.

The craziest thing is that you work for free but they treat you like they are paying a lot of money.

[billingsleypiano]

For engineering, there seems to be a culture of paid internships, whereas in healthcare, most are unpaid. This is my experience/observation at least