Unpaid internships are going out of style
A tight U.S. job market is pushing employers to pay for labour they used to get for free
A tight U.S. labour market is squeezing out the unpaid internship.
With unemployment at historic lows, more companies are paying for workers they used to get for free in order to ensure a pipeline of young talent for entry-level positions. In some cases, hiring managers are relaxing standards to fill open seats.
Internships have boomed in recent decades, providing a way for students to build their resumés while giving employers access to cheap labour. A survey of 2017 college graduates from the National Association of Colleges and Employers (NACE) reported that nearly 60 per cent of survey respondents had an internship during their time in school, compared with 49 per cent in 2007. In 2012, about half of all internships were unpaid. Since that peak, unpaid internships have steadily declined, hitting 43 per cent in 2017, according to NACE.
Grace O’Neil, a rising junior at the University of Minnesota, this past spring was offered an unpaid internship at a local media company. She turned it down, gambling that a better, paid opportunity was coming.
A month later, she got a call from Warner Bros. Pictures offering her a paid marketing internship in Burbank, Calif., for the summer.
“I think now people are understanding that you shouldn’t be taking an unpaid internship,” said Ms. O’Neil, who started the Warner Bros. job in June. “Our time is valuable. Students are not as willing to take them anymore.”
Unpaid internships have been widely criticized for taking advantage of free labour and catering to students who have the privilege to spend a summer or semester working for free while their parents foot the bill. Students can get college credit for internships, but unless they are on a scholarship, they still pay the school for that credit.
“Employers feel safer if the intern receives course credit — even though it’s the student, rather than the employer, who pays for those credits,” said Ross Eisenbrey, distinguished fellow at the Economic Policy Institute.
The U.S. Department of Labor rolled out new guidelines in January, including a seven-part test, clarifying what makes an unpaid internship legal. It states the internship must provide an experience applicable to the student’s education and that their work should complement, not displace, the work of a paid employee.
Cape Cod Five Cents Savings Bank in Harwich Port, Mass., built a paid intern program last year to attract college students and create a pipeline of young talent. Laura Newstead, a senior vice president and chief human resources officer, said recruiting local college students and graduates to stay in Cape Cod can be challenging because most of them want to go off to Boston or New York. Four of the bank’s previous paid summer interns returned after graduating to work full-time. Ms. Newstead is planning to offer full-time jobs to about 10 of the students in the current summer intern class, which would start after they graduate next year.
“The labour market has been extremely tight on the Cape and Islands, so we find the internship program gives us a competitive advantage, particularly with our rising seniors,” Ms. Newstead said.
When job seekers were more plentiful, Kelly Scott Madison, a media-marketing agency in Chicago, had considered turning its paid-internship program into an unpaid one. But it recently decided that to stay competitive for the best talent — especially given the high demand for labour — they had to continue offering paid opportunities, said Don Carter, who oversees the HR department. Paid opportunities mean an intern is more likely to return as a full-time employee in the future if they enjoyed the experience, he said.
Robert Walters PLC, a global professional recruitment consultancy, is converting the un- paid internship in its New York office to paid after some schools stopped sending students to the program, said Kurt Kraeger, president of the firm’s New York office. In the past, he said, the company offered college credit, flexible schedules and a small stipend to students — but that’s no longer enough.
“Going forward, we are going to be more competitive and do away with the unpaid internships,” Mr. Kraeger said.
The average hourly internship wage rose 3.7 per cent in 2018 to $18.73 ($24.74 Canadian), according to NACE. In 2014, the average hourly wage for an intern was about $16. Hiring managers say rising competition for workers is forcing employers to pay more for talented interns, or relax their hiring standards.
“A company that could afford to get an ‘A’ player are probably happy with a ‘B’ player,” said Tony Lee, vice president of editorial and overseas talent acquisition at the Society for Human Resource Management, a membership association. “A position might be sitting open for four months, and if that means dropping the standards a bit, so be it.”