The unpaid internship for credit must end

When Federal District Court Judge William H. Pauley III ruled in June that Fox Searchlight Pictures should have paid two interns who worked on its award-winning film "Black Swan," he did not leave a lot of room for interpretation. Pauley concluded that unpaid internship programs were in clear and near-universal violation of the Fair Labor Standards Act (FLSA). Interns whose labor benefits their employer are workers and are thereby entitled to minimum wage. The judge was not creating new law; he was simply enforcing what has been on the books. The ruling has already convinced some employers to decide how to handle their unpaid help, and interns to organize efforts to recover their stolen pay.

Hollywood is not the only industry paying attention; university administrators are worried as well. The common practice of granting class credit for completed internships has contributed to the dramatic increase of unpaid internships. According to a survey-based study by the National Association of Colleges and Employers (NACE), a record 63 percent of 2013 graduates had completed an internship. A similar study by the college recruiting consultancy Intern Bridge found that just under half of interns received school credit. Credits are what universities are selling. Since outsourcing the actual teaching to employers saves money — it is cheaper to certify than instruct — American universities have jumped on the intern bandwagon.

From a student's perspective, an internship for credit, even if unpaid, is a step toward both graduation and a job in her chosen field at the same time. But as many commentators have pointed out, employers commonly use internships as a way to skirt minimum-wage laws. College administrators and employers have colluded to invent a loophole where none existed. Meanwhile, hundreds of thousands of students are working for free, and actually paying their schools to certify it.

Pauley's ruling condemns universities offering credit for unpaid internships as accessories to wage theft. Administrators can no longer claim ignorance of the law. In 2010, after the Department of Labor sent a reminder that internships had to abide by existing employment regulations, 13 university presidents cosigned a letter to then-Secretary Hilda Solis requesting that federal authorities stay out of it:

While we share your concerns about the potential for exploitation, our institutions take great pains to ensure students are placed in secure and productive environments that further their education. We constantly monitor and reassess placements based on student feedback.

We urge great caution in changing an approach to learning that is viewed as a huge success by educators, employers, and students alike, and we respectfully request that the Department of Labor reconsider undertaking the regulation of internships.

These presidents, who included Mark Yudof of the University of California system and John Sexton of NYU, were not opposing any new rules. They were, as Economic Policy Institute Vice President Ross Eisenbrey put it in his response letter, "asking that the Department of Labor look the other way and condone violations of the law."

Defenders of unpaid internships point to the advantages these programs provide graduates heading into a tough job market. Students and their families expect universities to put them in a position to get hired. In a piece on the website Inside Higher Ed, Northeastern University President Joseph E. Aoun — another signatory to the DOL letter — appealed to NACE surveys:

The value proposition is clear: According to the NACE's 2010 Job Outlook Survey, 75 percent of employers prefer job candidates with relevant work experience. More than 90 percent prefer to hire interns or co-ops who have worked for their organization.

These are dramatic numbers, but they represent unreliable, voluntarily reported preferences. Using the same source, there is an easier way to verify the advantages of doing an internship. The NACE also surveys graduates’ employment outcomes, and they paint a different picture. Graduates who had completed an unpaid internship were less than 2 percent more likely to get a job offer than the control group (37 and 35.2 percent, respectively), and their median starting salary was actually lower ($35,721 versus $37,087). And this does not even factor in the depressing effect that 500,000 unpaid interns have on wages and demand for entry-level workers.

When Pauley ruled for the "Black Swan" interns, he closed the imaginary college-credit loophole. Academic credit, he wrote, does not certify an internship as educational. Work experience is a result of all employment; it does not replace payment. Rejecting any sort of free association argument, Pauley reminded the defendants that "the FLSA does not allow employees to waive their entitlement to wages." The minimum wage is not merely a recommendation, and young workers need to get used to feeling entitled to it.

Already there are indications of a shift. Ross Perlin's book "Intern Nation," which spurred the "Black Swan" suit, has inspired interns to start organizing for the wages they are due. At NYU, students have created a petition to get the career center to stop listing unpaid internships. Publishing giant Condé Nast is putting an end to unpaid positions conglomerate-wide starting next year — today's are the last of The New Yorker's interns. The best thing students can do to end these exploitative arrangements and help their collective employment chances is to force their schools to stop awarding credit for work experience that violates the Fair Labor Standards Act. Putting universities on the spot for their complicity could be just the push the Department of Labor needs to enforce the law. With Judge Pauley's ruling, an end to unpaid internships is within reach.