At 31Projects (www.31projects.com), we strongly support the principal that students should be paid fairly for the value they create for organizations. Even though money is typically not students’ primary motivation for participating in projects, we ensure that project sponsors compensate students fairly for the time and effort the students put into their project.

There’s been a decent amount of discussion in the press lately regarding the legality and fairness of unpaid internships, and an article this week about students paying to do internships at certain in-demand employers or abroad takes things to a whole new level. I wanted to take the opportunity to share my perspective on this issue, which is that unpaid internships (and naturally pay-to-play internships even more so) are a bad idea for several reasons:

1) Their nature prevents their use as an effective part of the recruiting pipeline. The nature of unpaid internships means that companies are likely not getting the most talented candidates for the positions; they’re simply getting the applicants who can afford to spend the summer without a salary. It’s no secret that many MBA students as well as undergrads take on significant debt to finance their education, and so for many spending the summer without a paycheck is financially impossible. One of the key benefits which internships (and projects on 31Projects) offer companies is the ability to try students out and identify the right talent to bring into the organization full-time. By automatically excluding a large percentage of candidates from their internships, companies lose the ability to use the internships as part of a comprehensive talent pipeline to get the right people in the door.

2) They confuse students regarding their value to the company. Proponents of unpaid internships often argue that the students are gaining valuable learning experiences which more than make up for the lack of pay. I agree that there is value in the learning students gain, however this reasoning raises the question why companies are willing to pay students a reasonable salary one year later for a full-time position, yet are unwilling to compensate them for their work during the three summer months as an intern. I believe that such arrangements set a poor precedent for the relationship between the company and student by confusing the value which the company places on the student’s contributions.

3) They prevent equal access to in-demand jobs. As mentioned before, unpaid internships exclude students who cannot bear the financial burden of a summer without pay. This eliminates a large percentage of students from the candidate pool for the internship and, to the extent that the company stocks its available full-time positions with previous interns, for full-time jobs. I’m not a lawyer, but it seems to me that a case could be made that this amounts to discrimination against students of certain classes or backgrounds.

It goes without saying that pay-to-play internships requiring the intern to pay for the experience take the above 3 points to the extreme. Although I am in general highly skeptical of unpaid internships for the above reasons, I can see an argument for them in two settings: nonprofits which have other volunteers working unpaid as well, and startups which have little or no budget to pay for the help. At nonprofits where unpaid work is less the exception than the norm and students view the experience very differently than a typical corporate internship, I could concede that there is a place for unpaid internships. 31Projects is even currently working on a special program for nonprofits who need help but cannot afford to do projects- more on that to come. I likewise sympathize with early-stage startups where other employees are working as well without pay as I believe the argument that the learning experience offers the student tremendous value has merit in this situation (plus such internships are typically not done with a view towards recruitment for a full-time position).