Caution on unpaid internships

Today's NYT reports that more employers are offering unpaid internships (old news) and some states are starting to prosecute these employers for violating labor laws (new news). Six conditions have to be met for an unpaid internship to pass muster: (1) training similar to a vocational or academic institution must be provided; (2) training is for the benefit of the intern; (3) trainees do not displace regular employees; (4) the employer obtains no immediate advantage from the trainees' activities; (5) trainees are not entitled to a job at the end of the training period; and (6) wages are not expected to be paid or received. The article reports some interns spending their time doing unskilled, menial tasks like making coffee or cleaning door handles. NC State's career services staff does its best to make sure that listed internships meet these standards.

The economic logic behind these internships: students should be willing to pay for training that enhances their marketability to a broad range of employers. No one has any problem with students paying tuition to vocational schools, community colleges, and universities to learn such skills. In an unpaid internship, the employer provides training and experience that is valued by the student in return for the option value of employing that student in some future period. Some unpaid internships would probably be paid if not for minimum wage laws that put a wage floor above the net productivity of the intern.

If federal and state attorneys start prosecuting employers who provide unpaid internships, do not be surprised when the employers respond by starting to charge interns to participate in a "summer academy." And this will make the students better off?