Despite Silicon Valley, Most Interns Who Earn, Earn Little

Bloomberg ran an article this week hyping about summer interns in Silicon Valley that can get glamorous jobs working directly with Mark Zuckerberg, being paid $6,213 per month and even being allowed the perk of flying their mother out for the interview.  Creative companies are always looking for new talent and youth create the future. But National Association of Colleges and Employers found that of the 55% of undergraduate students who had an internship or co-op during their time in college, 47% were unpaid.  

Working for gratis is not just about volunteering for charities: 1/3 of for-profit company internships were unpaid. And most paid internships will pay the unglamorous minimum wage.

The highest-paid internship on earth appears to be $7,012 a month working for Palantir Corporation. The company has been in the cross-hairs of privacy rights advocates after Edward Snowden outted the NSA’s PRISM program that vacuums up personal customer data from all tech giants including Google, Apple, Facebook and Microsoft. Although the big data company denies that their Prism software is the culprit, part of the $5 billion to fund the tech startup was from the CIA.

Arguments for and against the appropriateness of unpaid interns are highly contentious. Some people believe it is a massive exploitation of young people by powerful corporate interests which worsens inequality. Others believe it is a valuable opportunity for on-the-job training at a lower cost than a college degree.

The latest jobs report for June saw a +288,000 spike in jobs and unemployment falling to 6.1%. But a look at the data for the millennial generation ages 18-34 reveals: “Some 40 percent of unemployed workers are millennials” according to the Georgetown University Center on Education and the Workforce. “That equates to 4.6 million unemployed millennials–2 million long-term.” Many millennials are missing out on learning the type of skills and contacts that could assure a prosperous future. 

The reason that even a slim majority of college interns are now paid at least minimum wage is last year the United States District Court for the Southern District of New York Judge William Pauley ruled Fox Searchlight Picture’s use of interns for production of the Black Swan and 500 Days of Summer violated minimum wage and overtime laws. He also allowed the interns to proceed in a potentially big-bucks class action lawsuit against Fox and potentially against the entire movie industry. Judge Pauley concluded:

They worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training. The benefits they may have received–such as knowledge of how a production or accounting office functions or references for future jobs–are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school.

The “tests” that Judge Pauley referred to are consistent with determining if the majority of the internship benefits “inure” to the intern or the company. The Department of Labor Wage and Hour Division, which enforces minimum wage laws, publishes a “six test” fact sheet to determine if an unpaid internship is illegal:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The National Association of Colleges and Employers “2013 Student Survey” found that “63.1% of paid interns received at least one job offer, versus 37% of unpaid interns that got an offer.” The unpaid internship job offer result was only +1.8% higher than the 35.2% that received a job offer in spite of never having an internship.

NACE found that paid interns received significantly higher starting wages than unpaid interns, but both made more than job applicants with no intern experience: “The median starting salary for new grads with paid internship experience is $51,930–far outdistancing their counterparts with an unpaid internship ($35,721) or no internship experience ($37,087).”

There will always be a few high-tech interns making rock star wages over the summer, but they will be an infinitesimal minority. About half of college interns this summer will be working in the private sector for minimum wage or volunteering with charities. 

From July 15^th to July 29^th, Chriss Street will be teaching “Entrepreneurship and Capitalist Business Strategy” at Ho Chi Mihn University in Vietnam