Are unpaid internships good experience or exploitation?

James Freestone studied business and German at Aston University in Birmingham, UK, and completed internships in Austria and Shanghai before getting a full-time position with WaterRock Capital

Are unpaid internships beneficial to young Australians, or a one-way street for the people who aren't paying them?

As internships have become more widespread, there is growing debate about just who they benefit. Is it free labour, invaluable experience, or something only those who are well off can afford to do?

Unpaid internships polarise opinions. Many young workers see them as a chance to showcase their skills and, with any luck, secure a permanent job. Critics see them as a work-for-nothing trap that is open to abuse from some unscrupulous employers.

Now the debate has moved to the courts. In the US, prominent media groups such as Hearst Magazines, Fox Searchlight Pictures and Condé Nast have faced legal action over unpaid internships, while in Australia sports broadcaster Crocmedia has been in the headlines – and the Federal Circuit Court – over the issue.

That case, among others, has prompted Australia’s Fair Work Ombudsman to closely monitor the position in Australia. We canvass three views on the fairness of unpaid internships.

James Freestone

Investment analyst, Water Rock Capital

James Freestone Investment analyst WaterRock Capital James Freestone describes his experiences as an unpaid intern as “priceless”. After studying in the UK and completing four internships – one paid and three unpaid – 22-year-old Freestone now holds an investment fund management role in China.

He says he could not have reached this position without the opportunities provided by internships.

“The reality is that we live in a world where a university degree is no longer sufficient,” says Freestone. With a long-term ambition to enter a private equity firm, Freestone knew he required many years of experience in investment banking to achieve this dream and saw Shanghai as an opportunity to fast-track his career.

“To enter investment banking, I had to be at the top of my game, so Shanghai seemed like a good place to start,” he says. “Straight after graduating I packed up and left.”

Absolute Internship, a global internship provider based in London, which offers internships in China, Hong Kong, London and Singapore, slotted Freestone into a young company, an alternative asset management firm in Shanghai’s central finance district of Pudong. The internship required picking up the language and culture quickly, and helping to source Chinese investors for a US$2 billion Chicago project.

“The reality is that we live in a world where a university degree is no longer sufficient.” 

“I was sent to a Rolex event to find investors and ended up discussing the current strategy of the Royal Bank of Scotland with its chief operating officer,” Freestone says. “The next day I set up a meeting between our managing partner and him, which went down very well at my firm.”

His internship led to a full-time job at WaterRock Capital, with Freestone now leading the company’s European team, which assists real estate development partners.

Freestone’s advice to employers? Give interns responsibility. “The benefits of internships for both the intern and employer blow the negatives out of the water,” he says. “This is a free market and it’s a vital part of someone’s career ladder.”

Freestone points out that interns often apply for jobs after completing a placement.

“So the internship program should be a two-way courting exercise.”

Professor Rosemary Owens

Rosemary Owens

Labour law researcher, University of Adelaide

There is a clear risk of people being exploited if they engage in unpaid work, says Professor Rosemary Owens, an expert in the “law of work” at the University of Adelaide.

While secondary school students’ work experience is rarely an issue, the legal view becomes blurred if an internship has no formal link to education or training. Owens says anecdotal evidence suggests the incidence of unfair internships is on the rise, a trend she condemns.

“The idea that somehow young people should simply have to work for nothing is absolutely appalling in any society,” she says.

The legal, accounting and media sectors – as well as trades such as hairdressing – have a culture of providing placements or training “opportunities” for interns which can sometimes cross the line to become an unpaid, unfair work engagement. Owens says alarm bells should ring if a person has an obligation to go to work and is producing meaningful labour for a business without receiving a financial reward.

“It’s when they start to do productive work – the kind of work that if they weren’t doing it, somebody would have to be employed – that’s when you start to draw the line,” Owens says.

There are often multiple factors behind people’s decision to accept unpaid internships, including a shrinking number of jobs in their chosen field for highly qualified young people in the aftermath of the global financial crisis.

“Young people often think that doing some unpaid work will give them something additional to put on their CV and make them look more appealing,” Owens says.

“It’s when they start to do productive work – the kind of work that if they weren’t doing it, somebody would have to be employed – that’s when you start to draw the line.” 

Although critics often focus on financial injustice with unpaid internships, Owens believes that such placements raise other critical social issues. One of her major concerns is that unpaid positions often benefit the wealthy at the expense of lower socio-economic groups. It is really only those people with significant social or financial resources who can undertake free work.

“It tends to advantage those who have connections in the professions and those who can be supported either because they have their own individual financial support or their parents’ support,” Owens says. “So this is about equality of access and that is a very big social issue for us to be concerned about.”
Melissa Fuller

Melissa Fuller

Business Executive

The management team at financial services firm Rice Warner will not have a bar of unpaid internships. They take the view that paid placements for university students are not only fair but also reflect well on the firm and act as a starting point for providing true career paths for interns.

“Every student who comes through is paid on an hourly rate plus superannuation,” explains Melissa Fuller, Rice Warner’s deputy CEO.

“We recognise they are contributing and helping our business, so they should be rewarded for it. There’s a moral obligation, really.”

For more than a decade, Rice Warner has run a paid internship program, with students working a day each week around their university timetables. During holidays, their paid work increases. The work typically involves joining the firm’s research team and populating databases with information relating to superannuation and life insurance. Fuller says such tasks provide a good grounding for students on market products, an essential area of knowledge if the students are to later become consultants.

“For us it’s also a good way of sourcing permanent graduates,” she says. “It gives them the opportunity to get to know Rice Warner and vice versa.”

The internship program has seen a number of former university students make the transition to permanent roles at Rice Warner. Later this year, the firm will explore the notion of offering additional financial support for interns to cover some university fees.

“In exchange for that they’d need to make a commitment to the business for a certain period of time,” Fuller says.

Rice Warner’s internship program has helped the medium size business, with its 55 staff, successfully compete against the Big Four professional services firms for talent.

“Graduates look at the Big Four and think they’re the way to go, they’re a global business, so we need to find a point of differentiation to attract them,” Fuller says. “This is one way to do it.”

She concedes there may be students ready to work at Rice Warner for nothing, but the firm is not interested in such a deal.

“The arrangement needs to be beneficial for both parties. For Rice Warner, it is value for money and a great recruitment tool, and for the interns they are gaining valuable experience while being paid at the same time.”

Key takeaways

  • Job shortages in chosen fields have led to more unpaid internships
  • Courts and regulators are assessing the practice
  • Smart companies can use properly paid placements as a recruitment tool

This article is from the March 2015 issue of INTHEBLACK

March 2015
March 2015

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