The Internship Industrial Complex: Are Students Learning or Just Being Used?

Every year, millions of bright-eyed college students dive headfirst into the internship grinder. The narrative is polished: it’s “structured and career-relevant work experience”, a “win-win situation” that builds skills, boosts your resume, and paves the golden road to a killer job. Universities push them, often making them mandatory, and employers lap it up. It’s the modern rite of passage, supposedly bridging the gap between the ivory tower and the brutal realities of the labor market.

But pull back the curtain. Look closely. Are we building human capital, or just enabling corporate serfdom? Because all internships, it turns out, are absolutely not created equal.

The Great Divide: Paid vs. Unpaid

Here’s the dirty secret hiding in plain sight: about half of the intern workforce in the United States works for free. That’s right. Volunteers. Donating time and effort to organizations. And the proportion of these unpaid gigs is on the rise.

This isn’t just some abstract difference in compensation. The money (or lack thereof) signals something fundamental about the work itself. Potentially, unpaid internships might inherently exhibit less job structure than their paid counterparts. When you’re not paying someone, the perceived obligation to provide meaningful work, clear learning objectives, or even just a coherent structure seems to evaporate. It’s easier to stick the unpaid kid with the grunt work, the stuff no one else wants to do, the tasks that don’t require real training or development.

The debate is real. Are unpaid interns simply being exploited as cheap labor, particularly in industries where internships are seen as the only “in”? Organizations are increasingly using unpaid interns to save money on recruitment and other human resource expenses. The implicit bet is that they’re “better off” saving those short-term wage costs. But does it actually pay off for the firm if the intern has a terrible, unproductive experience? This is not well understood.

The Payoff Problem

So, does this whole internship hustle even work for the student? Research offers a decidedly mixed bag, highlighting a surprising lack of empirical depth on the topic until recently.

The theory is solid, internships build skills, provide realistic previews of careers, help clarify vocational goals, and build networks. They can potentially lead to faster job attainment, better job matches, and lower unemployment risk. Some studies, especially more recent ones employing more rigorous methods like instrumental variables to tackle the tricky issue of self-selection (because, shocker, more motivated students might seek internships and also do better later anyway), do find positive effects on earnings. One study using data from Germany found around a 6% earnings return. Another study looking at Swiss graduates found a 17% short-term and 14.9% long-term positive impact on wages.

But hold your horses. Other studies using different methods find no wage effects. Some research notes that the story is more complex and nuanced than has been told thus far. And a crucial finding suggests that the primary benefit might not come from signaling to employers (like getting more interviews, which some studies find) or learning highly specific skills. Instead, the big payoff seems to be through general human capital acquisition – learning transferable workplace skills, how to function in a professional environment. This implies that any work experience might be the key, not necessarily a hyper-structured, perfectly aligned internship.

This is a critical point. If the value is in just learning how to show up, work in a team, and communicate – basic stuff you can pick up almost anywhere – are students being sold a bill of goods about the unique, transformative power of the “right” internship?

The Market Imperative

Why the surge in unpaid labor dressed up as opportunity? Simple. The market allows it. Employers can reduce recruitment and HR costs. Students, increasingly desperate for any edge in a competitive job market (especially in places like Spain, where youth unemployment is stubbornly high), feel compelled to take whatever they can get. They accept low pay, or no pay, banking on the long-term payoff, even if the evidence for that payoff is sometimes shaky or conditional. It’s a classic power imbalance, amplified by the perception that internships are the “best way into the job market”.

Universities play a role here too, by institutionalizing internships, sometimes making them mandatory. While mandatory internships significantly increase participation, the sources suggest that the requirement itself doesn’t seem to be a major factor in which university or field students choose. This feels counter-intuitive, but perhaps students just accept it as part of the package, or maybe they just aren’t that well-informed about these details when making big life decisions.

Where Do We Go From Here?

For organizations, the message is clear: cheap isn’t always good. Treating interns, paid or unpaid, like disposable labor isn’t just ethically dubious, it might hurt your reputation (especially in the age of social media) and fail to deliver the actual benefits like finding future talent. Invest in job design, provide structure, and offer real learning opportunities.

For universities, leaning into practical learning makes sense, especially if it builds that valuable general human capital. But perhaps be more flexible, recognize prior work experience, and push employers to provide quality experiences, not just free labor.

For students, don’t just chase the brand name or the unpaid “opportunity” without scrutinizing the actual job. Ask about the structure, the learning objectives, the actual tasks. Can you “job craft” the role to make it more valuable if the initial design is weak? Understand that the biggest benefit might just be getting any solid work experience, paid if at all possible.

The internship industrial complex isn’t going anywhere. It’s deeply embedded in the education-to-work transition. But we need more transparency, better design, and less exploitation. Because right now, too many students are paying their dues for experiences that are, frankly, not worth the price, while organizations get a workforce on the cheap. That’s not a win-win… that’s just the market being the market, extracting value wherever it can.

Sources:

Bolli, T., Caves, K., & Oswald-Egg, M. E. (2021). Valuable experience: How university internships affect graduates’ income. Research in Higher Education, 62(8), 1198-1247.

Di Meglio, G., Barge-Gil, A., Camiña, E., & Moreno, L. (2022). Knocking on employment’s door: Internships and job attainment. Higher Education, 83(1), 137-161.

Margaryan, S., Saniter, N., Schumann, M., & Siedler, T. (2022). Do internships pay off? The effects of student internships on earnings. Journal of Human Resources, 57(4), 1242-1275.

Rogers, S. E., Miller, C. D., Flinchbaugh, C., Giddarie, M., & Barker, B. (2021). All internships are not created equal: Job design, satisfaction, and vocational development in paid and unpaid internships. Human Resource Management Review, 31(1), 100723.