Minimum wage

Should all interns get paid?

April 17, 2014: 10:45 AM ET

Internships aren't jobs, so the same rules shouldn't apply.

By Sanjay Sanghoee

Young and eager and unpaid?

Young and eager and unpaid?

FORTUNE -- As we head from spring into summer, many college students are planning their vacations while those looking to get their first taste of the working world are likely hunting for internships.

It is estimated that U.S. companies hire about 1.5 million interns each year, half of them on an unpaid basis. Working for free might not be a big deal for some who are just grateful to have their foot in the door, but a class-action lawsuit led by interns who worked on the set of the 2010 film, Black Swan, could change that mindset and have far-reaching implications. The plaintiffs want back pay for their work and seek to bar the film's producer, Fox Searchlight, from using unpaid interns in the future.

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However the lawsuit goes, it could say a lot about how companies should value the work of interns and whether interns have a right to a paycheck like employees

It's perfectly reasonable for interns to be paid. Stipends for living expenses are only fair, especially for young people from low-income households, who may not otherwise be able to afford an unpaid internship. Paying interns also helps employers draw better talent, such as at Google (GOOG), which actively recruits interns and pays them handsomely for working on substantive projects.

Nevertheless, it would be wrong to elevate the fight over intern pay to the level of seriousness accorded to the ongoing debate over raising the federal minimum wage. For the most part, internships are training wheels, and the rules applied to them shouldn't be the same as a regular job. The decision to pay interns should really be at the discretion of employers -- not a matter of law.

This is simply because there are many benefits to internships, regardless of whether it's paid or not; and at times, interns get a lot more out of the internship than the companies they intern for. The biggest benefit is pure work experience. Interns often gain valuable insight into industries and careers that they're looking to pursue. Few start at the top; most successful people work their way up from humble tasks.

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Internships also teach work ethic, which young people don't necessarily pick up in school. Lessons such as humility, the acceptance that no task is beneath one's dignity, and recognition of the chain of command, are all important to learn before a young person is ready to enter a competitive workforce. True, some of those skills can also be acquired as a cashier at a fast-food restaurant but if a young person wants to become a fashion designer, for instance, work experience and a reference from a good fashion design house is a lot more relevant than one from McDonalds (MCD).

Another thing to consider: A simple tenet of the business world is that the more you get paid, the less runway you have to "learn" your job. Interns, especially unpaid ones, are rarely held to the same rigorous standards during the interview process or in the workplace as actual employees are. The expectations of interns in general are lower, and tolerance for mistakes is higher. That's to the benefit of young people, who need time, training, and patience to reach the level of skill that businesses require.

During college I held three gigs: two unpaid internships at Wall Street brokerage houses, and a paid part-time job as a sales associate at a retail store. In my internships, I answered phones, fetched coffee, typed up letters, and many other things. Having three gigs was not easy, but the full load forced me to put my ego aside and learn to work. When I got to my first real job in investment banking and had to work long hours in a high-pressure environment, I was able to handle it. My banking internships may not have paid me, but they did provide me with useful training.

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The danger with filing lawsuits to squash unpaid internships is that many companies, either due to budgetary constraints or simply as a philosophy, may curtail or even kill their internship programs in response.

And while businesses would certainly be worse off without interns, the reverse holds true as well. Without these programs, many young men and women would lose the chance to learn important lessons about work and life that could prepare them for the next step in their development. It is an essential part of our social contract that should be maintained.

Perhaps there is some middle ground to be found that benefits everyone?

Sanjay Sanghoee is a political and business commentator. He has worked at investment banks Lazard Freres and Dresdner Kleinwort Wasserstein, as well as at hedge fund Ramius. Sanghoee sits on the board of Davidson Media Group, a mid-market radio station operator. He has an MBA from Columbia Business School and is also the author of two thriller novels. Follow him @sanghoee

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