The plight of the unpaid intern is improving. Not because businesses are paying more for summer helpers, but because colleges are stepping in to pay when companies can't, or won't, compensate student hires.
Schools have long granted stipends for stints in nonprofits and the arts, where unpaid labor is common, but now they are paying the way for students to work at profit-making enterprises, including a New York money-management firm, a Washington, D.C., lobbying firm and even a General Motors Co. GM -3.04% plant.
Colleges' job-placement rates have come under intense scrutiny as cost-conscious families, stung by rapidly rising tuition, want proof that universities can deliver on both academic and career fronts.
Paying the Way Some ways that colleges subsidize unpaid internships:
Washington & Lee University
Wages and stipends vary; general stipends are $1,000-$3,000. Recent employers: Chefs Feed, a restaurant app; public relations firm Peppercom
Average stipend is just under $2,400. Recent employers: Washington law and lobbying firm Williams & Jensen PLLC; Priority Capital Management
University of Richmond
Interns receive $2,400-$4,000 for up to 10 weeks of work; average stipend $3,700. Recent employers: Memorial Sloan-Kettering; Christie's
While career-services officers say they aren't thrilled to foot the bill, they need students to gain the skills and experience that will eventually get them hired.
The practice of "hiring" unpaid interns has come under renewed fire lately, with a federal judge's ruling last week that a movie studio's unpaid intern program violated labor laws.
University of Richmond has supported unpaid research and nonprofit work for years, but created more than 100 new fellowships this year for students with unpaid internships at for-profit enterprises. In all, the school awarded 300 fellowships, averaging $3,700 apiece. Employers ranged from a New York City hospital to Christie's auction house.
Ramsay de Give for The Wall Street Journal More colleges are helping to pay when companies don't compensate student interns. Pictured, Ujjwal Pradhan, a student at Hamilton College, received a $4,800 stipend for his unpaid position at Priority Capital Management, a money-management firm based in New York.
Funding for the awards came from alumni and other donations, as the development office spread word that students needed additional support for the internships.
Defiance College in Defiance, Ohio, is enticing local employers to hire its students by covering half of minimum-wage earnings for up to 10 hours a week, or about $38.50 a week under Ohio rates.
It listed 74 internship opportunities in the latest academic year, with employers including a veterinary clinic, a Biggby Coffee franchise and PSMI Corp., a firm that handles some staffing for General Motors.
The incentive is small, and some participating firms say they would hire the students regardless of the funds, but it does put Defiance students on employers' radars.
"$40 is $40," says Sue Strausbaugh, who runs the local Biggby.
Erin Rhodes, a Defiance marketing major, is spending her summer running quality-control reports on engine blocks produced at the local GM plant, earning $10 an hour.
Ms. Rhodes, who just completed her second year at Defiance, says the data-heavy project doesn't exactly fit with her major and career goals, but she is glad to have the line on her résumé.
According to Don Schooley, a PSMI program manager, GM picks the talent, but PSMI handles payroll.
A GM spokesman says the company was aware some of the workers' wages were being paid by Defiance College.
Hamilton College received 187 stipend applications this year, up from 116 last year, for unpaid positions in government, nonprofit and for-profit enterprises.
Students must secure internships on their own—with help from the career services office, if desired—and then apply for the aid. This year, the 66 awards averaged just under $2,400 apiece.
Ujjwal Pradhan, a rising Hamilton junior majoring in economics and mathematics, received a $4,800 stipend after securing an unpaid position at New York-based money manager Priority Capital Management LLC.
Mr. Pradhan spends his days analyzing corporate bonds and compiling research reports on potential investments. He says an analyst at the firm is serving as a mentor for the summer.
The 20-year-old Nepal native says he couldn't afford to work for free, but struggled to find a paying finance internship, since most Wall Street internship programs aimed at undergraduates target rising seniors.
Hamilton's career center introduced Mr. Pradhan to Jim Ely, the firm's chief executive and founder, and offered the stipend to cover rent, food and transportation.
"It is primarily an educational program," says Mr. Ely, noting that interns don't make investment decisions or deal directly with clients.
As long as companies aren't forced to pay the trainees, critics say, they probably won't.
It is "laudable" that schools want to help all students, not just affluent ones, get ahead in the job market, says Ross Perlin, author of Intern Nation. But funding unpaid jobs at for-profit employers, he says, "may actually be supporting an illegal internship, at an employer who can very much afford to pay."
The financial downturn increased the "sleaze factor" among employers, Philip Gardner, director of Michigan State University's Collegiate Employment Research Institute, wrote in a recent report on unpaid internships. Employers "offer work they need done, under the guise of internships, but without pay."
Federal laws mandate that unpaid internships meet certain criteria, including that the experience benefit the intern and the employer derives no "immediate advantage" from the intern's work.
On campus and off, the tide of opinion may be turning against unpaid work.
In addition to last week's ruling that Fox Searchlight Pictures violated labor laws by not paying two production interns working on the 2010 film "Black Swan," a former intern on Monday filed suit against Warner Music Group and Atlantic Records with similar allegations regarding his 2007-2008 unpaid internship, the Associated Press reported.
A Fox spokeswoman said the company is "disappointed" with the ruling and is seeking to have it reversed. Fox is owned by News Corp NWSA -1.31% ., which also owns The Wall Street Journal.
Warner declined to comment on pending litigation.
Earlier this year, New York University students circulated a petition asking the career services office to stop posting ads for unpaid internships, calling such jobs "illegal" and "exploitative."
So far, however, schools seem unwilling to halt the practice. A recent survey from Michigan State University's Collegiate Employment Research Institute found that nearly 100% of schools welcome requests for unpaid labor from government and nonprofit agencies, and upward of 84% allow for-profit companies to do so.
Originally Posted On: Wall Street Journal By: MELISSA KORN
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