A recent ruling against Fox Searchlight Pictures from a lawsuit where former interns sued the company because they weren't compensated with the minimum wage—and a host of other class action lawsuits from former interns of companies ranging from Warner Music Group and Atlantic Records to Conde Nast Publications—may seem like a David vs. Goliath story. However, the actions of these interns are going to end up hurting students all across the country—and ultimately our country's competitive edge.
At some point, many people in our country crossed the line that separated respecting money and worshiping money. However, now we are in a precarious position where we may cross a line of no return. That line is the one where people think that the only thing that has value is money.
Before money was created, individuals mutually bartered goods, services and time. Even now, small businesses facing cash flow issues are looking to alternative ways to fund their businesses, such as collaborating on marketing endeavors instead of using marketing dollars. But now a bevy of short-sighted interns and even shorter-sighted courts have become blind to the alternate benefits that you can garner in exchange for work.
The majority of students—or those who apply for internships—often have little-to-no relevant skills. Internships are a fantastic way for a student or other low skilled individuals to get a taste of a real work environment. They can see up-close-and-personally if a particular industry or company is a good fit for them. They can make key relationships that can provide a lead to or a recommendation for a future job, or even some ongoing career insight and guidance. And whether they pick up real skills or experience, or just create the perception that they have some, these real-world opportunities give students an advantage in being hired. Sometimes, an internship even leads to a permanent position at that very company. An internship isn't just valuable; as MasterCard would say … it's priceless.
However, interns, whether skilled or not, create a measurable burden on the companies where they "work." Even without compensating them, interns create time costs, opportunity costs and often monetary costs for those who have to take the time to house and train them. The internship provider may get some low-skilled tasks accomplished, but they give up a lot to provide training and insight, particularly to someone that they know likely won't be working there at the end of a short stint.
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Forcing businesses to pay the minimum wage for interns ignores both the costs incurred by the host business and the value received by the intern. Ultimately, it will lead to fewer businesses offering internships, as they weigh the cost of having to pay the interns in conjunction with the soft costs of having interns to conclude that it isn't worth it. The ones who lose out in this scenario in the short-term are the students. In the long term, we all lose out, as we have less prepared individuals entering the workforce.
We should be encouraging more—not fewer—internships for students. Students should be urged to try out several positions with a variety of companies in different industries during their studies. This gives them a broader network and more insight into where they can make the best impact post-graduation or after a job switch. However, these lawsuits and the narrow judgment of all involved threaten that reality.
It's time to pass a law to allow companies to "hire" unpaid interns at mutual discretion. If both parties agree upfront that they are getting value from the arrangement, the government should not intervene. That's what free market capitalism is all about. If we don't, we risk hurting students and other interns—the very individuals that the legislators and courts are trying to protect.
_ Carol Roth is a CNBC contributor, the host of WGN radio's "The Noon Show" and best-selling author of "The Entrepreneur Equation." Follow her on Twitter: @CarolJSRoth.