New research by Dr Angus Holford, Access to and Returns from Unpaid Graduate Internships, uses the data from the Destination of Leavers from Higher Education (DLHE) survey of graduates from English and Welsh universities between 2005 and 2011, to study the returns to taking an unpaid internship six months after graduating from a first degree, on labour market outcomes a further three years later. The research compared interns with individuals who went straight into paid work, into further study, or ‘something else’, by pairing each one with a ‘matched’ individual, according to their demographic characteristics and their reported motivations for taking the job or internship they are in.
The results show that both particularly advantaged (e.g. privately schooled) and disadvantaged (e.g. from areas with a high unemployment rate) graduates are more likely to be tracked into doing an unpaid internship. But they support the picture of a segregated market in which the social and financial capital that graduates from better-off backgrounds can access gives them an advantage in accessing the ‘good’ internships with a relatively high labour market return.
Nevertheless, almost everyone taking an unpaid internship can expect to do worse three years later than had they not: former interns face a salary penalty of approximately £3500 per year compared with those who went straight into paid work, and £1500 compared with those who went into further study. The negative returns to taking an internship are merely significantly smaller for those who were privately schooled or with parents in professional occupations.
Only compared with those doing ‘something else’ (including travelling or remaining unemployed) do interns gain any significant benefit on average, being 6.4 percentage points more likely to be ‘very satisfied’ with their career.
Dr Holford said: “These results argue for improving access to and reducing the opportunity cost for students from lower socio-economic backgrounds, of taking relevant experience for ambitious careers. Expanding opportunities during undergraduate degrees, and enforcing public and transparent recruitment processes for all placement positions would be good ways to do this. So would enforcing the law that those “working set hours, doing set tasks and contributing value to an organization” should be paid.
“Finally, improving the information available to students and graduates about the likelihood of different outcomes from internships in key fields would go a long way ethically. We all need to understand the rules of any lottery we are entering.”
IZA Discussion Paper IZA DP No. 10845: Access to and Returns from Unpaid Internships, Angus Holford
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