Pay to work for free: good deal?

Pay $1500+ to work for free in a company halfway across the world. Would you?

This article originally appeared on the Oxford Blue and was co-written by Jack Chong (me) and Phoebe Hennel

In April, we received a rather alluring email from TARGETjobs.

At the header, a model sat smiling in a tropical location, posing with her Microsoft Surface Pro.

“From Silicon Valley tech startups to Bali-based social enterprises, get an international internship experience for organisations — anywhere in the world.”

Due to COVID-19, businesses were closing their doors to interns.

So this seemed promising to many students who were anxious about their summer career plans.

Getting a remote internship with exciting ventures half-way across the world? Too good to be true.

The catch? They started at $799/month. We’re not talking salary; you yourself had to pay $799 to get a virtual job with no paycheck.

Several alarm bells went off for us:

  • Have the gap year programs “pay to volunteer saving turtles” and “pay to shadow surgeons in the Dominican Republic to get me into medical school” evolved?
  • Unpaid internships are bad enough, and were banned in 2017 as an “an abuse of power by employers and extremely damaging to social mobility”. So who would pay to work?
  • Will this disrupt the job market in favor of the privileged few wealthy enough to afford these programs?

What’s the law?

The UK law states that an intern is entitled to the National Minimum Wage if they count as a worker, and the employer cannot dodge this simply by drawing up a contract denying that the intern is a worker, or by saying they are a volunteer instead. The exception is if it is part of a UK-based further or higher education course.

So what are you actually paying for, and how do these companies climb through the legal loophole? Let’s look more closely at two popular businesses offering these programmes — Start Me Up, and Virtual Internships. Start Me Up was founded by an Oxford PPE graduate named Clare Harrison. Before Covid-19 hit, their remote interns all hung out together at a residential co-working space in Bali. Startups get paid to take students on board, despite students doing work for them. Students pay to be taught courses delivered by the agency — “upskill”, while also getting internships that they would not have gotten had they not paid.

Virtual Internships offers a more expensive service starting at $1,595, including a guaranteed internship, Rosetta Stone online language access, group webinars, mentoring, access to some lesson content on skills such as time management and CV creation, and some academic credits at a partnership university.

Could this be the loophole? The internship becomes just one component of an educational programme. However, we can’t help but get the impression that these “educational” components are just fillers — it is difficult to see what a Rosetta Stone Spanish subscription has to do with a data scientist role for an Indonesian fintech venture. The credits at their partner American university seem only a dead giveaway that you paid for a job while justifying a charge on a credit-worthy course, as in the US, university credits are expensive.

What’s its social impact?

On the one hand, in an already fiercely competitive job market, rich kids getting guaranteed internships and a CV boost can feel demoralising. If it weren’t for generous bursaries, many Oxford students would simply have to rule out summer internships in London, with rent and expenses costing an individual an estimated £926/month. There’s a reason unpaid internships were outlawed: they favour the rich. Especially in competitive sectors like journalism, law and fashion, companies are in a position to offer them unpaid because the spot will certainly get filled. Arguably, these paid-for internships are a step further into this class division.

On the other hand, is it as destructive for social mobility as it seems on the surface? We spoke to one edtech startup executive — Daisy Hill, COO of Zzish — who has in the past been offered money to take on an intern, but turned down the payment because they loved the intern so much.

“People who want to work in underfunded startups have different options to those wanting to work at big finance firms. Startups don’t have the funds, reach or time to take on a load of overseas interns when they barely have time to do their own job. The agencies in the middle are doing a valuable service in an industry without its own internship structure.”

This reflects the underlying market failure in the early careers “talent-market”.

An economic analysis of this market failure

To simplify the analysis below, we focus on internship/graduate role hiring for startups only.

First, on the demand-side, startups do not want to hire university students because they are not equipped with the right level of skills. For most job openings, startups look for candidates with a specific skill set. They might look for candidates with software engineering skills in multiple languages, or data analytics skills. Even in the realm of non-technical positions, startups want to bring in “star sales”/”star operation leads” who can just outperform in KPIs, or even bring in extra revenue. Unfortunately, a current university student or a recent graduate cannot really bring in extra value to the startup, at least not at the beginning of their careers. In addition, startups simply cannot compete with Corporate HRs at a level playing field. Startups individually do not have enough budget to spend on wining and dining undergraduates to apply to their graduate schemes.

Unfortunately, a current university student or a recent graduate cannot really bring in extra value to the startup

On the supply side, students are unaware of the types of jobs offered by startups. Big tech companies e.g. Facebook, Amazon, Google etc. brain drain STEM talents away from startups. And for non-technical degrees, ask the PPEists. Where do they end up? Either in finance or management consulting. Compared to corporate jobs, pay at startups is also significantly lower. This is not to mention that the startup career path is seen as “unsafe” with limited exit options. Working at startups, for university students, is just not sexy.

When approached for comment by The Blue, Start Me Up’s founder Harrison discussed this:

Advertising on platforms like TARGETjobs is expensive and so outside the reach of most startups and social enterprises. Many small organisations don’t have their own HR team so they don’t have the time/resources to post on university careers sites. I think that’s a shame as it means that the organisations students typically hear about are the opportunities from the big corporates.

This was something I felt strongly about at university. I remember thinking that there weren’t many options available as the big budgets of huge grad hirers like PWC and Deloitte can end out drowning out other opportunities.

Captured on Start Me Up’s Facebook page

The nature of the startup career path is that there is none. Unlike in investment banking, there is no “spring week-summer internship-return offer” pathway. Furthermore, there is no structured training. A startup hires you because you can start working and bring in value now. A bank hires you because they can train you with pre-internship training programs. And most importantly, because they make sure you work 100 hours a week.

The mini-economist inside me tells me that the perfect solution to this market failure is to place students with the right skills in the right roles. Competitive candidates belong to competitive and well-paid jobs. Less competitive ones belong to less-competitive and less-well-paid jobs. What a perfect world…. except that homo economicus all want to be overqualified and be overpaid.

And companies like Start Me Up and Virtual Internships are making students more competitive in the job market by delivering online courses and arranging internships to build their CV. For startups, they offer a better hiring service than job-listing websites. And they pay startups to take in interns. If you were an employer, would you take an intern, offload some mundane work to them, and just take the money? This is the BEST deal in the world.

Homo economicus all want to be overqualified and be overpaid.

If you are looking to intern at a startup, we’d encourage you to take initiative to reach out to them directly. Sadly, if you do not have the right skill sets, startups might ghost you. However, this is just a numbers game. The more startups you approach, the more replies you get. Fortunately, you will also avoid the administrative fees and (probably) unwanted Rosetta Stone Spanish subscription and lectures on “entrepreneurship”. Even if there are no advertised vacancies, they still might take you on. There are non-profit agencies, for example Jack Chong’s UnbOx, which can do the legwork for you. Phoebe is currently doing a paid virtual internship for strategy consultancy startup Evolution Partners, where she can be confident that she is delivering real value for the firm because they are paying her for it.

What’s the judgment?

These companies are like private tutoring — unfair to those who can’t afford it, but there’s a market for everything. You pay to be tutored on A-Level Maths so that you can get an A*. Similarly, here you pay to be tutored on “career skills” so that you can have a job with an actual salary in the future. We hope that they will not expand to larger enterprises, and immorally infringe upon those who cannot afford fees, and only provide “internships” that would not exist otherwise. Maybe one day the perfect solution — placing students with the right skills in the right roles — will exist.

Disclaimer: This article only reflects the authors’ personal opinions and not necessarily those of any organization, including The Oxford Blue.

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About the author:

Jack Chong | LinkedIn

Feel free to reach out to me on LinkedIn. Always keen to hear your story 🙂



I review products, strategy and startups. Twitter: @jackchong_jc

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Jack Chong

I review products, strategy and startups. Twitter: @jackchong_jc