You are assuming that unpaid interns would otherwise take the jobs of paid employees. In this regard, you are categorically wrong. Read my post: we don't want to hire anybody. From the post: It's a position "that doesn't exist." Offering to work unpaid is a hack that get's you in the door.
Absolutely. But it doesn't have to be within your company. Rather, its a tragedy of the commons.
Lets use my migrant farm labor example again. Many farms in southern California will tell you they can't pay minimum wage and stay competitive with the farms who are using illegal labor. That's because the de facto hourly wage for a farm worker is closer to $2/hour than $7/hour, because of lax labor law enforcement.
I don't think its hard to see how the same is true of programming jobs being taken by unpaid interns. How is my group payment service that pays its employees supposed to compete with WePay that uses unpaid labor?
Simple. You'll compete and you'll win (assuming we control the other variables, that is). Why? Well for the simple reason that programming != menial labour. If you pay a premium to have a small group of elite programmers working for you, and WePay has a small group of $0 programmers doing -$10 work - you'll win in the long run.
This discussion is a) not about programmers. And even if it were - b) the argument doesn't apply. You get what you pay for. Nobody is arguing that you should ditch your technical department for a team of unpaid, inexperienced code-monkeys, the same way nobody is arguing that you should ditch your administrative department for a team of unpaid, inexperienced business students.
Startups are too small, and too close to the market to do things like that. They simply won't survive.
I'm not sure it's an especially effective hack. Min. wage is what, less than a tenth what you'd expect to pay a technical person. From experience, training a new guy is going to take more than 1/10th of my time, (and I'm overpaid; Min. wage is closer to 1/20th of my bill rate.)
I know I've turned down offers for free work for this reason, and I'm spending my own money (meaning I'm quite a bit more tight fisted than most startups.)
Although they could also spend most of their time learning and not return even minimum wage value, I guess it's a trade off.
I'm just saying that compared to the value of my time, adding in a minimal paycheque doesn't make the intern significantly more expensive, and it makes me feel a lot better about asking him or her to do stuff.
If an employer isn't willing to pay a token wage, I question how much (expensive) time they will give to that intern in training and mentoring. I mean, just having real problems can be valuable, but you can get that for yourself. Buy a $8/month VPS from me and write something. The advantage you (the intern) are getting out of an internship is the mentoring; working with people who are better and more experienced than you are.