You aren't making anyone do anything. They choose to participate. If they think it's a bum deal, they don't have to do it.
Some alternatives come to mind, but none compelling in the long run:
- I need to practice anyway (but not in the long run, hopefully)
- I am the best and I will win (ok, maybe you deserve what you get)
- I want to be a designer, but nobody will pay me anyway, so at least I get to do my job for free (= ok, so it is a bum job, but I am a loser anyway, so I can't expect anything better).
Yeah I do agree that it's best for people honing their skills and experience; and for people living in low-cost places where payment in high value currency is worth it (rentacoder, elance, ...). Hell maybe it's fun for some designers like programming is fun for some programmers. What's wrong with that?
I'm still really confused over what I perceive to be antagonism towards contests (unless you own a mom & pop design firm)...
"low-cost" places: well, if they want to continue living in low-cost places, sure. But in general, even if you come from a cheap country, why should you be forced to work for little money like that, instead of doing proper consulting?
Doing it for fun: sure, if you have the time... I just think it would probably be more fun to do the same thing for real money and a real assignment. What in the "contest" makes it more fun than working for the client directly?