I know everyone can't do this because at some point you need compensation, but the arrangement has taught me a great deal about how to program scalable applications that I will definitely use in the future.
Which is why using unpaid internships to screen your hires is unethical. It's an artfully disguised form of class discrimination.
Lots of very smart and hardworking people cannot afford to work for free. Apparently those people are at a severe disadvantage when applying to work at your company. And it's not as if unpaid internships offer financial aid, like schools do.
I think it's fine to screen prospective employees as paid interns. I also think it's fine to try them out as consultants first, or even to have them perform a few hours of work for free, as a test. But in general work should be paid for. Unless, as I've said elsewhere, it is 100% free-software work.
Of course, just because it's unethical doesn't mean it doesn't happen or that you can do anything to change it.
But that's a slightly different argument. Unpaid internships don't impose requirements that would keep you from getting paid elsewhere, so regardless of your economic situation, you can decide how much you want to work. My employer doesn't care if you work 30 hours or 2 hours...they just want to see how much you enjoy doing the work.
Any smart and hardworking individual wouldn't be at a disadvantage because they could find a way to make it work.
For the record I'm pretty poor myself. I have two jobs to pay my bills. But I don't see anyone who has significantly more money having more of an advantage than me.
I've read one of Gladwell's other books, and I think he makes the same mistake you are making. A correlation does not necessarily imply "discrimination" or that the odds can't be overcome. For instance, women have higher GPAs than men, on average. That doesn't mean that using GPA as an indicator of performance discriminates against males. It might mean that males might need to work harder or do something a bit differently in order to get the same GPA.
In the end, my admittedly subjective take is that the biggest factor is individual motivation. We all have our setbacks and obstacles to overcome, but that's just the craps of life. I can verify, however, that it is indeed possible to go from moving out of your house at 16 with no money to graduating Phi Beta Kappa from Stanford (not me, but someone very close to me). Difficult, yes... but it shows that there is almost always a "fighting chance."
Here's what I'd say to that: "I enjoy doing work that adds value. If you have something valuable for me to do for your company, pay me what it is worth. If not, I'll be happy to sit in your air-conditioned office writing free software that has value for me. And then you will be able to see how much I enjoy doing that."
But you probably shouldn't say that out loud. You're not in a very strong negotiating position, after all.
This illustrates another reason why unpaid internship is pernicious: It doesn't teach anyone how well you add value. Because your time is unmetered and unpaid, you have no incentive to spend it wisely. And your employer certainly has no incentive to track it -- at least not out loud. (Imagine the conversation: "Wow, last week you worked 10 hours for free and saved the company $100k. Have a muffin!") What, exactly, is either of you learning? I guess your employer is learning how much value you can be coerced to add, for free, without you noticing or complaining. And you're learning how to look and act like a model employee.
Onward. "You can decide how much you want to work?" Yeah, I guess. I could also "decide" to live in a cardboard box and save on expenses. If I have a family, I could "decide" to never see them because I have to work two jobs instead. If I've got elderly parents I could "decide" not to take care of them.
But, more likely, an unpaid internship requirement will tend to select for young people with no family and a lot of time to spend at work. How convenient. Especially since overtly screening your employees for these traits is against the law.
Do you see why I'm tempted to call this "unethical" yet?
Anyway, none of this is to suggest that you're doing the wrong thing. We have to live with the hands we're dealt. Congratulations for finding a way forward, and good luck with your jobs.
I guess I just don't see this practice as unethical because if I look at the whole spectrum of unethical behaviors, this seems very minor to me. Does that make it excusable? Probably not. But to me this is just about acquiring a skill which I previously did not have. It's not about recognition or compensation.
But even still, I fail to see what my employers are doing wrong. You will be compensated for the skills you bring to the company and what you produce. And if you're middle aged with a family to support you could get a paid job there if you had the skills. If not, you could apply for the unpaid internship.
But nothing bars you from getting hired, so that's why I don't view it as an injustice. At the end of the day, its a choice, and if you didn't like the terms, you are perfectly free to go somewhere else.
I went to graduate school. A Ph.D. program is like being an unpaid intern for six years.
(And, yet, in some ways it's better. There is some pay. And a Ph.D. is a regular old-fashioned apprenticeship program: The bad news is that you're a slave, but the good news is that your adviser has a fairly strong incentive to help you graduate. The commitment goes both ways.
And, of course, if you've got an apartment and a web connection you can teach yourself to be a professional programmer -- especially if you already have a CS degree -- but you can't say the same for semiconductor engineering.)
What about equity? Most stock options end up being valueless. I'd say that a free summer at TechStars (or YC for that matter) would have a greater chance of tracing to some monetary reward than equity in most startups.
So your (somewhat strange) questions, broken down:
"Apply for and get a job" --- Check.
"Work however many hours they want" --- You need to make a commitment; you can't just come in Wednesday this week and Friday the next week. But if "however many hours you want" means "I'll give you days X, Y, and Z of every week", then, Check.
"Wouldn't be expected to produce work we could charge for" --- I have no idea what this even means. Who produces work for no reason at all? Of course we're going to want you to do real work.
"And still get paid" --- Check.
At my unpaid internship, I came in with no programming experience. They basically paired me with sr. programmers so I could learn how to program efficiently, but was still too inexperienced to give me actual client work they could charge for. Believe me, I wouldn't want to charge the client either for the crap that I put out initially. But their investment will eventually pay off because when my skills strengthen enough to meet their standards, they'll hire me.
http://bit.ly/13kxv3
(Timur works for us full-time now, of course).
I don't have to compromise the work we deliver for our clients to put interns on useful projects. And we're a special case: we do hard core programming work on a billable basis. Most of the companies people talk about on HN don't have that problem. There's a million useful things an intern can do without jeopardizing product quality.
Just think how much you'd love it if you were getting paid!