FORTUNE — Condé Nast seems to have a serious case of sour grapes, and purple isn’t even in season.
The magazine company that publishes titles like The New Yorker, Vanity Fair, and Vogue has decided to shut down its internship program a mere five months after two former interns sued the publisher over its practice of not paying interns.
Condé Nast declined to comment on the matter.
In June, Lauren Ballinger, who interned for W Magazine in 2009, and Matthew Leib, who interned at The New Yorker in 2009 and 2010, sued the publisher for allegedly violating labor laws by paying them the equivalent of less than $1 per hour. The case against Condé Nast, which is still pending, is part of a recent wave of similar suits over unpaid internships filed against high-profile employers in media and entertainment such as Hearst Magazines, Fox Searchlight Pictures, and the Charlie Rose show.
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The movement against unpaid internships was picking up steam in June when it got its biggest jolt from a judge in the case against Fox Searchlight, who ruled that the studio had violated federal and New York minimum wage laws by not paying two interns who worked on the film Black Swan.
Public opinion is following suit. There’s now a general sense “that unpaid internships are not only unethical but also illegal,” says Andrew Ross, professor of social and cultural analysis at New York University.
Condé Nast stopped short of paying its interns. But other employers see that even if internships no longer equate to free labor, they’re a worthwhile investment of time and money. Fox Searchlight, for instance, recently changed its policy to pay interns, as did NBC News, whose parent NBC Universal was sued over its unpaid internship program at MSNBC and Saturday Night Live. The Nation magazine announced in August that it would pay its interns minimum wage for the first time ever after its interns wrote a letter to the editor to protest their $150 weekly stipend.
The unpaid internship may be dying, but the paid internship will live on.
Nearly two-thirds of recent college grads took part in an internship or cooperative education program during their undergraduate years, according to a survey by the National Association of Colleges and Employers. That represents the highest overall participation rate since NACE started keeping track in 2007.
In a post-industrial, college-educated labor market, more positions require on-the-job experience even for entry-level vacancies, says Anthony Carnevale, director and research professor of the Georgetown University Center on Education and the Workforce. Internships give young adults an essential bridge between college and the labor force, he says. In fact, it’s the dearth of such conduits that’s contributing to what Carnevale calls young adults’ “failure to launch.”
In 1980, 26 was the average age at which young adults reached medium wage and held a job they were likely to keep for at least three years, according to a September 2013 study that Carnevale co-authored. In 2012, that age was 30. Those figures are supported by recent stats from the Bureau of Labor Statistics, which show that just 78% of 20-34 year-olds have a job or are looking for one because of the discouraging economy — the lowest percentage since the 1970s.
And it turns out that paid, as opposed to unpaid, internships are a viable method for recent grads to move from school to full-time work: A NACE survey of 2013 college graduates reported that 63% of paid interns received at least one job offer, compared to 37% of unpaid interns.
Young job seekers aren’t the only ones who benefit from internships. Hiring an intern for a full-time position establishes loyalty between the employer and employee and helps ensure that they’re right for each other, says Carnevale. That reduces turnover and saves the cost of filling an open position, which a 2012 report by the Center for American Progress pegged at one-fifth an employee’s annual salary. Internships stand to gain even more significance to employers as the labor market improves, says Carenvale. When the labor market is loose, an employer can more easily find people who meet its qualifications, he says. As the labor market tightens and qualified candidates are harder to find, homegrown talent takes on greater value.
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Given the recent spate of lawsuits and the Black Swan ruling, offering paid internships is the only way for employers to cash in on these advantages. “It’s worth paying minimum wage to create a pipeline of talent into the vocation,” says David Yamada, director of the New Workplace Institute at Suffolk University.
The dual benefit of internships is clearly understood: Employees offer — and young adults accept — at least 1 million every year in the U.S., according to Ross Perlin, author of Intern Nation, who notes that there is no formal system for tracking them. Unpaid internships gained prominence in the recession, when companies sought out free labor, Perlin says — nearly 48% of 2013 grads had an unpaid gig, according to NACE. But the flux of lawsuits against the practice and a greater awareness of its unfairness seem to be slowly turning that tide.
In this case, the typically trendy Condé Nast is simply out of style.