The norm historically is that there was a minimum labor cost incurred for a business, and supply and demand would end up paying people what they are worth, and that businesses had to pay money.  The minimum labor costs were such that the person working had to maintain a minimum income in order to pay for the bare-bones of essentials, or why would they work?  Well, is it possible that this historic assumption could get thrown out the window under certain economic conditions.  And, if so, what does it mean?  In short, could certain economic sectors be sustained on either labor that is never paid, or has to actually pay money to play in that sector?  Please comment on these examples given and explain why or why not, and how markets can eventually iron things out.  I will first look at examples of this trend happening, and then second look at why, and ponder what it means.  First examples I see happening:

* Businesses are heavily depending more and more on unpaid internships.  This is done to an extent that there is questions about whether or not such is even legal.

* Increasingly you see on Craig's List a number of businesses who look for free labor.  They may state commissioned sales, or supposed promised future revenue once they get paid.  Or, they may go the non-profit route.  I recall getting hired buy one business that was offering phone coupon business, then I had to step away for health issues.  When I returned, they did go out of business.  The business was hoping for a miracle with sales people to be able to move their product.  The business dangled promises of equity stakes and so for to people, but nothing in writing.  Also I ran into a paranormal investigative agency which was the same way.  Wanted unpaid interns, and got a number of them.  Also, you see people run ads "Hire me for free".

* Take stuff like insurance sales, that puts the person into it as a business owner, and I had one place tell me you had to have a decent amount of savings before you could enter into it.  It was pay to play.  A number of businesses are built on churn and burn of sales reps, counting on dial for dollars to keep them propped up.  MLMs are particularly notable for this.  People actually pay the business money to work for them.  And, if they can just recruit new sales people enough, with the promise of big pay days, then such individuals can stay in that area.

* Second Life sticks around forever with a sustainable economy built entirely on people who spend money to play in there, to run businesses, create, DJ and so on.  Some make money on tips.  The entire economy consists of clubs and malls opening and closing.  One article in a business magazine says the economy of Second Life is distorted because people keep paying to stay in business.  People also produce a large amount of free content on there also, making it hard for any quality products to really stand out much.

* Look at the "new economy" of the internet.  People have a hard time figuring out viable business models to pay for real journalism.  Newspapers struggle with that.  Free blogging, which is in abundance, is the norm.  Prices are driven down.  And what is the big deal as far as gaming goes?  How about free?  TONS of free games on the Internet.  The industry struggles even with piracy.  You have the makers of Farmville sucking people in on free.  And the flood of really cheap apps are out there also.  Websites are run by volunteers, and the beat goes on.  Even software ends up increasingly being free.  End result is, so long as individuals want to keep working, they can keep working for free, and keep the market flooded with content.  Crowdsourcing is also a norm to, where businesses depend on donated time and effort to solve their problems.  And you have stuff like LittleBigPlanet, where the game's value is based on free content produced for it.  Go into mods also.  And then there is free OS's like Linux.  It goes on and on and on.  The console makers feel concerned about it to, with Nintendo feeling that cheap and free stuff threatening their business.  So long as operating costs are cheap enough, the industry can support people staying in it.

If this is happening, WHY would individuals do this?  Isn't a basic principle that things not paid for don't get done?  Well, yes, but I see the following:

* Businesses hold out internships as a magic ticket into the job market.  There is an institutional compulsion that individuals MUST donate their time to for-profit businesses or they stand little or no chance to even get a job.

* Unless one shows continued production, then there is increasing chance that they won't get hired.  In tougher times, you been out of work a long time, well, you don't get hired.  That is it.  People feel your skills are too rusty, and you don't have a recent portfolio to show stuff.  You need to keep your skills sharp, or you fall behind.  Also, factor in if you are a specialist in an area that produces certain content.

* Certain industries dangle out fame and fortune as incentives.  This is implied and known for the sector.  Business opportunity pitchers feed off this.  And then you have the performing arts, with musical bands out there doing this.  And then take YouTube, and the lust for 15 minutes of fame.  If you don't show up, then you have no chance.  The continuing to perform and showing up is essential to even making it.  But nothing is promised, and for most, there will be failure.  But, 5 other people at least are waiting to take your place.  

* Certain businesses pander to fanboys.  Anyone here think Gamestop could get away with not paying employees if not for labor and civil contract laws that mandates it?  All they would have to do is make the business "fun" enough, and provide access to enough games, and individuals living in their mom's basement would still be there, indefinitely.  How about stuff like The Tester?  Yes, game companies could also be able to get fanboys to line of as game testers for their products;

Ok, maybe I am missing something here, but what I see is increasingly these pockets do exist.  If not, then show why not.  If they do, what does this mean?  What happens if growth areas for economic demand are in areas where there isn't any money, and people who are skilled in it, can't even make a living doing such, but these industries aren't even lacking for free help, and the there isn't any government regulation that limit this from happening?  What is the end result of an economy where business depend increasingly on unpaid labor to stay in business, and are able to stay in business doing such?  Maybe 5% end up rich and wealthy as a result, while the other 95% don't get a cent.  The business sector would support such, because it motivates.  What does this mean?

Ugh, that should be UNPAID labor, not PREPAID labor.

You forgot the biggest reason.

People CAN work for free.

Afterall, we have a safety net so people don't starve and plenty of families are well off enough that they can support people who want to work for free for a bit.

Though people did this stuff for free all the time before too... it was called a hobby. The difference was they weren't enabled to pursue it with more then part time.

Like Einstein... and for every Einstein there were a dozen more failures no doubt.

A lot of the past's scientists were rich kids who loved science and worked at it for free.  That was a case of the opposite really, a traditionally "free work" action getting monetized.

For example... Darwin.  Did Darwin even have a job?

I'm not entirely sure I understand the point you're trying to get across ...

Unpaid work has always existed and people accept these terms of "employment" because they believe the potential payout is worth the lack of one initially. Often these individuals are getting valuable skills in exchange for their free labour, which can translate into far greater employment opportunities elsewhere even if their current internship doesn’t land them a job with the company.

Commissioned sales are the ultimate in performance pay and, while there are lots of negatives with this approach, it tends to attract and keep people who are good at the job. If you walk into many small and medium sized companies the highest earning people in the company are the commissioned sales people (often earning more than the executives) so they’re hardly being exploited by taking no salary in exchange for their labour.

Every year the amount of "Internet Monies" is growing primarily because people will pay you to get access to your audience if you build a popular enough site/service. People are earning 6 figures on youtube posting dumb videos, web-comic artists and bloggers have built significant empires, and countless websites have become profitable without charging users a penny for their services. Media outlets are failing to take advantage of this because they cling to a business model that is broken and refuse to see its flaws.

What happens in the economy where what was traditionally "free work" (intellectual property creation) is the only growth area happening, and there is crowdsourcing as a norm?  Does this mean that, the end result will end up necessitating an increased social safety net, funded by tax dollars, or something else?

My focus isn't on what can, but what the economy could drive things to be.  What if can, becomes MUST, or else individuals stand NO chance of ever making it.  And the marketplace ends up producing a means by which individuals can keep generating IP for free, so they aren't driven out?  In such an environment, don't the rules historically seen with supply and demand change such that the supply never drops, thus being able to drive up prices as the basic rules of supply and demand dictate?  In such an environment, outside of a welfare state, how do people end up surviving and being able to make a living?

I am looking at something, not trying to get any point across.  It is a case of, "If this is true, then what do you see as the impact on the economy"?

If the end result ends up being an entire economy shaped so only 10% of people actually are profitable doing this, and can make a living, and supports a 90% failure rate, and that is the normal model, what happens to the economy?  If all you have are winners and losers, and not the middle guys, then what happens?

Darwin did have a job, but he was from a different era where being from the gentleman class kind of was a job. He was sent on the HMS Beagle to be the naturalist, but also to be a companion to the Captain, since the Captain couldn't associate with the commoner crewers, so it was like science and low-grade friendship prostitution was what he was paid for

Basically we're looping back around to an era where certain people get to make leisure into a career, the only difference being it's not only people who were born rich, but also people who just have "enough" monetarily, and devote their life to their craft, maybe working McDonald's at night but running some sort of hobbyist website during the day

First off, I suspect that the success rate is far higher than 10%; after all, the people who enter into unpaid internships tend to have little/no experience and even if their internship doesn't become a job they're far more likely to be able to get a job after it is done, and few people who would be particularly bad at commissioned sales would apply for a position that was strictly commission based.

With that said, I don't see how any thing you have mentioned is any worse than people going to University. People spend tens of thousands of dollars and 4 (or more) years working towards building skills they hope will be valued, and there is virtually no direct opportunity for employment from these institutions; and the majority of students are being let down because they're developing skills that are worthless outside of University.

Well, this trend I am talking about looks like it is going to run Universities out of business also.  Once businesses shift to not relying on paper degrees, but other things, universities will have problems.  If you shift to where it is boom or bust, then you dont' have a middle class.  All that is left is for businesses to stop using them as filters for people, and they have big problems on their hands.  No one is going to borrow a ton of money just to buy a lottery ticket in hopes maybe they can land a middle class lifestyle.

As far as 10%, how many you think make good money on the internet?  I would say about 10% as being reasonable.  I speak of YouTube stars.  90% is just make no money place.  The thing about the Internet is that it scales.  You end up either doing real well, or end up not making it.  There isn't room for the middle in it at all.  That is because of the viral effect that leads to things breaking out.  And because of the scaling, a small team can end up doing a lot.  Once you hit it, you hit it, like the Epic Meal Time guys or Equals 3.

A college degree is still hugely important, and should not be underestimated. Try getting an internship somewhere important without being in college, or try getting a real job somewhere without some sort of higher education degree (needn't be college necessarily, but technical school, vocational something or other, but it has to be something). The only thing that this might be doing is forcing change on the traditional college experience to push for something more streamlined and cut down on things like the classics and philosophy, which have been on the downslide in universities anyway...