A website is exposing well-known companies that, it claims, offer 'internships' that last for months with little or no remuneration

Famous high street businesses, including Topshop and the recruitment specialist Reed, are being named and shamed by an internet campaign targeting the rise of unpaid and very low paid internships that, it is claimed, is undermining the link between pay and work.

Topshop, the star performer in Sir Philip Green's £2.7bn Arcadia retail empire, is exposed for paying graduates on month-long work experience secondments just £3.50 a day plus limited travel expenses.

Urban Outfitters, the American clothier with stores in a dozen cities around the UK, has been attacked for advertising a nine-month unpaid internship in their merchandising department for people who are "hardworking, organised [and] able to multi-task".

And Reed, one of the country's largest job agencies, has been nicknamed "Greedy Reed" for having advertised 46 unpaid internships within its company, variously described as "intern receptionist", "intern executive assistant" and "secretarial admin internship". The adverts were recently taken down after the company was reminded by the campaign of the obligations of the national minimum wage legislation introduced in 1999. There is no legal definition of an "intern", and the law says that anybody who qualifies as a worker must be paid at least £6.08 an hour if aged 21.

These big corporations, and others, are featuring on the web pages of Graduate Fog, a site dedicated to the travails of young people emerging into the jobs market during what the Bank of England governor Sir Mervyn King said last week might be the country's worst ever economic crisis. The site says unpaid labour is the "big issue" facing people in their late teens and early 20s and the problem may get worse before it gets better.

Employment figures to be published next week are expected to show that joblessness among the young, which currently stands at around 20% among 16- to 25-year-olds, has risen again. Almost a million young people – 973,000 – are out of work according to the most recent figures, which cover the period up to July. And the new figures are expected to reflect a sharp increase in August, as school leavers and new graduates gave up hope of finding a job and joined the ranks at the jobcentre. Research on past downturns shows that young workers, and those less skilled, can suffer particularly badly because, when jobs are scarce, firms can pick and choose, and are able to hire desperate applicants with far more qualifications than the job requires.

However, in this crisis it appears that employers are also increasingly insisting that recruits work for nothing as a way into employment. It is this trend that is most worrying, campaigners claim, because it is dragging down wages and undermining the foundation of modern capitalism: a fair day's wage for a fair day's work.

Tanya de Grunwald, the 32-year-old behind Graduate Fog, said her campaign to embarrass big corporations employing people for no or low remuneration had just begun. "A practice that appears to be harmless – helpful, even – has turned out to be extremely damaging," she said.

"We believe that unpaid internships exploit those who do them, and exclude those who can't afford to do them. Too many large companies are taking advantage of graduates' desperation to gain experience by hiring them as interns and not paying them properly for their work. Interns are being used to cut costs and boost profits.

"Internships are getting longer, with less chance of a job at the end of them. We have seen the rise of the so-called 'serial intern': research from Interns Anonymous [an internet forum] show that 26% of interns have done three or more placements, and 39% of internships last three months or longer.

"This isn't about young people expecting payment for making the tea and sorting the post for a week – in most cases, interns are doing real jobs for months at a time, completely unpaid. They agree to work for free because they are desperate – and hope it will lead to paid work.

"Our Pay Your Interns campaign has turned the tables, showing young people that as consumers, and digital natives, they have more power against these big brands than they realise. Thanks to Twitter and Facebook, our negative stories about the brands that don't pay their interns properly can spread to tens of thousands of people in under an hour."

And there are other signs of discontent too. Last week, in an indication that the problem is common to many developed countries, two interns who worked on the Oscar-winning film Black Swan filed a lawsuit in Manhattan against studio Fox Searchlight. They claim producers broke the law by failing to pay them.

And in May, Keri Hudson, 21, who is in the final year of her undergraduate degree at Bournemouth University, became one of the first interns in the UK to take on their employer and win the right to be recognised as a paid worker. After six weeks of interning without pay for the online review site My Village, Hudson resigned in disgust in January and with the help of the journalists' union, the NUJ, won £1,025 for five weeks' work at the national minimum wage, plus pro rata holiday pay, at an employment tribunal.

Hudson fears, however, that this may be where the interns' rebellion ends. She told the Observer: "Employers realise that there are so many graduates out there desperate for work and they think they can exploit the situation.

"I got so angry because I saw people in nice suits, talking about their private gym membership, stroll into the offices while we, the interns, were doing all the work and making them money.

"I really, really hope that my case is the start of a series of actions but I don't think it will be because people are too scared to confront the companies, certainly without union support. I was helped by the NUJ, otherwise it would have been a little blonde girl fighting a business. It needs the unions to make themselves active."

Carl Roper, a national organiser at the TUC, says unions are trying to respond. In the next few months, the TUC is launching a new smartphone application that will allow people to work out how much they should be paid for their work. Whistleblowers are also being encouraged to come forward. "It is a national scandal, it really is," Roper said. "To say people working for free is Dickensian is to admit that in the Victorian age people didn't get a day's pay for a day's work – but it probably didn't happen as often as it happens now. We are determined to be beside people on this."

But, for many, confrontation with the corporations is not the answer. A more nuanced approach is required, according to Kayte Lawton, an author of a recent report on internships published by the IPPR centre-left thinkthank.

The instinct to simply crack down on internships "is fine from a legal perspective," she said. "But there is a need to have more paid internships and help employers provide those, rather than banning everything. Internships are so important, especially in those sectors where they don't have graduate training programmes and there aren't any other routes in. So if you take a crackdown approach I think it is reinforcing the extent to which only certain people can get into certain areas of work, such as the media, politics and creative industries.

"The reaction we got to our report is that a punitive approach could cut off opportunities to young people. You can't have companies breaking the law – that is not acceptable. But we need more creative ideas about how we can create paid opportunities."

Ian Nicholas, HR director at Reed, said a third of people who undertook internships at his company went on to attain some paid employment with them or one of their clients. "We are extremely proud of our internship programme at Reed," he said. "It launched in November 2009 and the positive response we've received from interns has been overwhelming. We designed the programme to help individuals looking to gain valuable insight and experience into the world of work.

"To be clear, our interns are not employed and do not do a job. The programme is entirely voluntary and intern-led, with the individual specifying the amount of time they would like to spend with us each week. They do not have set working hours and are not required to attend. All of our interns receive lunch and travel expenses."

On the subject of the recently removed internship adverts, however, he admitted: "We removed the adverts in question as they did not reflect our internship programme. We subsequently put more robust procedures in place to monitor any placements advertised by managers relating to our internship programme."

A spokeswoman for Topshop also claimed people on work experience at the firm shadowed members of staff rather than carried out a job.

She said: "At Topshop we have a clearly defined work experience policy and it's something we are very passionate about as a brand. We offer unpaid work experience placements here, not internships, where the individual spends their time shadowing a member or members of the team and learning about what they do. They do not have a set role to perform, or set hours in which to do it.

"As a benefit we offer those undertaking work experience £3.50 towards lunch and we cover their travel costs. Placements tend to run for around four weeks and are solely for those aged 16 and over."

Urban Outfitters declined to comment.