We currently have a big issue placing students (undergraduate) in work placements, because there is a feeling amongst the staff in some organizations that they are being used to fill in positions that used to be paid (not necessarily high level or requiring huge knowledge, but positions nevertheless). It is worse in organizations which are undergoing or have recently had job cuts, for obvious reasons.
I think this is an issue. The university I work for pays its interns and won't advertise free internships, but they also employ recent graduates to work in offices and do admin which again was done previously by longer-term paid workers in those sectors, it's all about driving down budgets.
I think this is less the case in charity shops, say, but there are then issues about whether charities, not all of whom plough a huge amount back into helping people, should be VAT exempt and have large numbers of free workers- how on earth can local businesses compete with this?
I don't know the answer, but increasingly voluntary work is being used to plug gaps where the work was paid, especially in social care. Fine if you are a retired person on a decent final salary pension and enjoy helping people, less fine if your job has essentially been taken over for free by a volunteer, which has happened to several people I know in several different sectors now.