Your business will only be as good as your lowest level employee says it is. That means, if you pay your interns zilch (with no perks or promise of full-time employment) you are playing with fire. You are essentially inviting impressionable minds to steal your mojo and then turn around and use it against you when they get hired by your biggest competitor.
If you think an employee is going to remain loyal to your company after you treat them like a disposable diaper, you are S.O.L. Pun intended. There is a reason internet moguls like Google provide their employees with free lunch, access to gym equipment and transportation stipends; it costs them MORE money to train new employees than it would be to just take care of the ones they currently have.
That being said, job satisfaction doesn't just come from providing a puffed up salary (or a pool table.) There are lots of ways that employers can show their appreciation for their employees other than regularly scheduled raises based on performance (although raises are always nice!)
1. Good old fashioned compliments--No, this does not include backhanded compliments. Don't give those, ever.
2. Pay for lunch once a week/month/quarter (whatever your budget allows.)
3. Give employees realistic daily goals and provide incentives to those that go above and beyond.
4. Let your employees in on the big picture- No one wants to be just a cog in the wheel. It's important to let your employees know how their performance affects the company as a whole.
5. Ask your employees for input on the company's daily operations- Good leaders are always asking for feedback (and then listening to the responses.)
This list is by no means exhaustive. There are lots of ways to show your employees appreciation if you are committed to doing so. Respecting your employees ensures that they are positively representing your company both in and out of the office.