It's working for spec on the off-chance your designs might get chosen. THe odds are stacked against you and the competition devalues your work. It's the type of thing that is historically rampant with IP theft, abuse, underhanded tactics etc.

Designers should not be working on spec; ever, especially college educated designers. It's tempting to get these projects under your belt for the experience and the portfolio but once you go down that path, it can be hard to raise your rates up to a liveable wage when everyone else is working for free or cheap.

If you're good and can market yourself you can always find people to pay the rates you want. If you are missing one of those things you wouldn't be getting the rates you want anyhow. Your work is worth exactly what someone is willing to pay for it. If you can't find people to pay what you want then you are overvaluing your abilities.

Some day I hope to start up a bunch of huge computer labs throughout SE Asia and Africa so that kids can come in and do custom programming and graphic design, undercutting all of us Westerners. I'd rather have disadvantaged teenagers drawing little icons for $5 a hour than working as hookers to get $10 a night--even if it means that designers in the US won't be able to afford to live in downtown S.F., drinking $6 cups of coffee, and buying $5K of gadgets every year.