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I am presenting my analysis of studies that compare nonprofit, for-profit and government wages at the Nonprofit West Coast Data Conference. Since this is an academic conference I must stick to the data rather than state my opinions. However, there is so much I want to say beyond my presentation. Luckily this blog is all about stating my opinion and I don't have to worry about sticking to research protocol. :) So...here are my controversial views on nonprofit wages.
I was outraged when the 2009 Independent Sector policy platform stated “most nonprofit employees earn wages that are considerably lower than their counterparts in either for-profit businesses or government" (p. 3). I have been reading alot about nonprofit wages recently and found studies that reported nonprofit workers made comparable wages to for-profit workers in select industries (Salomon & Sokolowski, 2006, Ruhm & Borkoski, 2003).
It appears many members of the general public, nonprofit workers and funders believe that nonprofit workers are paid less than for-profit workers even though there are studies that contradict this low-wage perception.
I believe many members of the general public, nonprofit workers and funders believe nonprofit workers make less wages than for-profit workers because of funder and IRS influence on nonprofit wages.
1) Many funders want nonprofits to have low overhead percentages. Since salaries are considered overhead, many funders want nonprofit wages to be low and might react negatively to higher nonprofit wages.
Also funders have influence over many national nonprofits especially the Independent Sector which has many high power philanthropists as members of their organization. These members may want nonprofit salaries to remain how they are so if the Independent Sector changed their policy brief to state nonprofit workers make comparable to for-profit workers, they may receive many negative reactions from donors and policy makers.
My counter argument to funder influence is assuming the studies are true that nonprofit workers make comparable wages to for-profit workers. Because of these comparable wages, nonprofits would be able to recruit more qualified workers, and these qualified workers would generate diverse funding beyond the traditional foundation and individual donor sources. It appears that organizations are already moving beyond traditional funding sources and may not need to ask for funding from these sources if this trend continues. I believe higher wages can also lead to increased organizational efficiency.
2) The IRS is another key influence in the nonprofit wage arena because they regulate 990 reporting and executive compensation. The IRS recently changed the nonprofit tax form 990 to get more information from nonprofits and as a result many nonprofits are struggling to learn the new reporting requirements. The IRS also started cracking down on nonprofit executive compensation levels (Guidestar, 2007) and determining what compensation levels are appropriate. They may begin to regulate all nonprofit pay if they perceive it to be too high.
As a counter argument to the IRS influence, as stated above, I believe higher wages can allow for nonprofits to recruit more qualified workers. These qualified workers can find innovative ways to operate nonprofits that turn away from the traditional 501c3 charities. This trend is already starting to occur with organizations that are doing well without having to be a 501c3.
These counter arguments help look at nonprofit wage in new ways in order to recruit qualified workers into the sector.
What do you think? Do you believe the nonprofit l0w-wage perception? What are some ways nonprofits can look at wages in a new way?
I've never heard the IRS and funder influence argument. And I don't know what the public perception of nonprofit wages is.
but I do know from my own experience working at a 501(c)3 NPO, that we get pretty paltry salaries. And that's okay. Because we're not working there for the money; we're working there because we care about the mission. Sometimes I think I'd feel guilty getting paid more when I know that any profit we make should be reinvested back into the organization. Just my thoughts.
I've been working in the NPO sector for 10 years, and yes, our salaries are lower. For what I do - marketing/graphic & web design, my salary is drastically lower than what I could make in the for-profit sector. Sometimes, I do still feel a twinge of jealousy when talking to my for-profit designer friends who are taking fantastic vacations. But, like Nisha said, we're in this for the mission not the money...and at the end of the day, I still love what I do - and that's very important.
I don't think the IRS influence is a real factor in salary benchmarks, but I do believe funder perception is. Every charity is measured by Charity Navigator, BBB, and other organizations on a variety of metrics, including overhead. NPOs feel pressure to keep overhead low, so that their cost-per-dollar raised ratio is favorable on those sites, and that they present a clear view of how much of each dollar raised is funding mission. The reality is, that staff are the mission drivers, and the perception that salary is an overhead that must be reduced is a fallacy. Without staff, you have no mission.
I worked for a 501c(3) my first year out of school, after interning there the year prior. The pay was comparable to work in the private sector for what I did, but the charity is heavily donor funded with 90 to 92 percent of the money going to programs and that is what their donors want to see. It was a humanitarian agency so there may be a difference between humanitarian/refugeee non-profits and other, I'm not sure.
I read a very similar article or post the other day somewhere, about the dearth of compensation in non-profits hurting their ability to get the best candidates for the positions. I can't remember where I read it, a lot of NGO, Non-Profit, and Development papers and emails pass by me daily, there was no real evidence to suggest the compensation really hurt the most successful of that sector, it was a suggestion.
I wasn't aware of the IRS influence or changes, as I am not familiar with the organization of the programs.
I have seen the opposite. My friends in the non-profit world have more vacation days, better work/life balance options, more options for continuing education (partial tution and time off to go), overall less hours per work week and higher pay for an equivilant work load.
I think there is truth that overall they make make less money in the non-profit world, but when you consider the benefit side I think they make more than the average private sector employee. It seems that executive and senior level people are the ones making less, not the rank and file.
I'll vouch for donor influence for sure. Because we're often fundraising here in the non-profit sector, we are susceptible to lower wages. When I was recruiting for a position in a non profit, it was the thing that I heard the most from friends and colleagues: That the pay just isn't enough.
I don't think your views are that controversial. What they do is bring to light the impact of heavily donor funded work on nonprofits. I don't know much about the IRS' influence (I'm Canadian, but we have similar issues here as well).
As for doing what we love for the sake of loving it: I love that i can make a difference. But I also like financial security. Too many people in the nonprofit world hover around financially precarious situations after dedicating their life to the greater good. It would be nice to not have to worry about financial security so we can continue to do what we do.
I have a different perspective: in my experience the wages are lower because the jobs are structured differently. For instance, I had a position where I was technically a manager but was essentially an admin. The pay was higher and the work standards and skill requirements lower compared to corporate admins who do the same work.
Ultimately, I left the nonprofit sector less because of the money than because I wanted to do the kind of intellectually challenging work I did at previous corporate jobs.
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