This op-ed was originally published by the Chronicle of Philanthropy. It is reprinted here with permission.
The rally outside New York City Hall was a familiar scene of speakers and placards decrying the injustice of near-poverty-level wages. The hundreds of workers gathered that day in March demanded a minimum wage of $21 per hour and a 6 percent cost-of-living adjustment — not unreasonable given the cost of living there.
What made this rally different was that the workers were not protesting Amazon or other large corporations. They were nonprofit workers seeking better pay from the food pantries, domestic-violence shelters, and foster-care groups they serve.
In New York State, human-service workers earn only 70 percent of what their counterparts at government agencies are paid — not enough to survive in normal times, let alone during a period of escalating inflation. Given the demographics of the state’s human-service workers — 66 percent women and 68 percent people of color — low nonprofit wages are fueling New York’s poverty and inequality.
The story of low wages for nonprofit employees is not unique to New York. Nationally, nonprofits employ about 10 percent of the entire private workforce. That’s 12 million paid workers — nearly as many as the entire manufacturing field. Many of those employees, with the exception of higher-paid college and hospital workers, earn $4 to $5 per hour less in terms of total compensation than similar workers in private industry. In my home state of Massachusetts, a quarter of all adult recipients of the Supplemental Nutrition Assistance Program are full-time workers, and nearly 10 percent of those are employed by nonprofit organizations.
Many factors contribute to the nonprofit wage gap. For some organizations, a reliance on donations or government contracts puts a ceiling on employee compensation. For others, mission-first means serving the cause even if it means sacrificing the financial well-being of the employees tasked with doing the actual work.
This is unacceptable — especially during a time when the nonprofit world is increasingly focused on the importance of aligning mission and human-resource policies. But figuring out how to make that alignment happen is the tricky part.
How We Made Changes
The organization I lead, the Center for Progressive Reform, faces challenges similar to that of many nonprofits, and we strive to provide a living wage and good benefits to our staff. We recently embarked on an effort to assess our compensation practices and to hold ourselves accountable for standing by our staff in tough times. I believe our experience can be instructive to other nonprofits.
Most of our staff live in high-cost metropolitan areas where housing and child care represent a huge strain on family budgets. Inflation has compounded the problem. Despite offering solid annual salary increases of 4 to 5 percent a year on average, it was clear that some of our staff members were struggling. Several talented employees left for larger institutions that offered higher salaries.
We set out to address salary erosion in three ways. First, our board established a contingency fund to augment salaries for this year only to help mitigate the impact of inflation. Staff received a $1,000 payment in the spring of 2022, which will likely be renewed in the fall if inflation continues through the year. The fact that we are a virtual organization with no office headquarters costs — and no commute for our staff — allows us some budget flexibility and makes gas prices less of a bite.
Second, we upgraded our benefits package, including providing a modest allowance to offset internet or utility costs for people working from home. We also added an extra week of vacation for all staff to be taken at the end of the year. And we now offer short- and long-term disability pay — something we consider essential, particularly in the Covid-19 era. These changes meant a lot to staff without blowing up our organizational budget.
Finally, the Center for Progressive Reform made explicit and public our commitment to pay all our staff more than a living wage. To achieve that goal, we went outside our organization to partner with a group called Living Wage for US, which certifies for-profit and nonprofit organizations that commit to paying living wages. (Disclosure: I supported the development of Living Wage for US back in its early days.)
Drawing on its own research as well as analysis from the Economic Policy Institute, the group assesses the costs to live in specific areas of the country, including housing, food, education, child care, and health care. It then sets a wage-and-benefits standard based on where different employees reside. This was especially important for us since our employees are scattered throughout the United States.
To meet the wage-and-benefits standard, we allowed Living Wage for US to conduct an individual assessment of each staff member’s living-wage costs and salary-and-benefits package. The assessments are updated and shared with staff annually. Through this process, we found that while all our staff members received at least the living wage in terms of overall compensation, our benefits package was insufficient. We rectified that by adding new benefits, which allowed us to be certified as a Leading Living Wage Employer — the first nonprofit in the country to receive that designation.
Why is that important? Certification by a third party is much more credible than any claim that we could make ourselves. Our staff is proud that we are a living wage employer, and the designation has already helped attract new people to our organization. Employees also know that if Living Wage for US finds that their compensation does not exceed their living-wage costs, they can press for a salary increase or ask Living Wage for US to de-certify us.
Understand Pressure on Workers
Regardless of whether a nonprofit works with an organization such as Living Wage for US, it’s important to understand the financial pressures staff members face. Can they afford decent housing and also pay the grocery bills? Can they cover child-care costs? Can they weather an emergency or unexpected event? Unless the answer is yes, nonprofits may be contributing to the problem rather than helping to solve it.
The upsides to paying living wages are clear. Absenteeism goes down and morale goes up. Families are more food secure, gain access to child care, and can save for unexpected events. Employers improve their standing with their clients and customers, and nonprofits have bragging rights with their donors.
Grant makers can also play an important role by ensuring that their funding allows grantee organizations to pay all staff a living wage — at a minimum. If the nonprofits they fund aren’t meeting that goal, they can offer strategies, ideas, and most important, increased resources.
At a time when high inflation has made it harder for nonprofit workers to make ends meet, leaders in this field need to recognize that underpayment of staff is an increasingly serious problem. My organization’s steps to improve our benefits and compensation have had significant positive effects. Our staff, board, and donors feel proud that we are living our mission and supporting our people. When it comes right down to it, isn’t that why we all went into this business in the first place?