ver nearly three-decades in the nonprofit sector, I have met
countless individuals who have experienced extreme hardship due to low-pay in the nonprofit sector. Several dedicated nonprofit professionals stand out:
- A nonprofit receptionist who couldn’t afford an airline ticket to see her dying mother
- A program manager who moved her family of five into an extended stay hotel because she couldn’t afford rent
- A case manager who was never paid enough to build a rainy day fund. He became homeless shortly after being laid off.
Stories like this are all too common. I have met people working at nonprofits who are seeking pay-day-loans at predatory interest rates, sleeping in their cars, and sometimes even sleeping in homeless shelters.
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If I could go back in time and change one thing across the arc of my career – it would be paying a higher wage to the bottom 25% of the workforce. As a leader and executive myself, I’ve been guilty of paying a “competitive” salary that still wasn’t a livable wage. The receptionist who couldn’t afford to see her dying mother worked for an organization I ran. While I paid for her emergency flight home, no one should have to rely on the charitable generosity of others when it comes to housing, food, and family responsibilities.
In my own consulting practice, I have adopted a $20 per hour minimum wage. And that is the floor – not the ceiling! My goal as an employer is to pay an equitable, fair wage that a person could actually live on.
The nonprofit sector needs to adopt a wage floor significantly higher than the Federal minimum wage. And our sector’s wage floor needs to be higher than the minimum wages of some progressive states like New York and California. There are many reasons why the nonprofit sector should pay higher wages, and I’ve listed a few of them below.
A commitment to equity, diversity and inclusion demands higher wages
Employment participation in the nonprofit sector is significantly higher among women (source). Yet, white men are much more likely to hold the highest paying jobs in the sector (source). Income inequalities are perpetuated by low starting wages for early-career college graduates and professionals working without college degrees.
A search for case manager jobs in metro Atlanta revealed that most employers don’t list a pay range. But the few postings that did list compensation were absurdly low. As an example, a case manager position that requires a bachelor’s degree and only pays $30,000 to $32,000 per year.
Most landlords require income be three times the monthly rent. So this case manager would only “qualify” for an apartment renting at $888 per month! According to Rent Café , 74% of the rental units in the area cost more than $1,000. Additionally, the position requires reliable transportation, which translates into even more money spent on car payments, insurance, gas and maintenance.
And if the “lucky” candidate for the case manager position has two children, the family would actually qualify for food stamps!
Regardless of whether someone has dependents, a professional with a passion for serving youth who accepted this job would need to get more money from somewhere: a parent, a trust fund, or a part-time job.
If your business model doesn’t pay your workers enough to live, you need to question that business model.
Talented professionals can make as much (or more) in less demanding jobs at for-profit companies
In the case manager example above, that $32,000 a year worker is making $15.38 per hour. A few miles from this very agency, the grocery store Lidl is offering a starting wage of $15 per hour (source: AJC ) without needing a bachelor’s degree. And the grocery store employee isn’t legally responsible for the well-being of youth! And also has a more flexible schedule than the case manager!
Recognize the many advantages nonprofits have
These days, nonprofits and for profits often compete with each other in the same industries: social services, housing, health care, entertainment, and more. Structurally, nonprofits have some significant advantages. There’s the obvious fact that they don’t pay Federal and state income tax, but there are many other structural advantages. Nonprofits can use donations to eliminate the cost of capital, they save on other taxes (like property tax), and they can often get free publicity and media that for profits don’t enjoy.
But nonprofits should agree to a social contract in exchange for these benefits. They will not only seek good by serving their constituents, but they will also do good by being a great employer. This means valuing the work of staff and providing a great place to work.
Prevent nonprofits from a “race to the bottom” on wages
Employers usually view wages in relation to what similar jobs pay in the area as well as national standards. As an example, the organization hoping to offer an exemplary case manager $15.38 per hour, might justify the low pay as being almost twice that of the $7.75 minimum wage.
Congress last increased the minimum wage about a dozen years ago. And repeated congressional proposals to increase the minimum wage have either been defeated or never made it to a vote. Each year, inflation eats away at minimum wage’s spending power. And employers have little incentive to increase wages when the federal minimum is so tragically low.
YOU can create a more equitable system
If you are a nonprofit executive director or board member, you can be part of creating a more equitable system. You can set a wage floor at your organization – just like the Iowa organization Every Step. This organization made a strategic decision to set a wage floor of $15.00 more than twice the Federal minimum wage. This immediately impacted 44 staff members, some of whom received as much as a $4 per hour increase. Since Every Step implemented a $15.00/hour wage floor, regional and national organizations have recognized it as an employer of choice.
Here are a few ideas for how to determine your wage floor and how to justify the additional cost to your funders.
#1 – Consider where your organization will stand against specific indexes
Your state’s food stamp guidelines, the cost of housing in your region, or the Federal poverty line are indexes you can use. Using Georgia as an example, you would consider the following:
- A family of four making less than $34,060 per year qualifies for food stamps. That’s a wage of $16.37 per hour.
- In metro Atlanta, the average two-bedroom apartment is $1,106 per month. Since HUD standards indicate that a household should not spend more than 30% of its income on rent, a person must earn $3,686 per month to afford rent. A full-time worker would need to earn $21.27 to afford an apartment in this region.
- The federal poverty level is an incredibly low bar, but a family of four needs to earn $26,500 to not be considered poor. While that’s only an hourly rate of $12.75, do you really want to pay anything close to poverty wages? Most organizations would probably want the minimum wage to be at least 150% of the poverty line, which is $19.11
#2 – Establish a wage ratio
A wage ratio is the ratio of the highest paid employee’s salary to that of the lowest paid employee. As an example, if an organization had a wage ratio of 3:1, then the chief executive couldn’t make more than $90,000 if the lowest paid employee made $30,000. A few brave charities have already established a wage ratio, and Mary’s Meals may be best known for that.
The wage ratio your organization sets will likely be based on your budget. But most organizations with an annual budget below $1 million would probably consider a 2:1 or 3:1 ratio. Those with budgets over $5 million would likely have a 4:1 or 5:1 ratio.
Some will argue against pay ratios because the ceiling on executive pay might hinder recruitment of a great CFO, CEO, or CDO. While I’ve always been an advocate of competitive pay for nonprofit executives, I’m just as much an advocate of paying every staff member a livable wage. If an organization realizes that it must increase executive compensation to attract talent, it also must factor in the cost of giving salary increases to their lowest paid team members.
#3 – Use your annual budget and grant proposals to communicate your organization’s values
When building your annual budget or writing a grant proposal, make it clear that your organization values paying an equitable wage that a family can live on. Don’t be shy about telling a funder, “This position at other organizations might only pay $12 an hour, but we are unwilling to pay anyone a wage that can’t sustain a life of dignity. That’s why our minimum wage for any position is $17.50 an hour, and compensation for others are positively impacted by that minimum as well.” Your funders will respect you, and you will be better able to raise the money necessary to pay a living wage.
We can do better
As I said at the start of this post, we can better fulfill our missions and make the world a better place by paying a living wage to everyone who works for us. But it’s incumbent on us – the executives, board members, and sector leaders to push for change within our organization.
Why am I writing about this?
As a consultant, fairness and equity are at the heart of everything I do. And doing what’s right isn’t just good for our staff and our organizations – – – but it also helps us build a better world.
Additionally, check out the following Successful Nonprofits® resources if this post was helpful:
Blog: Negotiating Your Salary