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?