Magazine article Stanford Social Innovation Review

A Fair Wage

Magazine article Stanford Social Innovation Review

A Fair Wage

Article excerpt

NONPROFIT COMPENSATION

Nonprofit workers earn the same as their for-profit counterparts

If you work for a nonprofit, you probably think you're underpaid. In one sense, you're right. On average, nonprofit employees earn 11 percent less than for-profit workers. But according to a new study, if you compare apples to apples, people doing the same work in nonprofit and for-profit organizations earn roughly the same amount of money. It's just that nonprofit jobs require fewer hours and nonprofits are disproportionately concentrated in low-paying industries. At least that is one explanation offered in "Compensation in the Nonprofit Sector," published last fall in the Journal of Human Resources (vol. 38, no. 4), for the apparent wage differential between workers in nonprofit and for-profit organizations.

Using data tracking 25- to 55-year olds over a five-year period, Christopher Ruhm of the University of North Carolina at Greensboro and Carey Borkoski of the University of Maryland, Baltimore County set out to test whether or not the rules of competition operate to set wages in nonprofits. The data was from the Current Population Survey a nationally representative survey of 50,000 households. Past research had suggested that people are willing to "donate" their time (by taking less pay) as long as they work for an organization that is socially responsible and aligned with their values. Other research has suggested that nonprofit workers essentially trade pay for nonmonetary "perks," such as improved working conditions. These forces should lead to suppressed wages in nonprofits.

The authors do not discount these explanations as possibilities for select groups, but, in general, they felt there was little reason to expect that employees would be penalized for their choice of working at a nonprofit. After all, there are forces that could drive nonprofit wages upward. …

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