“Pay Gap” by Nick Youngson. CC BY-SA 3.0. Alpha Stock Images.

January 22, 2018, Generocity

In Generocity, reporter Tony Abraham begins his analysis of nonprofit salaries where discussion of nonprofit salaries usually begins—at the top.

Here’s what happens when nonprofit tax forms are released every year: The public sees how much nonprofit CEOs make, there’s an uproar about a select few executives, then, within a matter of days, the outrage fizzles out, only to resume in a year’s time.

As Abraham observes, the fact that 990s make executive salaries publicly accessible also makes them easy media copy. Here at Nonprofit Quarterly, we have noted this phenomenon more than once ourselves, as in a story last month from Rock County, Wisconsin, where a newspaper exposé found some nonprofit leaders earning—the horror!—“higher than average pay.”

As Abraham points out, nonprofit executives typically earn less than their for-profit counterparts. And, in any case, the average nonprofit leader’s salary is hardly a headline-screaming number. A 2016 Charity Navigator compensation study, Abraham notes, reported an average nonprofit CEO salary of $123,362. The more serious issue, in short, is not compliance with IRS compensation guidelines, but rather making sure that the wages throughout the organization are consistent with nonprofits’ social justice missions.

Laura Otten is director of the Nonprofit Center at LaSalle University in Philadelphia. Otten asks, “Why are we wasting our breath and worry and concern about how much executives are getting paid instead of worrying about the issues of equity for the payment of everybody else?”

Otten adds:

If you have an executive director making $100,000 and entry level staff making $25,000…start thinking about the ethical and moral implications. How can we expect our staff to help people, particularly in the social services sector, when they’re barely making more money than they are?

In his article, Abraham illustrates the pervasiveness of low wages for frontline and direct care staff in so many nonprofits. In the case of direct care workers in fields like home health care and early childcare, NPQ has labeled this phenomenon the nonprofit wage ghetto, which, unfortunately, is still alive and well. As Abraham explains:

Home health care, an industry that boasts the fastest rate of job growth in the country, offers compensation that, for 55 percent of home health aides, sits 200 percent below the federal poverty line…Direct service providers—the folks who are on the ground working with some of society’s most underprivileged people—make an average of $10.62 an hour. Many entry and junior level workers at human services organizations receive public benefits themselves.

Abraham adds that “according to a 2007 Medicaid study, 42 percent of all direct service workers lived in households that relied on some form of public assistance, and not much has changed on that front since then.”

Fortunately, a growing number of nonprofits are recognizing this challenge. In New York City, NPQ reported that “In 2015, a coalition of advocacy groups led by the Federation of Protestant Welfare Agencies, the Fiscal Policy Institute, and HSC [Human Services Coalition] launched an effort to have state-funded nonprofits pay workers at least $15 per hour.”

Philadelphia, for its part, is home to Resources for Human Development (RHD)—a multi-state nonprofit that employs 6,000 people running 160 programs. To promote pay equity, CEO Marco Giordano indicates that RHD limits CEO compensation to no more than 14 times the lowest-paid employee. Giordano says, “Acquiring and retaining leadership is vital for every human services organization, and we’re very cognizant of that at every level, but our foremost challenge is figuring out how to better compensate staff who are doing incredibly important and essential work supporting people every day.”

As high as a 14:1 ratio may appear, it’s worth pointing out how rare it is in our sector to consider ratios at all—and it absolutely should not be.

The lesson? Abraham concludes, “Leadership is valuable, but so is the work your staff is carrying out…if you tout your nonprofit as a business, yet some of your full-time employees are on public assistance, you might be doing business wrong.”—Steve Dubb