Each month the Partnership for America’s Children hosts “Peer Exchange” sessions, where seasoned leaders from our network get together with Partnership members from across the country. Members share wisdom and inspiration, and discuss pressing issues facing all our organizations.
Nonprofits across the country are struggling to find and retain employees in a changing market. Unfilled jobs equate to unheard voices and less funding for our communities. Assessing pay can be a powerful way to dismantle a key component of racial injustice: wage inequality.
What is Pay Equity?
Addressing pay equity is an opportunity to enact lasting, systemic change for diversity, equity, and inclusion in your organization.
Even among nonprofit executives who make the budget decisions, there is a tremendous amount of mystery about pay, because it has been a taboo subject for so long. Among participants in the June Peer Exchange session – many of whom are in fact the budget deciders in their organizations – only 25% knew how pay is calculated at their organization.
Many unhelpful assumptions undermine pay rates in the nonprofit sector:
- “Funders don’t fund salaries/people”
- “We have to do more with less”
- “We have to watch our overhead so that we look good on Guidestar”
- “I don’t do this work for the money”
Many external factors also suppress pay, perhaps none so dramatically as stagnant minimum wage laws. The federal minimum wage of $7.25/hour has been in place since 2009, when the median home price in the US was $185,200 (compare that to $436,800 in 2023). Another factor is a useful but problematic tool: Nonprofit market studies. These studies can have the effect of suppressing wages, since most nonprofit organizations are paying less than they should.
Cost of Living vs. Cost of Labor
Whenever organizations pay what the market will bear, they are paying the cost of labor, rather than the actual cost of living in their communities. That severely limits who organizations can recruit and hire.
To better illustrate this disparity, Sally shared the US Bureau of Labor Statistics annual Consumer Expenditure Survey. The average annual cost of living in the US in 2022 was $66,828 (which equates to $32.13/hour). How many nonprofit salaries in your agency fall well below that level? Chances are that most front line staff are paid significantly less than the cost of living in your community. Sally stressed this point: “Great candidates may want to work for you but they just can’t, based on the salary.”
Thankfully, dramatic changes in the workplace since the pandemic are a real cause for hope. Employers are responding to younger employees’ desire for “safe, meaningful and sustainable” workplaces – and that includes pay structures. In the larger labor market, compensation is changing – and while nonprofits like to believe we’re special, the truth is that we are all competing for the same talent.
Getting Started on an Equitable Compensation Philosophy
Sally shared some important factors to include in a compensation philosophy for your organization. Consider not only where to get good data, but also who your organization is competing against, and perhaps most importantly, what kind of lifestyle you want your staff to have. For example: Are you okay with your front-line staff qualifying for income-linked public benefit programs like SNAP and Medicaid?
Sally also recommends including staff at all pay levels in the conversation about what your organization’s pay philosophy should be. Some potent questions to ask your staff about compensation:
- How do you know when you’re being paid enough?
- What types of benefits are most important to you?
- Where do you look for pay comparison information?
It is not uncommon for nonprofit leaders to get pushback from their Board of Directors about improving compensation structures. “We don’t have enough money” is a typical refrain. Sally’s response: “If you never start, you’ll never do it.”
It’s unlikely your budget can handle a big shift all in one year – plan to make changes over a few years. Use multiple data sources such as national and state-level nonprofit salary surveys, as well as real-time data from your competitors’ job postings. Your staff are certainly looking at those numbers, and you should too.
Sally gave participants a hands-on assessment tool and case study to get started on their pay equity journeys. In the second session, she helped participants work through the tool to get a clearer picture of their own pay structures. Partnership members left the second session with a powerful tool in hand to help them get more equitable outcomes in their own organizations.
Many thanks to Sally Loftis for generously sharing her expertise and insights during the June Partnership Peer Exchange.