Wednesday, November 26, 2008
Late last month the Bureau of Labor Statistics published an interesting report (full report) comparing wages in the nonprofit sector to wages for comparable positions in the for-profit sector. Here is a summary of the report from the Washington Post:
Despite their reputation for low wages, some nonprofit jobs actually pay about the same as comparable for-profit-sector positions, a new Bureau of Labor Statistics report shows. Those in full-time administrative support jobs collected about $15.50 an hour last year, whether they worked for a business or a charitable group, according to BLS economist Amy Butler. And nonprofit employees a range of occupations in health care and education earn similar wages to their for-profit counterparts, Butler said. Registered nurses, licensed practical nurses and home health aides also took home comparable paychecks whether they worked for a business or a nonprofit. But full-time managers at charities and nonprofits earn far less than those in business: $34.24 an hour on average at nonprofits vs. $41.38. While nonprofit financial, business and computer jobs also pay less, full-time nonprofit jobs overall came out ahead of all private-sector jobs. Butler said that's because the nonprofit sector has a higher concentration of higher-paying health, education and other professional jobs.
An interesting point of speculation made in the report concerns the extent to which nonprofit employees make the economic equivalent of a cash [charitable] deduction by way of lower wages:
There are several hypotheses as to why the wages of nonprofit workers could differ from their for-profit counterparts. According to the labor donation hypothesis, workers in the nonprofit sector are willing to donate a portion of their paid labor and receive lower wages because they obtain satisfaction from the fact that their efforts achieve altruistic goals. Also, nonprofits may pay lower wages and compensate their workers with employer-provided benefits or other favorable job characteristics such as a flexible work schedule. On the other hand, nonprofits might actually pay higher wages because nonprofits do not benefit from the cost reductions of paying lower wages in the same way that for-profit employers do. In addition, nonprofits may choose to hire better quality workers in order to produce a better quality product or service and pay these employees higher wages.
Now, I know this is no time to talk about tax cuts or preferences but perhaps when wealth and prosperity return we might once again talk about ways to attract superb talent to the nonprofit sector. Just as the tax code grants a lucrative tax benefit for donations of property to charitable organizations (cash too, but property garners a full fair market value deduction, even on the portion of the value that has not previously been taxed!), it might also grant a tax benefit -- perhaps via a lower tax rate -- for compensation paid to employees of nonprofit organizations. This would be appropriate, of course, if the statistics show that nonprofits actually pay lower wages. President Elect Obama has spoken about the need to stimulate a more vibrant civil society and this might be a way of doing so (of course, only once we get out of the deep hole we are in at the present time). On the other hand, such a tax benefit might have the perverse effect of drawing labor from the capital market which, until recent times, has been thought of as the best way to deliver goods and services to society. By no means have I given this idea any more thought than that necessary to write this post, but it might be a good subject to explore in greater detail via a long and heavily footnoted article (preferably written by some young hungry tenure track type).