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Income Inequality and Purpose for Nonprofit Workers

September 8 2015

Recently, the Securities and Exchange Commission decided to require publicly-traded companies in the United States to begin disclosing the ratio of CEO pay to that of the company's median employee.

There are generally two main arguments made in favor of this rule. The first is that the ratio will help investors evaluate a company's management by providing additional information about whether a CEO's compensation is appropriate. The second is that the ratio will help address income inequality by telling the public which corporations are paying their CEOs substantially more than the average employee.

But, income inequality isn't confined to for-profit companies. Indeed, nonprofit organizations should be more concerned than most about the issue. And, the nation's 1.5 million nonprofit organizations employ more than one out of every ten private sector workers in the country so it's an important sector from an employment point of view.

While working for a nonprofit organization is attractive for a large number of people, we sometimes hear that young people are dissuaded from working for - or continuing to work for -- nonprofit organizations because of low pay and long hours. In fact, a 2011 study that we commissioned with the Center for Creative Leadership entitled Emerging Leaders in Nonprofit Organizations: Myths, Meaning and Motivations, found that individuals at every level of nonprofit organizations feel a sense of purpose in the work they do, but individuals at lower levels are more concerned about pay than those at higher levels.

That sense of purpose is often cited as the major attraction of working for a nonprofit organization, and many argue that it's a common misperception that nonprofit organizations have to settle for employees who are willing to work long hours for low pay. As we are reminded by the Case Foundation, there are many advantages of working for a nonprofit organization:

  • Nonprofits employee interesting people
  • Unparalleled growth opportunities exist
  • Employees can shift skill sets quickly
  • The universe gets smaller
  • The opportunity to change the world is around every corner

But, there are also disadvantages:

  • Concrete results or clear benchmarks of success can be difficult to spot
  • Work environments can be frustrating
  • The level of burnout is high
  • The stakes are higher
  • There is a constant focus on fundraising

Aaron Hurst, chief executive of Imperative and founder of the Taproot Foundation, argues that shifts in our economy and the rise of Millennials in the workplace mean that everyone wants to find purpose in their professional lives now. "No longer do people see nonprofit work or government service as the way to fulfill their desire to help others," writes Hurst. "Nonprofits will lose workers to business unless they feel a sense of purpose." [The Chronicle of Philanthropy, April 7, 2014]

So, purpose is critical, but fair pay helps as well - particularly for workers at lower levels in an organization. Encouraging nonprofit organizations to re-examine their compensation structures - particularly for young people and junior positions - might go a long way toward making nonprofit employment more attractive for young people, and keeping them in the field longer.

So, what's good for the goose just might turn out to be good for the gander - and society -- too.

If you have a question or comment, please follow me on Twitter at @timmcclimon and let's start a conversation there.

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