ARTICLE | Is a Thriving Wage Part of your Nonprofit Organization’s DE&I Strategy? It Should Be.
By Nanci Hibschman, Managing Principal, and Amanda Wethington, Principal
Employees of nonprofits do life-changing work from helping people at the hardest moments in their lives, to breaking down barriers in healthcare and education, to fighting for the environment. They give of themselves, but this doesn’t mean they should sacrifice financial well-being to do a job they love.
We’ve heard too many stories of overworked nonprofit employees who are unable to afford housing, provide healthy meals for their children, and pay for childcare and higher education without taking on mountains of debt.
Many nonprofits correctly say they already pay their workers a living wage. But a living wage is defined as one that allows a person and their family to afford basic needs. In other words, a living wage is only that — enough to survive on, assuming nothing unexpected ever happens.
Nonprofit employees have historically been paid lower wages than those in similar roles in government and private sector work. But triggered by inflation and the pandemic’s impact on low-income families, nonprofit workers are now more often finding themselves excluded from the social and economic prosperity that their own organizations aim to create. And it needs to change because it can harm everyone involved.
Acknowledge the Problems
The sole purpose of most people-centered nonprofit organizations is to improve the quality of life for those who are disadvantaged. Yet, many nonprofits are spectacularly failing at improving the quality of life for their own employees. For example, in a city like New York with a notoriously high cost of living, nearly one in seven nonprofit human-services workers qualifies for food stamps (opens as a pdf).
With employees who are physically exhausted and financially stressed, it is unsurprising that the turnover rates of workers within the nonprofit sector are extraordinarily high. In Los Angeles, for example, 53% of people doing homeless support work leave their jobs after less than two years, according to a 2022 study by KPMG and United Way of Greater Los Angeles (opens as a pdf). Similarly, social impact organizations experienced a 20% voluntary turnover in 2021. That’s nearly double from 2020 (11%) and up from pre-pandemic 2019 (17%).
Subsistence wages combined with high separation rates have proven to be very disruptive in the nonprofit sector. Burned out, financially struggling employees and high turnover make it difficult to deliver high-quality, consistent services. Recruiting and training costs increase substantially, and the end recipients of the services suffer from a revolving door of managers, program officers and support teams.
Without being able to document and substantiate positive outcomes, grant partners, donors and funders dry up, creating a negative spiral and reducing the already limited resources for people and communities in need.
Aim for a Thriving Wage
To reverse course, a living wage is simply not enough. To truly walk the talk, nonprofits must evolve to offer a thriving wage. When employees are paid a thriving wage, they have enough to cover basic necessities (proper shelter, food, water, clothing, transportation). But a thriving wage also creates a much-needed buffer against financial hardships, supports saving for the future and provides some disposable income for small conveniences and cherished amenities, such as piano lessons or after-school programs for children.
A thriving wage recognizes employees’ dedication and improves their quality of life, but it also empowers them to do their best work. It gives them the freedom to focus on the work without the worries of financial insecurity. A thriving wage offers choice and flexibility, and rewards them for their choice to help others, because they have been supported and helped.
Paying a thriving wage can help organizations live up to the words and aspirations of their mission. It can create better incentives to attract and retain skilled, passionate workers. It can reduce turnover and improve morale — both of which lead to higher productivity, reliability and quality of services. And a thriving wage more realistically conveys the value of nonprofit work in building a strong, national human capital infrastructure.
Finally, a thriving wage benefits local economies. When workers have more, they invest more back into their communities, which in turn makes the places they work and live in more financially stable.
Make Thriving Wage a Reality
There is no one-size-fits-all approach to creating a thriving wage because compensation and benefits are unique to every organization. But it’s important to recognize that incorporating a thriving wage into compensation planning doesn’t always require making drastic pay increases. Based on our experiences with nonprofit employers, a thriving wage may be just 5% more than current market rate.
Even small increases can have a big impact. One comprehensive assessment of the effect of the minimum wage on family income found that every 10% increase in the inflation-adjusted minimum wage reduces Black and Hispanic poverty rates by about 10.9%.
Most importantly, organizations must be willing to redefine their compensation philosophy and create a pathway to a sustainable thriving wage model. Understanding the specific needs of workers is a great way to start. For example, a nonprofit that expects employees to use their own vehicles for daily field work could consider car insurance stipends or benefits. Nonprofits with employees who exclusively work from home might cover the cost of home internet access. Sometimes creating a thriving wage can mean reducing work-related expenses in addition to — or rather than — increasing salaries.
This type of change requires working with grant makers and other funders to make sure that annual financial plans support a thriving wage. It may require soliciting donors specifically to support a financial campaign. It may mean using data to adjust compensation and benefits to align with current housing and living costs in different cities.
But the effort is worth it. Nonprofit workers — like the organizations they work for — are an essential part of the American fabric. They must be able to make the world better for others without the worry of how they’ll survive another day.