Jumpstart Your Living Wage Program
A Practical Guide to Paying with Purpose
Gain insight into establishing a living wage for your mission-based organization.
There’s an exciting evolution in compensation occurring among nonprofit organizations throughout the country – and it centers around paying employees a living wage. Establishing a living wage program is a powerful way to help support employee well-being, enhance internal equity, elevate operational efficiencies, and more.
Considering implementing a living wage program within your organization? Read on to learn what it means to pay a living wage, how it benefits organizations and workers alike, and how to implement a program of your own.
Topics at a glance
What is a living wage?
A living wage is the income required to meet basic needs like food, shelter, and healthcare – enabling individuals to be financially independent and participate more actively in their communities and at work. The concept of a living wage was developed in response to minimum wage policies that simply weren't living up to their original purpose.
Dive deeper with our on-demand webinar
What is the difference between living wage vs. minimum wage?
Minimum wage laws were initially designed to support a decent living standard, but they have fallen short due to inflation and inadequate adjustments over time. According to MIT’s Living Wage Calculator, a single mother who has two children and is paid the federal minimum wage must work nearly six full-time jobs just to reach a living wage.
The minimum wage set by federal or state governments is often based on political and economic considerations rather than actual living costs – which is why it has remained stagnant. Meanwhile, a living wage is determined by the actual cost of living in a specific area and seeks to ensure that employees can afford a certain standard of living without relying on public assistance or working multiple jobs.
The gap between minimum wage and living wage has become more evident as inflation and the cost of living continues to rise.
What is the difference between a living wage vs. thriving wage?
While a living wage ensures that employees can cover their basic needs, a thriving wage goes a step further by allowing individuals to achieve greater financial security, plan for the future, and improve their quality of life beyond just meeting day-to-day expenses. It offers a more all-encompassing approach to fair compensation by accounting for factors like savings, discretionary spending, and unexpected costs.
Implementing a thriving wage as part of your nonprofit’s compensation strategy can further boost your organization’s overall operations by improving employee morale, job satisfaction, and retention, resulting in a more motivated and engaged workforce.
Tune into our recent podcast to learn more: Paying a Thriving Wage at Nonprofits
Further reading: Pay Equity and Living Wage
The Living Wage Gap
The gap between minimum wage and living wage has become more evident as inflation and the cost of living continues to rise.
6x
Jobs needed at minimum wage to reach living wage
18 %
Cost to replace low wage workers
6x
Nonprofits considering wage increases
What are the advantages of a living wage program?
Paying a living wage offers a wide range of benefits for both employers and employees alike. Most importantly, it is simply the right thing to do, as it can greatly enhance an employee’s quality of life, financial stability, ability to perform at work, and loyalty to their organization. It can serve to strengthen the impact of your efforts to deliver on mission-based objectives.
Implementing a living wage program offers numerous benefits that go beyond basic compensation:
Improves retention and recruitment
Employees are more likely to stay with and be attracted to employers that signal they value their well-being, which helps reduce hiring and training costs. The cost to replace low wage workers can be as high as 18% of their full-time salary.
Increases equity
Ensuring fair wages promotes a more inclusive and equitable workplace, which is a common core value of many nonprofits.
Reduces turnover and absenteeism
Workers earning a living wage are less likely to need a second or third jobs, resulting in fewer greater commitment to the job they’re in. Organizations paying a living wage experience lower levels of both turnover and absenteeism.
Gives your nonprofit a more competitive edge
Offering fair wages enhances your organization’s appeal to potential employees, donors, and funders.
Supports your mission
Financially stable employees can focus more on advancing the nonprofit’s goals rather than struggling to make ends meet.
Strengthens your reputation
Paying a living wage demonstrates thoughtful leadership, which helps create goodwill among stakeholders and the broader community.
Positively impacts your community
Employees with financial stability contribute more to local economies, leading to a ripple effect that benefits society as a whole.
Common misconceptions about living wage programs
Despite the clear benefits of paying a living wage, several misconceptions often prevent nonprofits from taking this leap. Here are some of the common myths and the realities behind them:
While the initial cost of raising wages may seem daunting, the long-term financial benefits often outweigh the expenses. Reducing turnover, increasing productivity, and improving employee well-being can lead to significant cost savings. Additionally, many nonprofits find that funders are increasingly supportive of wage adjustments that align with equity and sustainability; some are even providing additional funding to ensure livable wages are provided.
Implementing a living wage program doesn’t have to be an all-or-nothing decision. Many organizations start with incremental wage adjustments and prioritize their most underpaid employees first. Strategic budget planning and grant-seeking efforts can also help fund wage increases without negatively impacting programs or headcount.
Just because it isn’t legally mandated doesn’t mean it shouldn’t be a priority. Ethical and sustainable wage practices help improve the credibility of your nonprofit, attract top talent, and facilitate a more equitable workplace.
How to create a living wage program for your nonprofit workers
Use our Living Wage Toolkit as a guide
Our toolkit provides step-by-step guidance, tools, and resources to help your nonprofit assess and implement a living wage program.
Evaluate your current pay structure
Start by analyzing your organization’s existing wages and comparing them to living wage standards in your region. Identify gaps and determine which roles are most impacted by low wages.
Calculate an effective living wage
Utilize resources like the MIT Living Wage Calculator or the Economic Policy Institute’s Family Budget Calculator to determine a fair wage for your employees based on location and household composition.
Adapt and adjust
If full implementation isn’t immediately feasible, consider phased wage increases or compensation stipends to support employees while your organization works towards a full living wage program.
Tackle potential challenges
Address concerns such as salary compression, budgeting constraints, and leadership buy-in early in the process. Develop a strong case for a living wage and communicate its benefits to stakeholders to gain necessary support.
See how two prominent foundations in California and New York formed their living wage strategies:
Frequently Asked Questions
How can I make the case for a living wage to my leadership and board?
Gather data on employee retention, operational costs, and impact metrics to demonstrate how a living wage benefits your organization. Highlight case studies of nonprofits that have successfully implemented a living wage program and emphasize the positive outcomes.
What if my nonprofit operates in multiple regions with different costs of living?
Consider adopting regional wage adjustments based on each area's cost of living. Alternatively, you can establish a standardized living wage that meets or exceeds the highest cost-of-living standard among your locations. Typically there are no more than 3 levels of living wage floors established to address the needs of a dispersed workforce.
What if my nonprofit can’t afford to implement a living wage all at once?
Start with incremental wage increases and prioritize the most underpaid employees first. Explore funding opportunities, adjust operational expenses where feasible, and communicate your phased approach transparently with staff.
How do I talk to staff about wage adjustments?
Maintain transparency and open communication when discussing wage changes. Provide employees with a clear understanding of how and when adjustments will be made and how the changes align with your organization’s mission, values and long-term goals.