On June 30, the U.S. Department of Labor released a proposed rule that would increase the number of workers eligible to receive overtime pay. The proposal would require a minimum annual salary of $50,400 ($970 a week) for a position to be classified as exempt from overtime regulations. Currently the minimum is $23,660 ($455 a week). The proposed rule would impact an estimated 4.5 million employees, including workers in the nonprofit sector.
Many nonprofit advocacy groups in the sector are focused on slowing these changes calling for a 60-day extension on the federal commenting period. Advocates’ concerns are understandable. The apparent costs of implementing these changes could be dramatic. Higher wages equal fewer employees; fewer employees equal a reduction in programs and services. A reduction in programs and services means many social needs go unmet.
But what if we looked at this situation differently? Higher wages for our nonprofit workforce is a good thing, a much needed change that we should embrace. Being paid for hours worked is also a good thing. Put quite simply in a statement from the National Employment Law Project, who commented on changes in minimum wage and overtime laws for home care workers, “paying workers less than the minimum wage for their work hours, and not paying an overtime premium after 40 hours a week, benefits no one,” said Sarah Leberstein, NELP senior staff attorney. “Low pay leads to burnout and high turnover and compromises care, which in turn create economic strains on the home care system. Many states have already recognized the need to raise standards, and extending basic wage protections is a key element of that process.”
Our nonprofit workforce has needed a raise for some time now. Here in Massachusetts one in six members of the workforce are employed by a nonprofit. In our recent compensation study -- Valuing Our Nonprofit Workforce 2014 – we were alarmed to find that 43% of the employees represented in this survey are earning less than $28,000 per year. In Boston, it’s estimated that the annual cost of raising a family is nearly $90,000 and in most major U.S. it’s averaging around $75,000. Given the costs of housing, student loan payments, child care, and other necessary expenses, basic salaries fall short of a living wage for individual workers and especially for those with families.
Low wages are a real risk to the nonprofit sector. It is especially concerning to those of us in the social justice sectors who work toward a more equitable society. A nonprofit career, even a career working in the smallest of organizations, should be a viable option for anyone who wants to travel that path. Better wages and benefits contribute greatly to developing a professional, high-performing staff for nonprofits, and ensure that the best and brightest talent from the next generation of leaders sees the sector as a viable and desirable career path. We also need to remember that in order to eradicate poverty and other societal ills, we don’t need to take a vow of poverty ourselves.
Separate the myth from the realities of working in a nonprofit.
We’ve all seen the headlines about ‘overpaid’ nonprofit CEOs and the myths about too many nonprofits with exorbitant overhead. Our funders and donors need to remember that fair and livable wages don’t constitute excess. That fair compensation is linked to the health and viability of employees and therefore our organizations and the sector as a whole. A thriving workforce means better outcomes for constituents, better retention of talented and committed staff and more capacity to focus on and achieve our missions. Philanthropists, donors and government funders should view the new regulations as a much needed lift for the sector and work side-by-side with nonprofits to make comparable adjustment in funding to absorb the immediate effects of the new overtime rules and in the long-term, adjust their funding accordingly.
These types of strains on the systems will only become more apparent as long-time leaders in under-resourced, struggling organizations begin to retire and the next generation steps into their place. As we have reported in another study on nonprofit leadership released this spring, our organizations are already starved for resources; staff are underpaid and have few professional development opportunities. We need to shift our thinking about what it takes to lead and manage nonprofit organizations. A well-compensated staff is a start in the right direction and is a vital component of the long-term sustainability of the sector.