A common question presented to many young professionals when deciding their career paths is: "Do you want to work for passion or pay?" As a young professional in the nonprofit sector, I have been told that switching sectors is the only way to make a livable wage. However, when I chose my career path, I also challenged the lack of competitive pay in the nonprofit sector and explored how professionals can achieve competitive pay while completing the work they are passionate about.

Many factors contribute to the nonprofit sector's high turnover rate, such as lack of growth opportunities, dissatisfaction with an organization’s culture, and inadequate compensation. According to the US Bureau of Labor Statistics, wages of management, professional, and related workers at nonprofits are, on average, $3.36 an hour less than those of their counterparts employed by for-profits. Moreover, once the cost of benefits is added in, the difference in total compensation is $4.67 an hour less (US Bureau of Labor Statistics, 2016). With this information in mind, there is no wonder why this sector's turnover rate is 7% higher than the average all-industry turnover rate

As young professionals continue to mention competitive pay as a determining factor in their careers, the nonprofit sector continues to experience high job vacancy rates (National Council of Nonprofits, 2023). The National Council of Nonprofits' 2023 survey states that of the nonprofits that responded to the survey, three out of four respondents indicated salary competition as the most frequently cited challenge. Two-thirds of those who completed the survey stated budget constraints/insufficient funding. One of five respondents identified government grants and contracts as barriers, directly contributing to the lack of competitive salaries.

The budget constraints and insufficient funding nonprofit organizations face heavily impact how these organizations allocate their funding. For quite some time, nonprofits have campaigned for funders to end their widespread practice of providing full financial support for programs and services while skimping overhead costs. The idea of only funding programs and services leads to the "starvation cycle" issue. This cycle refers to the process constraining nonprofits' ability to invest in essential organizational infrastructure.

It is important to note how the the US federal government uses negotiated indirect cost rate agreements, also known as NICRA, to guide how it allocates billions of dollars in indirect business costs. Large domestic nonprofits that receive federal funding typically have a NICRA. However, smaller nonprofits tend not to have a negotiated rate and, without that, never receive any federal reimbursement for indirect costs. 

The following recommendations focus on reducing the significant pay difference between the nonprofit sector and other sectors to help attract young professionals and ensure the nonprofit sector's long-term success. 

1. Those involved in the nonprofit sector challenge their perspectives and those of others around them about what nonprofit professionals should be compensated for.
   1. The perspective that professionals in this sector are not highly skilled, talented, and educated professionals is untrue. With funders only willing to fund direct program costs, these talented and educated professionals are forced to work more for a livable wage. Furthermore, the organization can continue its work with these positions, services, etc., categorized as indirect costs.
2. To increase employees’ compensation, organizations need to invest in fund development. 
   1. Since the funding required for this investment is considered overhead or indirect costs, the second recommendation is that organizations and funders discuss moving to a pay-what-it-takes approach. 
3. When determining positions' compensations, nonprofit organizations should look at the workforce and compare the compensation offered to employees in other sectors of companies of similar size and similar positions.
   1. This recommendation would apply if policy changes, funders' expectations, and perspectives were to occur; nonprofit organizations may need some guidance on how to increase employees' compensation while balancing the organizations' revenue.
4. How nonprofits could implement the compensation increases. 
   1. This implementation process would be a multi-year plan to increase their employees' compensations to competitive amounts compared to similar positions in other sectors. The employees' annual compensation increase should account for inflation and the difference in each position's compensation compared to their for-profit counterparts.

The idea that professionals working in the nonprofit sector can live off passion and gratitude should no longer be the expectation. Nonprofit professionals hold higher degrees than those in other sectors. They provide vital services that other sectors cannot and deserve to be paid like their counterparts. Many nonprofit professionals would agree that passion does not fund the cost of living, and this issue will ultimately be why many young, talented professionals will not only consider working in the nonprofit sector or leave the sector after a short time of beginning. Now is the time for nonprofits' leadership to implement these changes to recruit and retain young professionals who can help nonprofit organizations continue to provide vital services to communities.

Jennifer Connor is a 2024 graduate of the Masters of Nonprofit Leadership and Management program at Arizona State University and is currently serving as the Caring Contacts Intake Specialist at Teen Lifeline Inc, a 501(c)(3) nonprofit that focuses on teen suicide prevention in Arizona. She has a little over 2 years of experience in the nonprofit sector and is an advocate for nonprofit professionals to receive competitive wages as compared to their for-profit counterparts. She plans on strengthening her knowledge and experience in program operations and grant writing as her career continues. 

Image by Lillian Finley

Your organization can host an emerging leader with Public Allies Arizona

Do you have a project that you would love to implement, but lack the staff capacity or other resources?  We help our partners increase their capacity to achieve their mission by matching them with diverse, talented individuals from the community.

Public Allies Arizona places these emerging leaders in full- or part-time service to nonprofits in Phoenix and Tucson communities. These nonprofits, called Partner Organizations, are chosen based on their ability to provide the Ally with significant work experience, as well as their need for an innovative young leader who can help them take on a project they otherwise could not afford or infuse energy into an existing project.

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