Nonprofit Compensation Losing to Inflation
I don't do the shopping in my house. First, I'm not smart enough. Secondly, when somebody's more talented than you are in a certain area (household leadership is much tougher than the job I do every day), you let them take the reins. But recently I was asked to go to the grocery store. To say I had sticker shock would be an understatement.
And if you're reading this, you've had similar moments as well. Inflation is the most insidious economic condition, I’ve always believed, because it eats into every aspect of life, exponentially in certain areas. It causes immense personal harm to basic living.
This is why I was so disturbed by some recent data from Candid. Normally, when looking at governmental statistics, nonprofits pay somewhere between 12% and 20% below their for-profit equivalents. With that said, from 2017 to 2021, the median nonprofit compensation was actually overcoming this fact by seeing greater gains versus inflation. This effect can be credited to the requirements of states and municipalities adopting pay transparency laws as well as competition in the workforce for highly skilled nonprofit leaders.
However, over the past year or so, in the various categories within nonprofit employees, inflation has outstripped the raises nonprofits have been forced to give. In one example, fundraisers saw an increase of 6.4% in 2022 as it pertains to their compensation packages. The problem is that inflation was running at over 8% for the cost of living in that same year. Thus, the buying power for fundraisers was more than a 1% loss.
And this is a double-edged sword. The cost nonprofits have regarding basic services, materials, technology, and other expenditures has been greatly affected by the same inflation affecting salaries. So as nonprofits have attempted to raise compensation, they're being hammered on the other end with higher expenditures. This is putting immense pressure on nonprofits as a whole.
So, what's the answer?
To be honest, I'm not sure. If people feel as if they can't afford their mortgage, insurance, food, and other basic necessities, they'll leave the job to find one that will pay them better. And if that means leaving the nonprofit space for higher-paid for-profit work, that's what will happen. And anecdotally, that's what I'm seeing in limited cases. The concern is that if it continues to grow, people will seek work outside of the nonprofit space, leaving us with even greater shortages in the workforce.
