As workers gain pay leverage, nonprofits can’t keep up
By Ben Casselman
In a Northern California school district, the superintendent is taking shifts as a lunchroom monitor. In Louisville, Kentucky, nonprofit groups are losing social workers to better-paying jobs at Walmart and McDonald’s. And in Rhode Island, child welfare organizations are turning away families from early-intervention programs because they are short of personnel.
The nationwide labor shortage in recent months has led to delayed shipments, long waits at restaurants and other frustrations for customers and employers alike. But many for-profit businesses have been able to overcome their staffing difficulties, at least in part, by offering higher wages to attract workers.
For many nonprofit and public-sector employers, however, raising pay isn’t an option, at least without persuading state legislators to approve budget increases or voters to approve higher taxes. That is leading to a wave of departures and rising vacancy rates as their salaries fall further behind their for-profit counterparts. And it is in some cases making it difficult for them to deliver the services they exist to provide.
“We’ve lost our ability to be competitive,” said Carrie Miranda, executive director of Looking Upwards, a nonprofit in Middletown, Rhode Island, that works with adults and children with intellectual and developmental disabilities and other health care needs. “When a new person comes to the door, I can’t say yes to them, and they desperately need the services.”
Looking Upwards, like many similar organizations across the country, receives most of its funding through state contracts that pay a fixed reimbursement rate for the services they provide. In many states, including Rhode Island, funding levels had been failing to keep up with rising costs even before the pandemic.
But the recent acceleration in wage growth, particularly in low-paying industries, has left them hopelessly behind the curve. At Looking Upwards, pay starts at $15.75 an hour for jobs that can be physically taxing and emotionally draining; the Wendy’s down the street is offering $17 an hour for some positions.
“We used to compete with hospitals and other health care entities, and now we’re competing with the convenience stores, the fast-food places, the coffee shops,” Miranda said. “I’ve heard more and more people say, ‘I’d love to stay in this job, I’m passionate about the work, but I need to feed my family, I have to pay my rent.’”
Wage pressures aren’t hitting all nonprofits equally. Some organizations have endowments or other funding sources that make it easier for them to raise pay. And some states regularly adjust reimbursement rates to reflect prevailing wage levels or have used federal aid money to make ad hoc adjustments.
But government data suggests the nonprofit sector as a whole is struggling to compete. Total nonprofit employment in November was 4.8% below its pre-pandemic level, compared with a 1.5% employment gap in the for-profit sector, according to a New York Times analysis of Current Population Survey data. That is despite a sharp increase in demand for many nonprofit services during the pandemic.
“We can’t just increase the cost of care,” said Micah Jorrisch, vice president at Maryhurst, a Kentucky nonprofit. “We aren’t Starbucks. We can’t add 50 cents to the cost of a cup of coffee.”
At Maryhurst, which provides help to children suffering neglect and abuse, the staffing shortage was so severe that the board recently agreed to raise wages for front-line workers, in some cases by as much as 28%. But the organization didn’t receive any permanent increase in state funding to pay for those raises, meaning it will have to cut costs elsewhere or raise extra money from private donors.
Neither approach is sustainable, Jorrisch said. And the organization still has a vacancy rate of about 30%. Just this month, Maryhurst lost a veteran supervisor to a job at Kroger, the supermarket chain.
Many public-sector employers are facing similar problems. Billions of dollars of federal aid to state and local governments during the pandemic helped prevent the budget crises that some experts initially feared. But many local officials are wary of offering permanent wage increases based on short-term federal assistance.
“It is very dangerous for us to set precedent using one-time funding to create larger salaries unless there is clarity that that funding will continue,” said John Malloy, superintendent of the San Ramon Valley Unified School District, east of Oakland, California.
Malloy says his district has an unusually large number of vacant teaching positions. But as in many school districts, the larger challenge is outside the classroom, where they are competing more directly with rapidly rising private-sector wages. School bus drivers can earn far more making deliveries for Amazon. Cafeteria workers and custodians can make better money doing similar work at for-profit companies. This fall, Malloy resorted to asking central-office staff, including himself, to take shifts supervising students at lunchtime.
Most economists expect the rapid wage growth among lower-paid workers to slow as the pandemic eases and more people return to the labor force. But even if the immediate staffing trouble abates, it could have long-term consequences. People who leave the field in search of better pay could be unlikely to return. And students won’t choose the field if they don’t believe they can earn a livable wage.
“It’s a field that’s becoming unattractive,” said Beth Bixby, CEO of Tides Family Services, a Rhode Island nonprofit.