Nonprofits Struggle to Pay Increased Minimum Wage

As living-wage advocates push for increases in the minimum wage, nonprofit organizations find themselves in the precarious position of supporting reform that would benefit their clients but which they may not be able to afford, the NonProfit Times reports.

In 2014, New York City raised the minimum wage for eighty thousand nonprofit workers operating under city contracts to $11.50 an hour, with an across-the-board 2.5 percent cost-of-living adjustment, while Governor Andrew Cuomo has advocated for a $15 minimum wage in the state that would affect an estimated five hundred and fifty thousand nonprofit workers. But most nonprofits have no direct means of absorbing wage increases, New York Council of Nonprofits CEO Doug Sauer told NPT. A Head Start program with ninety employees, for example, would need to increase its $3 million budget by a third to be able to pay $15 an hour and, given that it is 99 percent dependent on federal contracts, would likely go under without a significant increase in funding. Indeed, in an impromptu NYCON poll of nonprofit leaders, some 92 percent said their organization's financial sustainability would be jeopardized by a minimum wage hike, while 30 percent said that such a hike would force them to reduce employee benefits. 

"There's a reason it's an under-compensated workforce," Sauer said. "You can raise the wage, but if government doesn't want to pay it and donors say, 'We want more bang for the buck,' it's not a stable workforce. We're squeezed." Seeking better philanthropic support might be the best solution, given the volatility of government budgets, he added.

Minimum wage increases are especially tough for nonprofits that employ the disadvantaged and help them gain work experience that would qualify them for better jobs. For example, while Homeboy Industries in Los Angeles has been supportive of Los Angeles County's plan to increase the minimum wage from $9 to $15 over the next five years, said Jose Osuna, the nonprofit's director of external affairs, the organization was one of three area nonprofits to seek an exemption from the wage hike for transitional employees, an exemption it ultimately received.

"The reason we sought the exemption was that we're already very financially strapped," said Osuna. "We receive very little government funding and want to continue our current services. The other side of that is, because of the nature of our organization, people receive financial support through us. We have no-interest loans, therapeutic services for free, support services, tutoring [for employees]. We factored that in."

Andy Segedin. "Minimum Wage No Small Issue for Nonprofits." NonProfit Times 12/31/2015.