![[ Visit Client Website ]](images/banner.gif)
Background/Purpose: Research has found that gender wage gap in nonprofits is smaller than in for-profits, however, workers in nonprofit organizations earn less than their for-profit counterparts, on average. Does this relative wage equity in nonprofits represent better career advancement opportunities for women? Is the greater gender pay equity a side effect of nonprofit pay compression? The ratio of nonprofits and for-profits and pay structure vary across human service industries. Therefore, this makes economy-wide studies unable to differentiate the two effects.
Using American Community Survey (ACS) annual data for 2009-2013, this paper focuses on the seven human service industries where nonprofit and for-profit organizations intensively compete for workers. Through analysis of nonprofit wage differentials by industry, this paper identified two highly competitive industries, nursing and personal service and educational service, where the nonprofit–pay–compression argument does not hold. Then, the paper examined gender wage equity within each of the two industries. Whether women have a better chance for managerial promotion or higher-wage occupations are assessed. Individual’s educational degree was controlled to partly address selection bias.
Methods: Data and samples: I use the 2009-2013 ACS annual samples. Samples for each industry range from about 5,000 to 70,000 individuals. Important to note, if an organization receives government contracts, they are obligated to pay men and women equally. If nonprofits receive more government contracts, they will have stronger motivation to advance gender pay equity. Therefore, administrative data on government contracting with nonprofits vs for-profits in each industry were also used.
Measures: The first dependent variable is the natural logarithm of weekly earnings in the previous year converted to 2009 constant dollars using the Consumer Price Index. Because ACS 2009-2013 only contains an interval variable of “weeks worked last year”, the weekly earning was calculated by total wage and salary income in the previous year divided by the mid-point of the “interval weeks worked last year”.
The second outcome variable is a binary variable that indicates whether one work in a managerial occupation or not. The third is a three-point likert scale variable measuring the wage-level of three types of occupation (i.e. high/medium/low). The occupation wage-levels are defined based on the mean wage of each occupation.
Results: The paper found that in most human service industries, the gender wage equity is greater in nonprofits, where women are more likely to work in managerial and higher-wage positions. In the two most competitive industries, where the pay compression factor is ruled out, gender wage equity is greater in nonprofit organizations. The empirical results provide evidence for the nonprofit wage premium resulting from non-distribution constraint in competitive industries. They also support the worker motivation hypothesis.
Conclusions and Implications: The results imply that nonprofit status does make a difference in women’s economic empowerment. The pay equity in nonprofits is likely attributed to the prevalence of government contracts among nonprofits, which mandates nondiscrimination employment and pay policies.