Employee Compensation of Nonprofit Child Welfare Agencies in New York: Crises and Strategies

Background and Purpose: The United States has long relied on the nonprofit sector for the delivery of essential public goods, particularly human services (Cornelius & Corvington, 2012). This is especially the case since the privatization of public services—in which nonprofit organizations undertake the service provision role with funding from government contracts (Shick & Martin, 2020). New York state’s child welfare field is an example of this public-private collaboration where nonprofit child welfare agencies heavily rely on government contracts (Parrott & Kramer, 2017). Nevertheless, because of the chronic underfunding of government contracts, NY nonprofit child welfare agencies long struggled to pay workers a living wage and thus suffered from high staff turnover (Kohomban & Collins, 2017; Parrott, 2022). According to the New York Human Services Council (2016), salaries in primarily government-funded agencies are so low “that many nonprofit employees depend on safety net programs, such as food stamps and Medicaid” (p. 3). While the literature has well documented the low employee compensation in nonprofit services organizations primarily funded by government contracts, we know little about how nonprofit management perceives and responds to this issue. Specifically, except for the budget constraint of government contracts, what are other major factors that shape management’s decision-making about employee compensation? How has nonprofit management responded to this situation?

Theories and Method: Adopting resource dependency and competing institutional logics perspectives, we chose the New York nonprofit child welfare sector as a collective case to study these issues. Between September 2022 and May 2023, we conducted 18 in-depth interviews with 17 key informants knowledgeable about the compensation issues of major nonprofit child welfare organizations in New York State. Due to the exploratory nature of the study, the maximum variation principle was adopted to purposely select theoretically representative child welfare agencies. The criteria used include the following: size of the organization’s operational budget, revenue mix, gender and/or race of the CEO, religious background, and percentage of workers unionized. We utilized Delve, a qualitative data analysis tool, in coding and analysis of interview transcripts and memos taken after each interview.

Results, Conclusions, and Implications: We found that interviewed agencies’ employee compensation was primarily constrained by government contracts, and they were torn by conflicting institutional logics from the state, the labor market, private funders, and unions. Overall, government contracts and market competition determined worker pay, and nonprofit child welfare agencies faced labor competition not only from peer organizations, but from the government and for-profit sectors. With the “great resignation” atmosphere and increased cost of living intensified by the Covid-19 pandemic, agencies were under tremendous pressure to increase worker pay. However, programs chronically underfunded by the government were incapable of providing competitive wages and were experiencing high staff turnover and vacancies. Agency leaders agreed on the need to push the government to pay programs adequately but disagreed about advocacy goals and messaging. These common but attenuated labor dynamics, related managerial responses, and implications for the future of the sector are discussed, particularly in response to competing institutional pressures.