Nonprofit Wage Differentials: A Systematic Literature Review

• In Event: Mapping the third sector

Abstract

The last half-century has seen an increase of nonprofit presence within society accompanied by academic formalization of the sector’s observed characteristics. One prominent branch of this growing literature is the focus given to labor force patterns. Within this area of study, researchers seek to understand employment levels, wage dispersion, executive compensation, organizational structures, and other features that arise from the unique demarcation of “nonprofit”. This assessment takes the form of within and between sector analyses, where the former is concerned with differences that occur holding the nonprofit title constant and the latter explores variation that arises when contrasting to counterparts such as for-profits and government entities. In both analyses, the unique structure of nonprofits necessitates theory around actors’ objective functions, product characterizations, work characterizations, and firm maximization behaviors. In considering the broad field of third sector research, this article focuses on nonprofit wage differentials.
Nonprofit wage differentials are defined as differences in pay that arise between the nonprofit and for-profit sectors given identical workers performing identical tasks. Academics and practitioners have long recognized the subjective belief that nonprofit workers earn less than their for-profit counterparts but robust analysis confirming this phenomenon has lagged. Additionally, quantitative research on profit wage disparity reaches varying conclusions on the direction and magnitude of this effect (Hirsch et al., 2018; Johnston & Johnston 2021; Leete, 2006). This paper performs a systematic literature review to compile conclusions that exist in the extant literature on nonprofit wage differentials. It will pull together findings on the studies’ settings, theoretical frameworks, empirical methods, and findings. Research steps will follow the UNC Systematic Review guide in addition to implementing the PRISMA checklist. Beyond data collection and presentation, this paper will place results into the larger context of the nonprofit sector today and offer suggestions for best practices in future research.
This study is the first to attempt to systematically pull together various strands of literature and research to create a full picture of nonprofit wage differentials. It will serve future researchers by creating a robust understanding of past processes and best practices.

References

Hirsch, B. T., Macpherson, D. A., & Preston, A. E. (2018). Nonprofit wages: Theory and evidence. Handbook of Research on Nonprofit Economics and Management, 146–179.


Johnston, A. C., & Johnston, C. (2021). Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes. Journal of Human Resources, 56(4), 1226–1253.

Leete, L. (2006). Work in the nonprofit sector. The Nonprofit Sector: A Research Handbook, 2, 159–179.
https://doi.org/10.3368/jhr.56.4.0319-10120R1

Author

• Tiana Marrese