IDEAS home Printed from https://ideas.repec.org/a/uwp/jhriss/v56y2021i4p1226-1253.html
   My bibliography  Save this article

Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes

Author

Listed:
  • Andrew C. Johnston
  • Carla Johnston

Abstract

We explore the nonprofit earnings penalty. To separate the influence of demand and supply, we leverage workers who change employers in administrative tax data. The average nonprofit worker earns 5.5 percent less than the average for-profit worker. Supply-side factors (worker selection) contribute 80 percent of the nonprofit differential. The remaining 20 percent is from demand (a nonprofit penalty). Within-worker nonprofit variation generates several insights about the influence of nonprofits on the labor market. Nonprofits compress the wage distribution and reduce inequality among earners. Nonprofit penalties are much more pronounced in classic charities than in “commercial” nonprofits, which sometimes exhibit nonprofit premia.

Suggested Citation

  • Andrew C. Johnston & Carla Johnston, 2021. "Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes," Journal of Human Resources, University of Wisconsin Press, vol. 56(4), pages 1226-1253.
    • Handle: RePEc:uwp:jhriss:v:56:y:2021:i:4:p:1226-1253
    Note: DOI: 10.3368/jhr.56.4.0319-10120R1
    as

    Download full text from publisher

    File URL: http://jhr.uwpress.org/cgi/reprint/56/4/1226
    Download Restriction: A subscripton is required to access pdf files. Pay per article is available.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bound, John & Krueger, Alan B, 1991. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 1-24, January.
    2. Preston, Anne E, 1988. "The Effects of Property Rights on Labor Costs of Nonprofit Firms: An Application to the Day Care Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 337-350, March.
    3. Frech, H E, III, 1976. "The Property Rights Theory of the Firm: Empirical Results from a Natural Experiment," Journal of Political Economy, University of Chicago Press, vol. 84(1), pages 143-152, February.
    4. H. Naci Mocan & Erdal Tekin, 2003. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data on Child Care Workers," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 38-50, February.
    5. Preston, Anne E, 1989. "The Nonprofit Worker in a For-Profit World," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 438-463, October.
    6. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
    7. Weisbrod, Burton A, 1983. "Nonprofit and Proprietary Sector Behavior: Wage Differentials among Lawyers," Journal of Labor Economics, University of Chicago Press, vol. 1(3), pages 246-263, July.
    8. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
    9. Goddeeris, John H, 1988. "Compensating Differentials and Self-selection: An Application to Lawyers," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 411-428, April.
    10. Christopher J. Ruhm & Carey Borkoski, 2003. "Compensation in the Nonprofit Sector," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
    11. Roomkin, Myron J & Weisbrod, Burton A, 1999. "Managerial Compensation and Incentives in For-Profit and Nonprofit Hospitals," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 750-781, October.
    12. Jones, Daniel B., 2015. "The supply and demand of motivated labor: When should we expect to see nonprofit wage gaps?," Labour Economics, Elsevier, vol. 32(C), pages 1-14.
    13. Feldstein, Martin S, 1971. "Hospital Cost Inflation: A Study of Nonprofit Price Dynamics," American Economic Review, American Economic Association, vol. 61(5), pages 853-872, December.
    14. A. G. Holtmann & Todd L. Idson, 1993. "Wage Determination of Registered Nurses in Proprietary and Nonprofit Nursing Homes," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 55-79.
    15. Pauly, Mark V & Redisch, Michael, 1973. "The Not-For-Profit Hospital as a Physicians' Cooperative," American Economic Review, American Economic Association, vol. 63(1), pages 87-99, March.
    16. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    17. Leete, Laura, 2001. "Whither the Nonprofit Wage Differential? Estimates from the 1990 Census," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 136-170, January.
    18. George J. Borjas & H. E. Frech III & Paul B. Ginsburg, 1983. "Property Rights and Wages: The Case of Nursing Homes," Journal of Human Resources, University of Wisconsin Press, vol. 18(2), pages 231-246.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jones, Daniel B., 2015. "The supply and demand of motivated labor: When should we expect to see nonprofit wage gaps?," Labour Economics, Elsevier, vol. 32(C), pages 1-14.
    2. Barry T. Hirsch & David A. Macpherson & Anne E. Preston, 2018. "Nonprofit wages: theory and evidence," Chapters, in: Bruce A. Seaman & Dennis R. Young (ed.), Handbook of Research on Nonprofit Economics and Management, chapter 8, pages 146-179, Edward Elgar Publishing.
    3. DeVaro, Jed & Maxwell, Nan & Morita, Hodaka, 2016. "Compensation and Intrinsic Motivation in Nonprofit and For-Profit Organizations," CEI Working Paper Series 2015-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    4. Noguchi, Haruko & Shimizutani, Satoshi, 2007. "Nonprofit/for-profit status and earning differentials in the Japanese at-home elderly care industry: Evidence from micro-level data on home helpers and staff nurses," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 106-120, March.
    5. DeVaro, Jed & Maxwell, Nan & Morita, Hodaka, 2017. "Training and intrinsic motivation in nonprofit and for-profit organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 139(C), pages 196-213.
    6. Christopher J. Ruhm & Carey Borkoski, 2003. "Compensation in the Nonprofit Sector," Journal of Human Resources, University of Wisconsin Press, vol. 38(4).
    7. Barigozzi, Francesca & Burani, Nadia, 2019. "Competition for talent when firms' mission matters," Games and Economic Behavior, Elsevier, vol. 116(C), pages 128-151.
    8. Astrid Haider & Ulrike Schneider, 2010. "The Influence Of Volunteers, Donations And Public Subsidies On The Wage Level Of Nonprofit Workers: Evidence From Austrian Matched Data," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 81(1), pages 1-20, March.
    9. Mathieu Narcy, 2011. "Would nonprofit workers accept to earn less? Evidence from France," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 313-326.
    10. Patrick Francois, 2007. "Making a difference," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 714-732, September.
    11. F. Barigozzi & N. Burani, 2016. "Competition Between For-Profit and Non-Profit Firms: Incentives, Workers Self-Selection, and Wage Differentials," Working Papers wp1072, Dipartimento Scienze Economiche, Universita' di Bologna.
    12. Barigozzi, Francesca & Burani, Nadia, 2016. "Competition and screening with motivated health professionals," Journal of Health Economics, Elsevier, vol. 50(C), pages 358-371.
    13. Patrick Francois, 2004. "'Making a Difference': Labor Donations in the Production of Public Goods," The Centre for Market and Public Organisation 04/093, The Centre for Market and Public Organisation, University of Bristol, UK.
    14. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial talent, motivation, and self-selection into public management," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 654-660, October.
    15. Becchetti, Leonardo & Castriota, Stefano & Tortia, Ermanno, 2009. "Productivity, wages and intrinsic motivation in social enterprises," AICCON Working Papers 66-2009, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    16. Monica Auteri & Richard Wagner, 2007. "The Organizational Architecture of Nonprofit Governance: Economic Calculation Within an Ecology of Enterprises," Public Organization Review, Springer, vol. 7(1), pages 57-68, March.
    17. Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011. "How important is pro-social behaviour in the delivery of public services?," Journal of Public Economics, Elsevier, vol. 95(7), pages 758-766.
    18. Astrid Pennerstorfer & Ulrike Schneider, 2010. "What Determines the (Internal) Wage Distribution in Non‐Profit Organizations?," Kyklos, Wiley Blackwell, vol. 63(4), pages 580-596, November.
    19. SHIMIZUTANI Satoshi & SUZUKI Wataru & NOGUCHI Haruko, 2003. "Nonprofit Wage Premiums in Japan's Child Care Market:Evidence from Employer-Employee Matched Data," ESRI Discussion paper series 034, Economic and Social Research Institute (ESRI).
    20. Prüfer, Jens & Xu, Y., 2021. "The Nonprofit's Dilemma," Other publications TiSEM 237785b1-929d-40db-872f-d, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwp:jhriss:v:56:y:2021:i:4:p:1226-1253. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://jhr.uwpress.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.