Donative labor effect of the nonprofit pay: A multilevel explanation

Abstract

Studies on the nonprofit pay differential find that nonprofit workers in the child day care industry earn more than comparable for‐profit workers, whereas nonprofit lawyers earn less than lawyers in for‐profit firms. Are nonprofit day care center workers less altruistic than for‐profit day care workers or nonprofit lawyers? The answer is yet to come. The study aims to test the donative labor hypothesis, which is derived from altruistic motivation. To estimate the donative labor effects on the individual level, I apply cross‐classified multilevel modeling to disentangle the confounding effects on the industry level and occupation level. Data are pooled from Census 2000 and American Community Survey 2005–2016 to provide individual, industry, and occupation information. Industries are cleaned based on the Statistics of Income data from the National Center for Charitable Statistics. My analysis finds that nonprofit workers earn 4.3% less than comparable for‐profit workers net of industry and occupation effects. The study contributes to elucidating the explanatory levels of different theories. The random‐effects modeling has established an exhaustive inventory of nonprofit pay differential across industry and occupation levels.

Are CEOs rewarded for managerial ability? Evidence from nonprofit hospitals

“…Consistent with Handy and Katz (1998), Hallock (2002) states that executives tend to “donate” their wages to nonprofits while serving social missions. The donation and self-sacrifice behaviors originated from altruism (Cui, 2020). Paying high compensation could lead to monetary incentives crowding out altruism and attracting the wrong type of CEOs (Jobome, 2006).…”

Layoffs during a pandemic: Results from an experiment on the management practices of nonprofit organizations and business firms

“…The nonprofit sector as a whole is typically viewed as benevolent and good for society. There is a general expectation that individuals who work for nonprofit organizations are willing to do more with less, including by taking less pay than workers in other sectors (the "donative labor effect," e.g., Ciu, 2020), and to make sacrifices for the good of their organization's mission or cause, an idea that has been conceptualized as nonprofit service motivation (e.g., Word & Carpenter, 2013). Thus, nonprofit organizations that find ways to remain operational during a crisis may be seen as living up to these expectations and also performing a public good.…”