My first report on the nonprofit workforce crisis appeared here at Inside Philanthropy in 2022. Since that time, the message from the field has been unequivocal: Burnout is an ongoing issue. It’s resulted in widespread staffing issues in the sector and made it more difficult for nonprofits to serve their missions. And while the private funders we cover are not the worst offenders, and also not responsible for the COVID-19 pandemic and other non-monetary factors that contribute to burn-out, the fact remains that low pay and overwork are significant contributors to the problem. Both can be traced to public and private funders’ stinginess with so-called nonprofit “overhead” expenses like labor.
These facts are hardly breaking news. In fact, for more than 30 years, private funders have been aware of their contribution to the nonprofit starvation cycle, which is fueling the current difficulties in the sector.
Earlier this year, two reports added more data showing the challenges faced by nonprofits and their workforces. Neither of these reports alone tells the whole story. They aren’t exact comparisons with earlier reports, and the data they reveal aren’t universally troubling. But taken together and in the context of previous work, alongside what experts in the field have been telling me for two years, they add up to the conclusion that government and private funders alike need to step up if they want to enable this sector and its workers to fully serve their missions.
A struggle to meet the demand
In August, a 2024 survey by the Federal Reserve conducted in partnership with the National Council of Nonprofits and other organizations found that just over a third of the 937 responding nonprofits that serve low- and moderate-income communities expected they would be able to meet most of the demand for their services in the year to come. The Fed survey isn’t an exact match to last year’s National Council of Nonprofits (NCN) survey following up on its earlier work on the nonprofit hiring crisis. The Fed survey also contains some heartening facts: For example, over half of respondents said that their financial condition was either “steady” or “very healthy.” However, the Fed survey’s respondents also said that “they expected a combination of a lack of funding, an increase in demand, and a lack of staff and/or volunteers to have an adverse impact on their ability to meet demand going forward.”
In 2023, roughly a third of NCN survey’s respondents reported that 20% or more of their jobs were going unfilled, and another third had vacancy rates from 10% to 19%. Meanwhile, 1 out of 4 of the NCN respondents had waiting lists for services of more than a week, 11.5% reported waiting times of up to a month, and 12.9% said their waiting lists stretched over a month. Some even had wait lists as long as a year. The 2024 Fed survey didn’t ask participants specifically about their vacancy rates or wages, but the 2023 NCN survey did, with nearly three-quarters of respondents attributing their hiring problems to salary competition and two-thirds citing budget constraints and insufficient funds. Meanwhile, respondents to the 2024 Fed survey named “funding/fundraising” as the top challenge affecting their ability to provide services. It’s also important to note that foundation giving comprised only 10% of the revenue received by the responding nonprofits in the Fed survey, and that survey participants that received most of their money from private foundations saw a 42% increase in those funds.
One concerning fact — and one that cannot be laid at the feet of philanthropic institutions — is that 40% of the Fed’s survey participants reported that their individual and corporate donations had decreased between 2023 and 2024. Meanwhile, 80% of respondents reported an increased demand for their services, and 84% said their expenses had increased.
The results of NCN and Fed surveys, taken together, point to a sector that is struggling to meet increasing needs in the face of increasing costs and that remains unable to hire sufficient staff. It doesn’t take a quantitative survey to realize that understaffing can lead to untenable workloads, which then create or add to the burnout of existing employees, leading still more of them to quit.
A look at inadequate nonprofit wages: the Independent Sector/United for ALICE report
Next, in September, Independent Sector and United for ALICE released a report detailing troubling facts about how little many of the country’s nonprofit workers are being paid. The acronym ALICE stands for “Asset Limited, Income Constrained, Employed.” It’s an analysis of the cost of living that measures the minimum price of household necessities including housing, child care, food and technology in every U.S. county. The federal poverty level (FPL), on the other hand, is calculated as three times the cost of a minimum food diet from 1963, adjusted for inflation. The FPL is the same for all 48 contiguous states, regardless of other cost-of-living factors that differ from state to state, like housing and internet service. Unlike the FPL, ALICE is a much more complete look at the actual amount of money today’s households need to survive, factoring in cost-of-living variations not only between states, but between individual counties within those states.
“There’s a difference between, either you’re impoverished or you’re not, and how much you need to actually pay your bills every month,” said Independent Sector President and CEO Dr. Akilah Watkins. “The ALICE metric is really about how much financial power do individual families or households need in order to live at a basic level where they’re at.”
Using those factors, the Independent Sector/United for ALICE report reveals that 22% of the nonprofit workforce falls below the ALICE threshold, with 5% of those nonprofit workers’ paychecks also placing them below the federal poverty level — a smidge higher than the 2021 national poverty rate of 4% for those employed at least 27 weeks of the year. In the social-service subsector, 32% of nonprofit workers were paid below the ALICE threshold for their communities. The report includes all nonprofit workers, regardless of the size of their agencies, and compares those workers to people who work for government agencies, for-profit companies and those who are self-employed.
Like the 2024 Federal Reserve survey of nonprofits, the September ALICE report includes some encouraging numbers. For example, the ALICE data shows that the overall percentage of nonprofit workers being paid below the ALICE threshold is 22%, which is lower than the 27% of for-profit workers whose paychecks don’t meet the threshold. However, the report says, that result is driven in part by the low median wage in the notoriously low-paying retail, leisure and hospitality sectors.
Originally founded by United Way of Northern New Jersey in 2009, United for ALICE is composed of over 600 United Ways and other entities, including nonprofits and foundations.
Why funders should care, and what they can (and can’t) do
As an Inside Philanthropy staff writer, my focus is understandably on private funders from foundations to the occasional ultra-rich donor. That focus can make it tempting to mentally elevate such donors to a higher rung of the nonprofit funding pyramid than they actually occupy and assign them more power than they actually have. For one thing, as the Fed’s survey demonstrates, not all nonprofits rely primarily on foundation largesse to meet their bottom lines.
Many nonprofits, in fact, receive most of their money from government sources at the state, local and federal levels. The federal government plans to spend roughly $1.8 trillion in 2024 alone compared to the total estimated $1.4 trillion in assets held by private foundations, of which less than 5% is disbursed per year. Granted, that latter figure doesn’t include DAFs, charitable LLCs and other wealth-holding vehicles created for more or less philanthropic purposes, but the point stands: In the realm of funding for social good, even the giant private funders are small potatoes.
Nor is the federal government ignorant of the huge role it has played in hampering nonprofits, as the revised rules governing federal grantmaking that went into effect on October 1 make clear.
Given their size relative to the U.S. government’s, funders could argue that they don’t have that large a role to play in shaping salary levels and capacity in the nonprofit sector. And as the Independent Sector/ALICE report itself shows, nonprofit workers are hardly unique in receiving below-living wages, and are even in better shape than self-employed and the lowest-paid for-profit sector workers. Why should nonprofit worker pay be prioritized?
These arguments have merit on their face. They also strike me as cop-outs. Whether or not individual funders’ missions include fighting poverty or boosting working conditions including pay, the facts remain: Nonprofits are struggling to hire and retain workers. That struggle is impacting their missions. Lack of funding, which contributes to below-living-standard wages and overwork, thanks to understaffing, is a key factor determining how many staff nonprofits can hire and how long they can retain them.
The equation is a simple one: No people equals no programs. And no programs equals a sector that is struggling to meet its missions. Given that mega-rich donors and private foundations have been allowed to stockpile large amounts of wealth within a social contract that asks them in return to fund the public good, the signs that they are failing to hold up their side of that contract should be of great concern to them — and particularly to funders whose missions do revolve around alleviating poverty, combating systemic racism or improving conditions for American workers.
Or as the National Council of Nonprofits’ Chief Communications and Chief Operating Officer Rick Cohen said in a recent email, “Until the root causes of the workforce shortage are addressed — most significantly the lack of available funding to be able to better compensate nonprofit employees or even keep up with rising demand — it is going to continue to be an issue.” Private funders can’t cure all the issues plaguing the nonprofit workforce, but they do have the money and the clout to help far more than they are.
As we’ve reported before, the funding sector has known about its role in the nonprofit starvation cycle for three decades. Yet for the most part, funders have ignored the wellbeing of the nonprofit workforce even as they’ve looked at issues like the overall economic wellness of nonprofit organizations. The Walter & Elise Haas Fund, on the other hand, is a foundation that understands both the moral and practical responsibilities funders have for the nonprofit workers that depend on them.
“The ALICE report hasn’t fundamentally changed the reality: Nonprofit wages remain too low, and workers across America continue to struggle to make ends meet, build assets and secure better futures,” Pui Ling Tam, who leads the funder’s economic wellbeing investments, told IP. “The mandate for funders is clear: Invest in the people who are working to improve our country.”
The reality is that the causes of the nonprofit starvation cycle and the nonprofit burnout and hiring crises are complicated. Funders alone aren’t to blame, and funders alone lack the ability to ride to any kind of miraculous rescue. But they can take meaningful, impactful steps to raise the workers they fund above the ALICE threshold and to at least make sure that more of the nonprofits that they do fund can rise to the occasion of increasing demand. In particular, funders whose missions include alleviating poverty and systemic racism, or supporting workers’ rights more broadly, have no excuse for expecting nonprofit employees to be the exception to the goals they are working to achieve.
Foundation leaders and megadonors can encourage, and even socially pressure, their peers to do the same, and they can use their demonstrable clout at the local, state and national levels to advocate for increased government support of the nonprofits that hold together the frayed ends of our social safety net. Making these complexities and difficulties into the enemy of the greater good is tempting. It’s also the wrong approach.
From Inside Philanthropy
