The Living Wage Debate: Affordability and Feasibility

Monday, November 17, 2014

by Carol Kellerman, President, Citizens Budget Commission 

Everyone can endorse the worthy goal of paying non –profit social service staff a decent wage. They do important, admirable work. Many of them – an estimated 35,000 in New York City, many of them part-time – are paid less than $15.00 an hour.  In contrast, the average cost of compensation for a NYC employee, including generous fringe benefits, is more than $100,000 a year. 
But figuring out how to achieve the goal is far more complex than endorsing it. At a panel discussion on this topic held at Philanthropy New York on November 5 (“Should Nonprofits Be Mandated to Pay Living Wages, and What is Philanthropy’s Role?”), I outlined serious concerns about the costs of a wage mandate and about the implications of imposing such a requirement on non-profits. 
While much more information is needed to develop precise estimates, preliminary research has shown that a $15 per hour wage minimum could cost somewhere between $250 million and $400 million a year. And that doesn’t include the additional cost of creating, supporting and maintaining ‘career ladders’ for low wage employees, another proposed requirement.
Where would that significant sum come from? It may well be that the current administration would make covering this additional expense a priority, but there is no way to assure that this source of funding is guaranteed in the event of a fiscal squeeze or change of administration. Are philanthropists willing to provide all or part of the funding in lieu of or in addition to their other grants to social service providers for specific programs?
Another program panelist, Allison Sesso, President of the Human Services Council, expressed misgivings about imposing a one-size-fits all wage requirement on the thousands of non-profits in the social services sector in the City. She urged that they be given flexibility and discretion to target additional funds to meet their particular needs after years of under- funding from the City and State.
Several grant makers in the audience focused on the need to assist low wage employees, through means other than a wage floor. One reaction was that requiring both a $15 per hour wage and a program of ‘career ladders’ might be  too burdensome and that it would be better to focus first on creating career ladders for low level employees to develop the skills to move into better paying positions. Another suggested developing a formula to award each organization a sum to be used over a period of two or more years to improve the welfare of  low-wage employees through educational grants, childcare and other means and then to evaluate the results.
All agreed that the decentralized, private, community-based provision of social services in New York is vital and worth preserving and that nothing should be done that would move toward turning non –profit staff into de facto government employees or to create inequities between workers performing the same or similar functions based upon whether they are funded by city contracts.  
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