How Does Piecemeal Minimum Wage Legislation Affect Nonprofits?

How does minimum wage legislation affect nonprofits?

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Cook County, Illinois, is raising its minimum wage, though not at the rate that Chicago did, meaning that the greater Chicago metro area now has three different minimum wages. That’s confusing, certainly and it can cause difficulties for people living and running businesses in those areas. But it’s also indicative of a much larger problem: the federal government hasn’t been able or willing to establish a nationwide minimum wage that allows people to live above the poverty line.

Nonprofits are in a difficult place because of all of this, too. The ideal nonprofit is one that can balance its mission with what is required to achieve that mission. For smaller organizations, paying employees can be difficult, and a minimum wage increase can make that even harder. But there is also an ethical question many nonprofits need to address: is the minimum wage to which your organization is subject high enough for your employees to survive? If not, can you afford to pay them more?

In places like Chicago or Seattle, where the minimum wage is increasing, being able to stay ahead of that increase is pretty helpful. If an organization can pay its employees $13 an hour before the wage increase is required by the city, it will be able to plan ahead, budget, and fundraise to meet that expense.

However, grantmakers are more likely to fund projects and services than they are to fund overhead expenses such as salaries and wages for nonprofits’ employees. CalNonprofits executive director Jan Masoka told Nonprofit Quarterly, “foundation folk quietly support minimum wage increases but seldom fund efforts to raise it, and they virtually never help their grantees with the transition and the huge budget increases it entails.”

Nonprofits are supposed to be thinking about what’s best for their mission and employees, not for profit margins or bottom lines. Nonprofits have an ethical obligation to pay employees a living wage, whether that’s the minimum wage or not. The trick is figuring out how to do that.

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