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

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  • Johnston, Andrew C.

    (University of California, Merced)

  • Johnston, Carla

    (University of California, Berkeley)

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

  • Johnston, Andrew C. & Johnston, Carla, 2020. "Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes," IZA Discussion Papers 13059, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13059
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    References listed on IDEAS

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    More about this item

    Keywords

    employment; for-profits; nonprofits; labor demand; earnings;
    All these keywords.

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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