Jordan Jones
LPO 3452
October 19, 2011
Generation Y in the Non-profit Workforce
Jasmine McGinnis, of Georgia State University and the Georgia Institute of
Technology, received the W.H. Collins award at the 2009 Southeastern Regional
Conference for Public Administration, for her empirically driven study on understanding
wage differentials between the for profit and nonprofit sector among Generation Y
employees. McGinnis desired to draw into question whether nonprofit managers practice
of enhancing non-compensation related job characteristics in order to attract and retain a
young workforce was favorable. This question is crucial because the nonprofit sector
(traditionally more-so than the for-profit sector) must be immensely strategic to how they
use their scarce resources. In addition, keeping their young employees engaged, focused
and bought-in for the long haul, are crucial uses of those resources. If those scarce
resources are being aimed toward fulfilling that aim and founded on faulty assumptions,
nonprofit management adjustments must be made.
The widely accepted theory and practice of issuing non-pecuniary benefits to
nonprofit employees in order to reconcile the wage gap between the sectors has routinely
proved useful for engaging and retaining Generation X employees. However, the
question remains: should that trend continue for younger employees? According to a
2008 survey, “69% of young nonprofit employees reported feeling underpaid in their
current positions and 64% reported that they had financial concerns about committing to
a career in the nonprofit sector.” (Cornelius et. al., 2008) McGinnis also makes reference
to a national survey of Generation Y employees, who state that “salary, benefits, and
opportunities for career growth and advancement” are the three most chief job
considerations (out of 11) (Yahoo!/Robert Half International. 2008)
McGinnis believes that scholars have solidified that non-profit employees, in the
past, have assigned more significance to intrinsic rewards they obtain from their positions
than their for profit counterparts. In fact, McGinnis notes that the profit nondistribution
constraint has routinely produced a self-sorting of individuals into the nonprofit sector.
McGinnis’ four primary hypotheses of Generation Y employees pivot around advancing
existing theories of nonprofit compensation:
Hypothesis 1: Employees who work in nonprofit organizations will be paid less
than comparable employees who work in for profit organizations.
Hypothesis 2: The wage differential between men and women will be lower for
nonprofit employees than for profit employees.
Hypothesis 3: The wage differential between minority and whites is lower for
nonprofit employees than for profit employees.
Hypothesis 4: Nonprofit employees with graduate education will earn less than for
profit employees with graduate education.
McGinnis used the 2001-2006 U.S. Census Bureau’s American Community Survey
to examine wage differentials for young, college educated nonprofit and for profit
employees using pooled cross section regression (regression analysis for time series). The
two regressions keyed in on the examination of earnings differentials between male and
female wages, minorities and whites wages as well as returns to graduate education
between nonprofit and for profit employees. McGinnis’ hub of findings is listed in Table
1 below.
Some important analysis of the results of this study ensued. Hypothesis 1 was
confirmed, as McGinnis’ research confirmed a sizable earnings gap between nonprofit
and for profit salaries, approximately $6,300 in median salaries. In addition, Hypothesis 2
was also proved correct, as the research shows that nonprofit employees who are females
are paid more egalitarian than their for profit counterparts (even though women in
nonprofit organizations still earn less than men). The difference between male and female
earnings of nonprofit employees is only a $2,000 wage gap, while there is a $9,000 wage
gap between male and female earnings of for profit employees. On the other hand,
McGinnis’ third hypothesis proved to be too broad, as only certain racial/ethnic groups
are paid more equitably in relation to men and whites respectively.
With regard to Hypothesis 4, similar to previous research findings, a larger
percentage of Generation Y nonprofit employees have attained more graduate education
than for profit employees. The proportion of Generation Y employees holding Masters
Degrees and Doctorates is nearly twice as high as the proportion of for profit employees
holding Masters Degrees and Doctorates. Nonprofit and for profit employees with
Masters degrees earn approximately 16.2% and 17.1% more than employees with
Bachelors‟ degrees. Although the highest percentages of employees with Masters degrees
are in the nonprofit workforce, these employees are compensated the least for their
graduate education. For profit employees with Professional degrees earn approximately
23% more than employees with Bachelor’s degrees, while nonprofit employees with
Professional degrees earn approximately 18% more than employees with Bachelor's
degrees.
I believe the results of this research should be used to adjust current modes of
incentivizing young professionals in the nonprofit sector. Survey results mentioned in the
study that non-wage compensations and adaptations to the working culture of an
organization are not enough to appeal to, and especially deficient in retaining Generation
Y employees. Nonprofit compensation, which severely lags behind comparable for profit
compensation, must be improved for an educated workforce who increasingly weighs
compensation as a primary factor in job satisfaction.
The research does reach an important conclusion that female and racial/ethnic
minority nonprofit employees are being compensated more equitably than their for profit
counterparts. However, I believe the most pressing discovery from this research is the
low paying returns to education for employees. Highly educated, Generation Y
employees are paramount to the progressive innovation and sustainability of nonprofit
organizations. There must be a tidal change toward incentives (including compensation
practices) that they find fulfilling.
Although I believed the research and study were solidly constructed, I believe there
is considerable advantage to noting what an empirical study is missing that could prove
prodigiously relevant in the field. I would be wary of not looking further at the sentiment
surveys that were listed, confirming their legitimacy. In addition, I would be wary of
assuming that this trend away from non-pecuniary compensation defines all Generation
Y employees. Some genuinely have no excessive attachment to money, other than for its
allowance of basic comforts. What are additional ways that we can solidify our belief in
these individuals as an organization?