Paying a High Price

Living-wage laws threaten stability of some charities

Bryan Van Dorpe is facing one of his toughest challenges as executive director of the South

Boston Neighborhood House, a charity whose 80 employees care for 6,000 children, adolescents, and elderly people.

Beginning July 1, Neighborhood House, which gets 20 percent of its money from the city of Boston, must comply with a local “living wage” law that will raise the minimum pay for employees of city contractors by about 50 cents, to $10.69 an hour. To cover the increase, Mr. Van Dorpe says, he may have to cut up to one-fourth of his staff or close one of the charity’s four centers. Deeper cuts could come if Massachusetts, which also provides money to Neighborhood House, pares its budget this year.

“Our people do the most important job in the world,” Mr. Van Dorpe says of the charity’s employees. “Of course they deserve a living wage. But when we’re confronted with an arbitrary living wage and no way to fund it, it’s like a slap in the face.”

Mr. Van Dorpe’s complaint is growing increasingly common these days. More than 80 municipalities and counties have passed laws to force employers — mostly government contractors — to raise the pay of their least-compensated employees. Typically, the measures add between $1 and $5 an hour to the federal minimum wage of $5.15.

Movement Gains Momentum

So far, about two-thirds of the wage laws exempt nonprofit employees, and most cover only government contractors. Indeed, only 1 percent of workers in a given locality have been affected. But momentum is growing to require all employers — including charities that don’t receive government-support — to raise wages.

For example, voters in New Orleans in February approved a law requiring employers, including nonprofit groups, to pay 70,000 low-wage workers at least $6.15 per hour.

Few charities or foundations have reshaped their pay plans to conform to living-wage standards, but some universities have made efforts to raise pay. Under pressure from student and faculty activists, the Johns Hopkins University, in Baltimore, agreed to give its lowest-paid workers and contract employees at the university and Johns Hopkins Hospital a raise, starting in July. The new minimum pay rate will range from $7.75 to $8.20 per hour, less than the $8.44 required for employees of city contractors in Baltimore.

Small Groups Worry

While big universities may be able to shoulder higher wages — Johns Hopkins has an endowment of $1.8-billion — many small social-service charities say they cannot do so without hurting the people who depend on them for help. Reflecting on how a wage law would affect the Neighborhood House’s day-care services, Mr. Van Dorpe says, “We might have to force parents to pay more for child care. And that’s backwards.”

Proponents of living-wage laws disagree that anything is backwards about the fight to raise the pay of nonprofit workers. In fact, activists such as Michael Gecan, senior organizer at the Industrial Areas Foundation, in New York, contend that charities that say they cannot afford higher wages should go out of business.

“The thinking is that they can provide more services if they keep pay scales down,” says Mr. Gecan, who has been involved in a number of local living-wage efforts. “If you’re paying home health-care aides $6 an hour, for example, you’re going to have a high turnover, and that’s going to hurt the quality of your services.”

Services vs. Salaries

A key reason support is growing for living-wage laws is that many Americans have trouble making ends meet, even if they are working full time. Nearly 25 percent of all jobs pay less than $8 per hour, too low to raise a family of four above the federal poverty line of around $18,000 per year, according to U.S. Census data. Nonprofit groups pay about 15 percent less than for-profit companies, on average, according to U.S. Labor Department data. Nearly a half-million nonprofit employees earn less than $7.15 per hour, Census data show.

Colin C. Bennett, an economist at the Employment Policy Foundation, a nonprofit think tank in Washington that opposes raising the minimum wage, estimates that if all nonprofit groups were subject to living-wage laws, they would have to come up with $2.2-billion to cover the pay raises. Nonprofit groups would have to increase their fund-raising results by 2 percent annually just to cover the cost-of-living increases built into many living-wage laws, Mr. Bennett says.

For many nonprofit groups, donors hold the key to raising wage levels, but many want their money used for programs, not salaries. “We wish we could pay a living wage to all of our workers,” says Katie deF. Williams, director of early-childhood programs at the YWCA Children’s Center, in Minneapolis. But, she says, “the amount of our raises is dependent upon the amount of money we can raise.”

The children’s center, which, like other charities in Minneapolis, is exempt from the city’s living-wage ordinance, pays some of its 90 employees as little as $8.50 an hour. The law requires that employees of large government contractors receive at least $9.57 per hour.

The YWCA increases its day-care fees annually so it can afford to raise salaries, but Ms. Williams says the charity cannot afford to pull every one of its workers out of poverty. Some of the day-care center’s employees are single mothers who, she says, cannot afford such basics as rent.

Refusing Government Aid

Unlike the YWCA in Minneapolis, nonprofit groups in many locales must follow local wage ordinances. Some are giving up government support — and cutting government programs — to avoid having to comply.

The Salvation Army in Detroit is among them.

In 1998, the Salvation Army of Eastern Michigan argued against a living-wage referendum that raised the hourly wage for employees of government contractors to $8.35 per hour. Conforming to the law would drain cash and require cutting services to homeless people, the Salvation Army affiliate said. When the measure passed anyway, the group stopped taking government money, including a $100,000 annual grant from the city for two emergency homeless shelters. If it hadn’t, says Don Czaplicki, director of social services for the Salvation Army of Eastern Michigan, “our operating budget would have been shot.”

“If I accept $100,000 from the city for a program,” he says, “I might have to pay $300,000 to $400,000 in living wages.”

Still, Mr. Czaplicki says, opting out of the government contracts hasn’t been without problems. Without the city money, he says, the Salvation Army is running a “significant deficit” at one of its homeless shelters in Detroit, and the charity had to eliminate a separate federally supported housing program that served 45 people a year.

Organizing Poor Workers

In recent years organized labor has lost thousands of government employees from its ranks as more and more municipalities have turned to nonunion, private employers — including nonprofit groups — to operate local-government programs. Union officials see supporting the living-wage movement as a way to help replenish their membership rolls while also improving the plights of the working poor.

The American Federation of State, County and Municipal Employees union, which represents 1.3 million government and health-care workers, is trying to organize low-paid workers at child-care and home health-care charities, among others.

Marilyn Brinker, who says she makes $6 an hour caring for mentally disabled people in Belleville, Ill., is among those the union is trying to help. “I’m in poverty,” says Ms. Brinker, who says she lives in federally subsidized housing and relies partly on food stamps to feed herself and her niece. “I should be making $9 or $10 an hour for what I do.”

Belleville, near St. Louis, has no living-wage law, but the union last year did help win a $73-million measure in the Illinois legislature that gives workers such as Ms. Brinker a $1 hourly pay increase. Even so, much of that money has yet to filter down to workers and is being kept by charities and other employers, says a union spokeswoman, Marrianne McMullen. “With the exception of some union shops, organizations are keeping a lot of the money in their general-operations budgets,” she says, adding that she hopes the state will start trying to crack down on those groups that don’t pass the increases on to workers.

While unions are unyielding in their desire to see nonprofit groups included in new living-wage laws, lawmakers are far from unified on the point. Many say that nonprofit groups should be exempt from wage laws because they provide such services as food donations and health care for the poor that would otherwise be performed by government.

Politics also play a role. Because charities are popular with constituents, they often have enough clout to weaken living-wage measures or win exemptions.

Phil Andrews, a member of the Montgomery County Council, in Maryland near Washington, and a proponent of living-wage legislation, says a wage bill that included charities lost in the council in 1998 largely because nonprofit groups refused to back it.

A similar measure, introduced by Mr. Andrews this year, excludes nonprofit groups and appears headed for victory.

Seeking Financial Help

In New York City, nonprofit activists are trying to reduce tension between living-wage advocates and charities by persuading lawmakers to earmark more city money for wage increases in contracts with nonprofit groups.

Activists are applying lessons they learned six years ago, when the Salvation Army, Catholic Charities, the Federation of Protestant Welfare Agencies, and other organizations resisted efforts to force a wage law through the New York City Council.

The charities said they couldn’t afford to pay their employees more, and the council acquiesced, passing a bill that affected only a handful of government employees. The council’s action was something of a wake-up call for groups like the Association of Communities Organized for Reform Now, or Acorn, which has sought living-wage laws in a number of cities.

Recognizing that it had failed to rally support among charities for the New York law, the association last year sought amendments to the measure so that as many as 200,000 workers, including tens of thousands of nonprofit employees, would be covered. This time, it made sure to seek the support of charities before plunging ahead.

“I personally visited a lot of those groups to see where they stood on the living-wage concept,” says Bertha Lewis, executive director of New York Acorn. “Business groups were really counting on nonprofit organizations to back up their views against a living wage this time around, so I was surprised to hear so many nonprofit groups arguing with me as to why the living wage we were seeking shouldn’t be even higher.”

The association’s effort paid off — somewhat, at least. Charities agreed to support minimum-wage legislation, if government agreed to pay for any raises. A bill currently before New York’s City Council would require many employers who hold city government contracts to pay $8.10 an hour if they offer medical insurance to employees, or $9.60 an hour if they don’t. The city, state, and federal governments would kick in $90-million to cover the raises.

Because the city is running a $4.5-billion deficit, the measure falls short of what Acorn and other advocates wanted: a minimum wage of $10 per hour, regardless of whether health-care coverage was available. Still, if the New York law passes, it will cover 80,000 employees, several thousand of them from nonprofit providers of home health care and day care.

To Ms. Lewis, that would be a good start. She says she is counting on the tighter bond recently forged among nonprofit groups, unions, and grass-roots activists to strengthen the law in coming years. “If you make new allies,” says Ms. Lewis, “you can change things.”

For groups like the South Boston Neighborhood House, that kind of change would be a blessing. “If the government wants us to pay more, then it can pay us more,” Mr. Van Dorpe says, noting that nonprofit groups in Boston are asking the city’s government to do just that.

“These laws might be great for labor,” he adds. “But nonprofits run differently from businesses. We need help to live up to laws like this one.”