You’ve probably heard some version of the urban legend where a person alone at home receives a series of progressively more threatening phone conversations. The story culminates with the police saying “Quick! Run! The calls are coming from inside the house!” The spookiness arises from the way our expectations of safety are violated, and how enemies can be hidden close by. Part of our non-profit work involves fighting courageously for fair treatment, equity, and overcoming individual and community poverty. What happens when we discover that the ones being unfair are us? In this post, we’ll examine how RVC had to adjust its perspective on compensation and benefits when we discovered the calls for poverty pay were in fact coming from inside our organization.
My name is Jon Kauffman, and I’ve been a volunteer in operations and development at RVC since 2015. Earlier this year, our managing director Ananda Valenzuela asked me to analyze the Fellows’ compensation and benefits package to ensure we were paying a living wage. What began as a dry HR exercise ended up revealing important lessons about the relationship among pay, priorities, and values – and how even if you’re an enlightened new-age non-profit boss, it’s still tricky to be a boss.
What we learned about hiring and paying RVC Fellows
The RVC Fellowship program began in 2015. We recruit people of color who want to advance as non-profit leaders into management roles and place them at area community organizations while providing training and support in non-profit administration, advocacy, and leadership. The program runs for two years, with the first cohort working from 2015 – 2017. Compensation for that group consisted of a $13/hr wage rising with the Seattle minimum, 17 days annual paid time off, healthcare benefits with RVC covering 90% of premiums, and a $4,000 end-of-year bonus meant to help Fellows with education costs. Given the training component and prevailing local conditions, we were thought this was a fair package. In fact, it was significantly more generous than we had initially budgeted, and sufficient to generate a strong pool of candidates who accepted offers. We declared victory and put compensation and benefits planning on the back burner while we focused on running the program.
Fast-forward to the end of 2016 when we began planning for the second cohort. We faced troubling facts. First, our Fellows gave us feedback — the pay was either barely enough or insufficient to make ends meet. While introducing them to the promise of non-profit careers, we were simultaneously demonstrating that those careers risked being unsustainable. While we asked them to work in the Rainier Valley community, we weren’t paying enough for them to live there. Second, our outreach to prospective candidates indicated that those with advanced skills and experience – like greater and more sophisticated work history, deeper cultural competency, advanced degrees – simply weren’t prepared to apply for a job that paid a little over Seattle’s minimum wage, even when health benefits were included. (Those with sharp ears should be able to detect a faint sound like a phone ringing in the parlor of our darkened non-profit…)
Instead of accelerating a career in non-profit leadership as we hoped, the program risked instead becoming an introductory survey, focused on early-in-career or new-to-career candidates whose pay expectations matched what we would offer. To add to this, we got some friendly but firm encouragement from our partners to do better. Mo! from our partner Got Green had been immersed in advocating for living wage green jobs as part of their environmental justice work, and she pressed Ananda to explain how RVC was providing living-wage jobs for its Fellows. While the total Fellow compensation package lined up with (the low end of) what Got Green had been fighting for broadly, the package suddenly didn’t seem as generous, and we found ourselves less self-congratulatory and more worried we didn’t have a sustainable program. That challenge kicked off a deeper discussion of our compensation philosophy, how we thought about the local labor market, and what we should aim for going forward.
Lower wages mean doing more with less, so that’s awesome, right?
While lowered wages might be a boon to EDs during budgeting season, they have long-term negative impacts for employees, employers, and the communities we serve. I had a few thousand eloquent, trenchant words drafted on the unique downward pressures non-profits face when setting pay, but I realized that if there’s one audience that’s already noticed this, it’s RVC and NPAF blog readers. Suffice to say, lowered wages that demand employees trade mission for cash lead to burnout, turnover, and sector departure. They also reduce the pool of qualified applicants, shorting our programs of needed skills and experience.
Beyond making it hard to bring in capable employees, low pay decreases representation. People who can’t afford to work our jobs choose work that pays better – and that includes the candidates from the communities we serve. For many, this connects back to historical exclusions from generational wealth creation, inequitable distribution of opportunities, weakly resourced networks, and the other systemic factors we’re in business to combat. If you need a highly-paid spouse, or to live at home rent free, or not to support children to afford your non-profit job, something’s probably wrong, wrong in a way that’s driven by and contributes to inequity.
In addition to these “micro” effects within our organization, we saw hints of an equity-focused “macro” effect. In 2016, RVC staff attended The People’s Institute for Survival and Beyond‘s training on undoing institutional racism, which I’d recommend to any organization that wishes to be intentional its community and system anti-racism work. One exercise the Institute folks led was to ask if we understood our organization’s role supporting the systems which oppress our community. As “do-good” outfits who prefer to see ourselves as part of the solution, not the problem, this can be challenging introspection. (Do you hear the heavy breathing on the line? Yeah, um, it’s us…)
Among other things, we’ve concluded that the wage-setting is one way we can harm the communities we are trying to support. Here’s how: Non-profits comprise a bigger part of the economic footprint of the poorer places where our work happens. We aim to employ staff from the places we serve. If you believe (in the same way you believe water is wet and rocks fall downward) non-profit wages tend to be lower than in other sectors, then that means we are collectively imposing downward wage pressure on those communities. Lower prevailing wages contribute to impoverishment. Connecting the dots, we can squint and see how non-profits’ drive for efficiency can end up reinforcing poverty.
This perverse effect is true for any firm that pushes local wages lower, but it stings more for RVC, because supporting the community is our entire reason for existing. And since we aim to provide guidance and coaching to non-profit partners, we could be magnifying the effect by tacitly endorsing similar low pay rates across the ecosystem. (“Run! Get out! The poverty wages are coming from inside the poverty-fighting non-profit!”)
This thinking led us to the conclusion that RVC needed to pay its Fellows a living wage for our community, even if that was higher than the lowest we could get away with in the market. We thought this should apply to all our jobs, but it was doubly important for the Fellowship, where we hoped candidates would be rooted in the Rainier Valley – authentically connected to and part of the communities they would serve. Poverty pay meant folks wouldn’t even put down a security deposit, let alone roots. And we owe it to the neighborhood that our Fellows be able thrive and invest in the local economy.
What’s A Living Wage?
Having resolved to pay a living wage calibrated to Rainier Valley, we then faced the task of figuring out what one was. Why might it be more than the poverty line or the Seattle minimum? The answer lies in flipping the usual pay scale approach – instead of learning what people would take, what could we learn about what it took to live?
Lucky for us, there are many groups who work to figure out what households need to live. We consulted the MIT Living Wage Calculator, the Self Sufficiency Standard developed by the University of Washington Center for Women’s Welfare, the Federal Poverty Guidelines developed by the Department of Health and Services, and living wage reports prepared by the People’s Action Institute and Seattle Jobs Initiative / Economic Policy Institute. Unluckily for us, these sources yielded vastly different numbers — enough variance to let an organization cherry-pick whatever answers they want.
Reaching out to folks involved with these efforts, we got guidance that helped make sense of what we were reading. First, we needed to distinguish between “survival” and “living.” There are several excellent products focused on what it takes to subsist in the US. These numbers are used to calibrate anti-poverty safety net policy, and judge training program efficacy. The budgets they use for their calculations are “no frills” to say the least – they wouldn’t generally include telephone or internet service, for instance, and food budgets were calibrated to very inexpensive diets. Even though these standards were detailed and thorough (the UW’s Self-Sufficiency Standard and federal poverty guidelines are good examples) and fit for their purposes, a survival standard didn’t match the living wage we were shooting for even if it made our pay look generous by comparison. Instead, the People’s Action Institute and Seattle Jobs Initiative targets were most aligned intent-wise with living vs survival. These wage targets, while still modest, included things like rainy day savings, cell phones, and Internet connections which made it possible to think about investing in education or personal goals. What’s more, they made it more likely Fellows would fully participate in the neighborhood’s economy.
Second, we needed to zero in on location-specific measures. Given our local focus, nation- or even state-wide estimates of household budgets varied greatly from those rooted in King County or Seattle. Given our longstanding status as a hot real estate market, estimates that combined housing costs with rural areas and other Washington cities like Spokane told us very little about living costs in our zip code. The federal anti-poverty guidelines fell into this category, setting thresholds that were identical across the continental US. (It’s not that these figures aren’t useful at all — but they just didn’t answer our question.) MIT’s Living Wage Calculator and People’s Action Institute’s “Waiting for the Payoff” report broke down to the county level — still not perfect in a place where people are currently being displaced from Seattle into other parts of King County, but they were detailed enough to let us begin to draw conclusions.
Third, we needed to stay current. Costs are changing rapidly in Seattle, especially housing costs. Reports that are even a couple years out of date under-estimate a present-day living wage, and our unique housing market made a standard cost-of-living-adjustment inflator iffy. We were fortunate to find estimates based on current data for several reports.
Even after zeroing in on living wage-focused, locally calibrated figures, we found a significant spread in “modest” or “living wage” estimates: from $16.77 (Seattle Jobs Initiative) to $20.24/hr (People’s Action Institute) for a single adult household. While those numbers confirmed our belief that simple adherence to the minimum wasn’t going to yield a living wage, the range was still too broad.
We took an additional step looking closely at the methodology and budgets, using our staff’s experiences to validate. One great thing about these reports and tools is that they break down into summary budget line items for categories like transportation, housing, health care, etc. This let us reach out to our staff and partner organizations to compare their actual experience with what we were reading. After this dialogue, we found that the report from The People’s Action Institute, while the most challenging budgetarily, best matched staff experience in the Rainier Valley. Below, excerpted from their excellent 2016 “Waiting for the Payoff” report (pdf), is detail for living wage budgets in King County. (It’s important to note that this calculation expects employer-funded health coverage equivalent to a “Silver” ACA plan and attendant employee premiums — so the full cost of health care isn’t captured in this chart.)
As a target, we adopted the “Waiting for the Payoff” single adult household living wage of $20.24 (in a 40 hour work week) or ~$42,000/year – a wage likely to allow someone to live in Rainier Valley and contribute to its growth. Expressed for a 37.5 hour work week, this is $21.59/hr. (2.5 hours additional free time is meaningful, but it doesn’t change monthly expenses, so the shorter we make the full-time work week, the higher the hourly pay needs to be during the remaining hours.)
[You’ll note we’ve set our goal based on “Single Adult households” in the chart above. There’s no specific justification for this. Households with children unsurprisingly have a higher cost of living, and they’re a big part of our community and candidate pool. We will have to do more work going forward in order to hit a living wage for these households.]
This $42K goal was a heavy lift from the roughly $33K in total cash compensation originally budgeted. We began by taking a hard look at the $4K “education bonus” which was paid at the end of each work year. In light of Fellows’ regular expenses, it made little sense to hold back money for an annual payout when month-to-month pay was insufficient. We chose to eliminate the bonus and instead rolled that money into straight hourly pay. That’s not to say that we are universally against bonus compensation, but we decided it was more hardship than benefit at this wage level.
But simply rearranging these deck chairs alone was not going to right the ship. We needed to find more money to put in paychecks, and we also needed to understand how RVC’s total compensation package compared to the wage target we had set. If any of our benefits could address some of those Fellow expenses, we could get comfortable with a wage short of the $21.59/hr target. If we could find the funds to boost pay some and find efficient ways to reduce employee costs some, we might meet in the middle.
Comparing Total Compensation to Living Wage Budgets and Finding Efficiencies
It was essential to get creative, but creativity is risky given RVC’s incentives as an employer to justify minimizing pay. Would we convince ourselves item by item that employees didn’t really need a living wage after all? Would we be tempted to roll out a mandatory pro-vegan “top ramen bank” benefit and congratulate ourselves for eliminating Fellow food budgets while also saving the Earth? Buy off-brand sleeping bags and explain how Fellows could crash in their offices and avoid pesky rent payments? Our learning when thinking about this risk was: Employers should be skeptical when they explain why it’s okay to pay employees less. Trying to remain aware of this fallibility, we focused on two budget areas where a living wage could be achieved on lower budget:
- Health Care – First, RVC’s health care plan pays 90% of employee premiums, more than average in the sector. This amounted to an employee savings of about $50/month for single adults vs. the “Waiting for the Payoff” budget. RVC’s base health care plan also includes an HRA (Health Reimbursement Account) that provides a zero-deductible experience vs. our health plan’s standard $500 or $2000 deductible. This isn’t a standard benefit in many plans, and we think it further reduces staff out-of-pocket expenditures and increases access to care. Finally, RVC covers 50% of dependent child premiums, leading to savings for households with covered children.
- Transportation — The transportation budget in “Waiting for the Payoff” assumes automobile ownership — payments, insurance, fuel, and maintenance. Cars are expensive. They’re the only sensible default for transportation nationwide, but Seattle’s solid transit system makes transit a realistic alternative. We got in touch with Sound Transit to get a sense of what a no-car, lots-of-transit + taxi + short term car-rental budget would look like in comparison to the car-ownership budget.
Unsurprisingly, we confirmed it’s a lot cheaper to ride transit, as long as you give up your car and the fixed costs associated with it. Having heard that many Fellow candidates were positively disposed, we rolled out an RVC-sponsored ORCA Business Passport from Sound Transit that provides all Fellows (and all other RVC employees) with an unlimited transit pass, costing employees a mere $10/month. It didn’t hurt that boosting transit is aligned with our progressive community and equity values.
With the transit plan in place, we felt we could reduce the transportation budget line item by about half (ca. $320/month), while still leaving funds for taxi and other on-demand car services. This has a substantial impact on the total living wage target, since transportation is such a relatively large part of the total budget.
Taken together, we estimated that these benefits (transit, lower premiums, and HRA) accounted for about $5K/year of expense relief. (And because the transit expenses are significantly cheaper for RVC than their cash equivalents, this $5K in staff value only costs RVC around $1500.) Expressed in terms of a 37.5 hour/week wage, this works out to about $2.50/hr in benefit value. Thus, a $19/hr cash wage, when combined with our expanded benefit package, achieved our living wage goal of $21.59/hr. Thanks to the generosity of our donors, we were fortunate to be able to find the funds to pencil this pay rate into the budget.
These “extended benefit” substitutions were the riskiest part of our modeling: they trade money (which is super flexible) for inflexible benefits Fellows might not value. For instance, consider a Fellow with a toddler. The bus might be a great solution for the parent’s work commute but a grueling burden for managing kid pickup/drop-off on top of getting to/from work. We have ethical reasons to support transit, but we need to remember it’s the employees who bear the cost of RVC expressing its values. We will need to look carefully in the coming couple of years to see how these “optimizations” impact Fellows, and whether they end up being more “RVC wins / Fellows lose” vs. “Win / Win”. (File under “Urban Legend II: They Called Back”…)
Finalizing the Package
With the $19/hr wage target in place, Ananda, our Executive Director Vu Le, and the RVC board could finalize the 2017-2019 Fellows compensation and benefits package. Here is a summary:
- Non-exempt, full-time employment (i.e. eligible for overtime pay)
- 37.5 hours/week at a rate of $19.00/hr – no annual bonus
- 23 days annual PTO combining vacation and sick leave
- Gold HMO and Silver PPO-equivalent Healthcare coverage by Kaiser Permanente, with $600 and $2000 deductibles
- 90% employee premium paid by employer
- 50% dependent premium paid by employer
- HRA (Health Reimbursement Arrangement) to cover full deductible expenses, providing zero deductible experience to employee
- Dental and vision coverage
- Short-term disability, long-term disability, life, and AD&D insurance
- Sound Transit Orca Business Passport (Transit Pass) at $10/month opt-in cost
We think this moves us closer to a true living wage for Fellows, and meets RVC’s goals to invest in our neighborhood’s economic vitality and open the Fellowship to a wide range of non-profit leaders of color. As the first major adjustment to our Fellows compensation package, we will need to track it carefully, continue to challenge our assumptions, and commit to improvement as the climate evolves and we learn more.
Continued Evaluation and Further Progress is Necessary
While we’ve set pay for this year, we probably can’t afford to go dark for eighteen months before we assess again. First, costs are going to continue to evolve – rapidly. In Seattle’s local economy, housing costs continue to grow more quickly than inflation, and we need to keep tracking how that affects our Fellows’ ability to live here. Second, our assumptions about the value of health benefits and transit – the ones we used to justify aiming lower than our original goal – need to be tracked and challenged. Third, we need to grapple with the budget realities for non-single adult households, exploring what we can do to increase pay and defray expenses, especially around childcare. Fourth, we will have additional opportunities to bring compensation into alignment with values – for instance, if part of our mission is overcoming generations of barriers on wealth creation and savings, we might need to invest more in employer-run savings programs for our staff. And since we are proposing, in our small way, a kind of increased minimum wage, we would also do well to track the evolving debate about the efficacy of minimum wage increases and the potential for adverse consequences – could a push for higher pay backfire and reduce opportunity?
If you’ve made it this far, you’ve likely escaped from the house before being axe-murdered – way to go! Like the process this article describes, it has been a journey. I would close by recalling that we can’t do any of this alone. Just as our thinking led us to see deeper relationships to partner organizations and community, we’ll need to stay in conversation and learn from each other’s experience to continue to learn and improve. (Warning: Dad joke ahead….) It’s bound to “pay off”!
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