- Leete, L. (2001). Whither the Nonprofit Wage Differential? Estimates from the 1990 Census. Journal of Labor Economics, 19(1), 136-170.
These ideas, all variants of the donative-labor hypothesis, are attributable to the work of Hansmann (1980), Preston (1989), Rose-Ackerman (1996), and Frank (1996). While each author offers a slightly different rationale and formulation, in each case individuals accept lower pay from a nonproﬁt organization in return for assisting with production in which the worker ﬁnds intrinsic value. According to Preston, this lower pay is equivalent to a monetary donation to an organization producing public goods. Frank views it as a compensating differential in return for work that is more morally palatable. Alternately,
Rose-Ackerman notes that ideologues may accept lower pay in return for the guarantee that their efforts are helping to achieve their idealistic goals and are not lining the pockets of for-proﬁt stockholders. Hansmann suggests that it is a result of a sorting mechanism through which employees more interested in the production of quality services than in ﬁnancial gain signal this to nonproﬁt organizations. The variants put forth by both
Hansmann and Rose-Ackerman are particularly applicable to the case in which nonproﬁt organizations are formed because of information asymmetries and consumers take nonproﬁt status as an indicator of either product quality or integrity along ideological lines.
- Preston (1989) found up to 15% lower wages for white-collar nonproﬁt workers.
- Weisbrod (1983) found that nonproﬁt lawyers earn 20% less.