NCPA - National Center for Policy Analysis

Living Wage Hurts Nonprofits

December 17, 2003

Social justice, equality and a higher standard of living: Those were the ideals of the Berkeley, California, living wage ordinance. But the law, designed to bring "economic justice" to the city's workers, is leaving some nonprofits in a bind this year, squeezed between the rising demand for services in a tough economy and swelling costs that could lead to cuts in staffing or programs.

Berkeley's living wage law requires employers who hold large city contracts or lease city-owned property, including nonprofits, to provide a higher minimum wage and health benefits to their employees:

  • This July, the Berkeley City Council voted to increase the city's living wage from $9.75 to $10.76 an hour (an 11 percent increase) to reflect inflation; this was the first increase since the living wage ordinance was enacted in August 2000.
  • Berkeley's new minimum wage puts some of its workers $4 above the state minimum and $5.60 above the nation's minimum.
  • For example, the Berkeley Food and Housing Project, Berkeley's largest homeless services organization, estimates it would cost some $30,000 to bring their employees' salaries up to compliance -- money the group doesn't have.
  • After already trimming its budget last spring, the Project found itself facing $100,000 in unanticipated costs due to the hike in insurance premiums and wages.
  • The Project might have to make cuts to permanent staff, which would lead to reduced services.

Another difficulty in lifting the minimum wage, is that the Project cannot afford to raise other workers' salaries accordingly in order to offer incentives for staying longer, pursuing education or doing a good job. People who just started could be making as much as people who have worked for several years.

Source: Michael Chandler, "Nonprofits Feel the Squeeze of Wage Increases," Daily Californian, October 27, 2003.


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