Wage hikes will harm non-profits and their clients

Much has been written about the adverse effects that substantial minimum wage hikes will have on manufacturers, farmers and retailers. Only months into those announced increases, businesses are making or planning to make changes to their business models: fast food chains are replacing order takers with computerized kiosks and factories that had never considered automation are making such investments.

Maybe because of the nature of the beast (non-profit directors are more reserved and less outspoken than capitalists), comparatively little has been said about the impact that the wage increases will have on non-profits. One could argue that the minimum wage hikes will be more damaging to their operations. Couple that with the final overtime rule introduced last week by the Department of Labor, and we’re talking about a perfect storm.

I can say that with certainty, as I’ve been involved with non-profits my whole adult life and now lead the board of one. Our organization, like most of them in Western New York, operates on a shoestring budget. Any changes in our costs as caused by outside factors beyond our control cause handwringing and some very hard decision making.

With most non-profits, you are not charging users a large fee for your services and you really can’t -- most of us are in social service endeavors serving children, families, the handicapped, the addicted or the poor. So, we can’t pass the new costs on to consumers like a manufacturer or store can hope to do. Instead, we have to collect more money from donors. But, you can only go to the well so many times and every single non-profit in town ends up competing for a smaller piece of the same pie as they are facing the same crisis. On top of that, the local economy, especially in rural areas, is tepid, so money’s tight.  

Then what is a non-profit to do? They have to cut what was already their largest cost before these hikes-- personnel. I can tell you that the minimum wage and overtime rules were major forces behind my board’s decision to remodel our staffing, which cut the number of personnel directly available to interact with our clients.

We’re just one agency that has to cut back. I know many more stressed-out executive directors and board chairmen who have or will be letting people go. It’s not a good time to be employed by a not-for-profit agency -- the Grim Reaper of careers looms large.

Think about the impacts that come from that. Fewer workers mean fewer programs and services. Handicapped people will have less helping hands. Young expectant mothers will have less options to prepare them for motherhood. Scouts will see fewer programs offered by their local councils. Kids from blue collar families won’t have access to afterschool activities. Addicts won’t have counselors to lean on. I could go on and on, put I think you get the point.

That’s how it goes with government making stark changes to the markets; there are plenty of unintended consequences to go around. While, at first glance, wage hikes and more overtime pay might seem like a win for the working class, it’s not. As I’ve written before, many of them will lose their jobs in the profit sector. Then, based on what I’ve written here, the services they’ve relied on so heavily from the non-profit sector will be but a shell of their former selves. Not to be an alarmist, but people will suffer because of it.

From the 23 May 2016 Greater Niagara Newspapers