Report: $15 wage floor for nonprofits will cost $250-$300 million yearly

Report: $15 wage floor for nonprofits will cost $250-$300 million yearly

December 9, 2015

To fund a $15-an-hour wage floor for nonprofit human services workers in New York, the government will have to increase annual spending on contracts by 20 percent, or an additional $250 to $300 million, according to estimates released today in a joint report by the Federation of Protestant Welfare Agencies, Fiscal Policy Institute and the Human Services Council.

“The State contracts out roughly $1.5 billion annually to nonprofit organizations,” according to the report, titled A Fair Wage for Human Service Workers. “Raising the wage floor in the State-funded human services sector would cost $60 to $75 million in the first year and approximately $250 to $300 million yearly” after a $15-an-hour minimum wage is fully phased in. 

The report argues that the state’s 2,500 nonprofit human service organizations should not be left out of any plans by Gov. Andrew Cuomo or the state Legislature to raise the minimum wage for all New Yorkers. Since around three-quarters of the state’s 200,000 nonprofit workers rely at least partially on government contracts to fund their salaries, according to estimates by the Fiscal Policy Institute, state government will need to increase funding in nonprofit human services contracts.

Since Cuomo has already committed to raising wages for government workers, committing to this additional funding is a natural next step, advocates reason.

“Nonprofit organizations, in essence, are essentially an extension of the government's workforce,” said Jennifer Jones Austin, who heads FPWA. Government, she said, “should contract at a wage that would allow nonprofit workers to be gainfully employed and be able to make ends meet — and that hasn't been happening.”

Many nonprofit workers contracted by New York state to help the poor, homeless and vulnerable are so underpaid they need the same services they help provide, advocates say. The report notes these workers are often “standing in the same food pantry lines as their clients, on the same waiting lists for affordable housing, and in need of the same childcare subsidies to allow them to go to work each day.”

“We can't have the people who are delivering services eligible for food stamps,” said state Sen.James Sanders Jr., who sits on the Senate Labor Committee. “We have to have a society which pays to work.”

While the report’s authors are in favor of a universal $15 minimum wage, raising the wage floor without providing new funding for human service providers “would spell disaster for many nonprofits,” the report says. Without the ability to increase the prices for their services or cut into profits to pay the higher wage - the way for-profit businesses can - “many nonprofits would be in dire financial straits.” Conversely, if nonprofits were exempted from the wage increase, the whole nonprofit sector would suffer from prospective hires and current employees moving to other higher paying sectors.

Ultimately, without the increase in state contract funding, the services these organizations provide and the people they serve would suffer, warns James Parrot, chief economist at the Fiscal Policy Institute. “These are not luxury goods that we're talking about,” he said. “These are core human services provided to the most vulnerable and to a broad cross section - it's not just poor people.”

The report’s cost estimate is meant to show what it costs to bring workers up to $15 an hour, while also providing a small, proportionate increase for other workers in those organizations that are currently making more than a $15 hourly rate. "This is just saying: This is what it costs to bring everybody up to fifteen and provide a smaller, proportionate increase for workers in the fifteen to low twenty range to maintain a compressed wage hierarchy," Parrott explained. 

“This is not some kind of a comparable worth estimate,” Parrott said with a wry chuckle. “We did not figure out what these workers really should be making” or what they need.

According to the report, half of all human service providers under government contract in New York state are paid less than $15 an hour, and nearly a third make less than $10.50. In most parts of the state, the report notes, those wages are not enough “to meet the high cost of living.”

"The state hasn't done anything like this,” Parrott added. “To the governor's credit he's making a bold proposal to make up for lost time and put New York state on a path to be in the lead among all states raising the minimum wage."

The report quotes Fred Shack, CEO of nonprofit homeless services provider Urban Pathways, saying that for 82 employees, or about a third of his workforce , “despite working to provide homeless New Yorkers essential services and permanent housing, are relegated to live in poverty struggling to pay their rent and meet the basic needs of their families.”

For years, Jones Austin said, workers have not been paid a wage that meets their needs, struggling under wage cuts as a result of funding cuts at the state level. An unfunded mandate for nonprofits to pay their workers $15 an hour would add to that burden.

Historically, the state has promised regular cost of living adjustments and hasn’t followed through, saving the state what now amounts to close to $300 million, Allison Sesso, executive director of the Human Services Council said. “That is why we are in the situation in which we have a low wage workforce today," Sesso said.

Jones Austin added, “We have to reverse this and we have to take care of the workers. So we're going all out.”

While nonprofit advocates appear confident that the governor is in their corner, the proposal would face challenges in the state Senate, which has a narrow Republican majority. 

Members of the state Senate’s =Labor Committee returned discordant answers to questions about whether they support increasing contract funding for a $15-an-hour wage floor for human services nonprofits.

State Sen. Patrick Gallivan, a Republican representing the 59th district in Western New York, said he was “opposed to an increase in the minimum wage to $15 in any industry because of the negative consequences to consumers, taxpayers and businesses.”

Meanwhile, Sanders Jr., a Democratic state senator for the 10th district in Queens, voiced support for the proposal, but added a word of caution: “If the past has any bearing on the future, the Republican-controlled Senate is not going to be sympathetic towards it. And under those conditions, we're going to find ourselves in a bind.”

“If it is to happen, the governor will have to step up to the plate — or be prepared to step up to the plate,” Sanders concluded. “At a minimum, he will have to join us in moving over the Republicans."

Frank Runyeon
Frank G. Runyeon
is City & State’s senior reporter. He covers state politics and investigations.