Professionalisation of the voluntary sector should draw the line at executive pay

27 Jun 2011 Voices

Amidst growing public concern about widening pay gaps, Alasdair Rutherford asks whether we should be worrying about voluntary sector pay.

Amidst growing public concern about widening pay gaps, Alasdair Rutherford asks whether we should be worrying about voluntary sector pay.

Although the British don’t like to talk about money, we do care what other people earn. Recent research from the Institute of Public Policy Research has shown that half of Britons say the pay gap in their workplace is too large, while over two-thirds say that the government should act to reduce the gap between high and low earners. 

Workers in the voluntary sector certainly do not command the salaries of those in banking and finance or at the top of the civil service, but people do care how much of their donations are spent on a charity’s wage bill.  Should we worry about voluntary sector pay?

Pay in the voluntary sector has been growing faster than either the private or public sectors over the past 15 years. This is on the back of dramatic growth in the number of people employed in the sector, largely as a result of the contracting-out of public services, and  has done little to reassure those concerned about the pay of top charity managers.

Respondents in the IPPR research identified responsibility, results and difficulty as the characteristics that should determine pay.  The services that most voluntary organisations provide are challenging and have a real impact on people’s lives, but despite this are traditionally low-paid - so how much should voluntary sector workers be paid? 

On one side of the debate are those who argue that the voluntary sector should be primarily about volunteers: those choosing to make it a career can be paid, but the ‘warm glow’ of helping others is part-payment, and this explains lower wage levels.  On the other side is the argument that there are many roles for which paid staff are most suitable, and voluntary organisations must ensure that they can attract talented workers to fill them.  In addition, they have a responsibility to pay fairly; this means both good wages for workers in lower paid jobs and pay restraint for managers.

Voluntary sector pay gaps narrowing

So are charity workers poorly paid? While the rise of contracting-out might have been expected to put downward pressure on wages in the sector, my research using the UK Labour Force Survey suggests not – for both male and female workers, average wages have been increasing and are now equal to or greater than private sector wages. Of course, analysing changes in average pay does not capture what is happening to the distribution of pay, and as the IPPR research shows this is something that the public worries about. 

Voluntary sector wage growth has been greatest for those in lower paid jobs, who now earn wages comparable to or greater than those in the private sector. Top earners in the voluntary sector still earn significantly less than similarly qualified high-paid private sector workers, but even this gap has narrowed. While in 1997 top earners in the voluntary sector earned almost 4 times the pay of those at the bottom, by 2010 this had dropped to just over 3 times.  This has been driven by wage growth amongst the lower paid workers in the sector.

There is certainly a tension between attracting talent with competitive wages, and ensuring that the hard-earned charitable donations are being spent on the good work of the organisation.  Increasing professionalisation of the sector requires that voluntary organisations employ qualified, experienced and committed staff, and it is right that they are paid accordingly.  But it is also right that large organisations show restraint in paying top managers and demonstrate their commitment to their causes.

In essence it seems that voluntary organisations have so far got it right – pulling up the wages of those in low paid jobs while resisting upward pressure on the wages of the highest paid.  This is despite the ‘contract culture’. While there are many benefits from professionalisation, accelerating executive pay is not one of them.  The concerns raised in the IPPR research suggest that the voluntary sector is acting in line with public opinion, but those uncomfortable discussions about money need to continue.

Alasdair Rutherford is research fellow at the University of Stirling concentrating on economics of charities and the voluntary sector

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