The Overpaid and Underpaid: A Comparison of Labor
Costs in Nonproﬁt and For-Proﬁt Service Organizations
Received: 3 February 2018 / Accepted: 18 April 2018
Ó Fudan University 2018
Abstract The comparison between nonproﬁt and for-proﬁt organizations has been a
lingering question for scholars and practitioners. This research explores employee
wage differentials across sectors using a national sample of child care workforce.
After controlling for a range of individual, occupational, organizational, and com-
munity factors, this research reports a signiﬁcant wage premium for nonproﬁt child
care teachers. In addition, this study ﬁnds evidence for both the labor donation and
property rights hypotheses, but the property rights theory demonstrates compara-
tively stronger explanatory power. Although individuals with stronger intrinsic
motivation are more willing to donate labor for charitable outputs, inefﬁcient
management in nonproﬁts actually sets wage levels over the market level. Overall,
the study highlights nonproﬁts’ comparative advantage in employee motivation but
disadvantage in efﬁcient management. The ﬁndings have implications for public
and nonproﬁt management.
Keywords Labor costs Á Labor donation Á Property rights Á Human
& Jianzhi Zhao
School of International Relations and Public Affairs, Fudan University, Handan Road 220
Yangpu, Shanghai 200433, China
School of Public Affairs and Administration, Rutgers University-Newark, 111 Washington
Street, Newark, NJ 07102, USA
Fudan J. Hum. Soc. Sci.