Finances, Funding, and the Racial Wealth Gap: Strategies for a More Equitable Future

Mar
2
2021

Written by Tessa Constantine (Research Analyst)

The past year has seen scores of Americans face hardships as the COVID-19 pandemic rages on. From mass unemployment, to increased need for food assistance, to the failure of the federal government to provide much-needed aid, many people have found themselves struggling to stay afloat in this tumultuous economy. The nonprofit sector has not been immune from the financial challenges of 2020. A recent report from The Center for Civil Society Studies found that the sector lost more than 50,000 jobs in December 2020 alone, with nonprofit employment still below pre-pandemic numbers despite recovery efforts. Additionally, more than half of nonprofit employees in a recent survey indicated that their organization is facing budget cuts.

With more than 25% of the population either un or underemployed across all sectors, now more than ever it is important to take stock of the financial situations many people found themselves in before the pandemic began, with the knowledge that these issues have likely only intensified with the events of the last year. In 2019, the Building Movement Project conducted an update of the Race to Lead series, a national survey of the nonprofit sector which included a series of questions on respondents’ financial situations and the financial situations of their organizations. The data from this survey sheds light on disparities between people of color and white respondents, including the additional financial strains on respondents of color and inequitable funding situations for people of color-led organizations.

The pre-pandemic sector in numbers

Similar to other research on salaries in the nonprofit sector, our data found that the uneven distribution of people of color across organizational hierarchies has real impacts on pay. When asking about role, we found in the Race to Lead data that people of color were less likely to be in executive director or CEO roles (17%) than white respondents (26%). Respondents in these executive positions also reported higher salaries with 45% earning $95,000 or more compared to 17% of respondents in other roles who said the same.

Respondents were also asked to self-report their current and childhood socioeconomic status (SES). This data revealed more people of color reporting they are currently working or lower class (25%) compared to white respondents (15%). Additionally, while more people of color reported upward socioeconomic mobility between their childhood and now, they were also almost twice as likely to report being working or lower class during their childhood (62%) than their white counterparts (38%). One respondent succinctly noted this trend, writing, “I’m working poor but still the ‘richest’ in my family.”

Despite upward mobility and consistent pay across race, people of color faced other financial barriers and tolls that offset these positive findings. Most clearly, respondents of color were twice as likely to say they currently provided financial support to family outside of their household (31%) than white people (16%). This gap even held for respondents who were early in their careers, with 27% of millennials of color reporting they currently provide financial support to other family members compared to just 10% of white millennials. In line with this pattern, when asked if their salary was inadequate, almost half (47%) of respondents of color said this was often or always the case, compared to 38% of white respondents who said the same. White respondents were also more likely (56%) than people of color (51%) to say they relied on an additional source of income to cover household expenses, though because of the wording of this question the additional income could come from another member of their household or a second job.

Even though the Race to Lead survey did not ask respondents to write about their financial struggles, several respondents described living on low salaries and providing for family members in response to other open-ended questions about negative experiences. One respondent of color wrote about the financial obligations they had to family outside their home: “I am the highest paid member in my family…I am the only person in my life who financially provides support to many family members when needed.” Other respondents mentioned navigating lower salaries in their current role, such as one respondent of color who wrote, “I think that when you come from a very poor background with no resources or support it can make for a very difficult start into the professional world. I have had a lot of barriers and though I have worked through them it has taken a significant amount of time.”

How do we create change?

What stands out in this data is the contrast between the financial situations of respondents of color and white respondents. With communities of color hit hardest by COVID-19 and the subsequent economic downturn, the circumstances shown in our 2019 data have likely been exacerbated. In a sector known for strained budgets, long hours, and low pay (especially in this era of economic uncertainty), it can feel challenging to tackle these issues head on. Organizations that fail to do so, however, risk losing valuable talent and an opportunity to create lasting change in the sector.

For Funders

Adequately fund organizations (especially POC-led organizations). Funders should take a look at the staff salaries of the organizations they fund. The Race to Lead data makes apparent that funders need to realistically evaluate what organizations are able to do on limited or restricted funding, and funders need to address the impact this has on salary disparities. Looking specifically at organizations with 50% or more POC in leadership and board positions (referred to here as POC-led organizations), they were fourteen percentage points more likely to have a budget of less than $1 million than white-run organizations (where leadership and board were less than 25% people of color). One leader of color survey respondent described the struggles to secure adequate funding, writing “As an African American, female non-profit founder who grew up in an impoverished community without a great deal of contacts or support, it’s been extremely difficult to leverage long term funding at a level adequate to ensure our sustainability and growth.” To overcome these inequities, funders should ensure that the organizations they fund are able to pay their workers appropriately. They can start to do so by evaluating living-wage salaries and increasing access to unrestricted general operating funds.

For Organizations

Look within. Regular analysis of pay and opportunity are essential to ensuring employees are paid fairly and equitably for their work. When asked if they felt their salaries were inequitable compared to peers doing the same work, 31% of Race to Lead respondents of color said this was often or always the case, compared to 20% of white respondents who felt the same. This disparity was made even clearer when looking at race and gender. While 22% of white women said their salary was often or always inequitable, this figure jumped to 32% for women of color. Similarly, 15% of white men felt their salary was inequitable while 22% of men of color said the same. Nonprofits looking to ensure they are free from inequity should conduct regular audits of pay within roles and make adjustments where discrepancies appear.

Additionally, organizations should ensure there are opportunities for upward mobility. As the Race to Lead data shows, higher roles come with higher salaries. While upward mobility varies based on organizational size and roles, providing opportunities for promotion is one piece to ameliorating the racial leadership gap and racial wealth gap.

For the sector at large

In a time when adequate compensation for workers is at the forefront of national discussion, the sector must use this opportunity to come to terms with the need for truly livable wages for workers in all roles. Industry standards that grapple with pay disparities across role and race would be greatly beneficial to a sector that, despite calls for reform, is not immune to inequity. With nonprofit work historically viewed as ‘charity work,’ it is time to recognize and act on the reality that individuals rely on nonprofit wages and deserve to be compensated appropriately for the work they do.

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