Unintended Consequences: Donated Labor Drives Down Wages

Lynda St. Clair, Ph.D

Using volunteer labor has a negative effect on the wages of paid staff.  That’s the conclusion of Austrian researchers Astrid Pennerstorfer and Birgit Trukeschitze.

They state, “the direction of the effect of volunteers on wages is ambiguous from a theoretical point of view” and note the following ideas from popular theories:

  • Nonprofit workers “donate” part of their wages because they want to contribute to a social good. Volunteers represent the extreme case, donating all of their wages, but paid employees also donate a part of their wages.
  • Nonprofits pay higher wages to ensure that no shirking takes place. Having volunteers work with paid staff may serve as a social control mechanism: paid staff may be less likely to shirk, even without higher wages.
  • Having volunteers may reduce the cost of turnover because volunteers can pick up the slack temporarily when a paid staff person leaves the organization.
  • Volunteers may reduce the stress experienced by staff members, reducing the need to pay a higher wage to compensate for a stressful employment situation.

Some theories suggest that wages may be higher if volunteers are used.  For example:

  • Nonprofits have no profit-led motive to save labor costs and using volunteers provides resources that can be used for higher wages for paid staff.
  • Nonprofits that use volunteers may be able to assign tasks to those workers that require lower qualifications, resulting in staff being paid higher wages because their jobs require higher qualifications.

To learn more about the impact of volunteers on staff wages, Pennerstorfer and Trukeschitz used data from different types of nonprofits, not including schools.  Most of the nonprofits in their sample used volunteer workers and had fewer than twenty employees.

After analyzing the data, the researchers concluded that “in nonprofits where volunteers contribute to the production process the wage for paid staff is, ceteris paribus, 13 percent lower than in nonprofits engaging paid staff only.”

Although not the main focus of their study, Pennerstorfer and Trukeschitz also found that wages for women in their sample tended to be lower than wages for men, even though the majority of employees in the nonprofit sector are women.  If there is a bright side to this finding, it is that although female workers were paid about eight percent less than male workers, this difference is much smaller than the average for the Austrian economy.

The finding that donated labor drives down wages may not surprise nonprofit leaders, but it should give them pause.  Just because a nonprofit can pay less to a staff employee, doesn’t mean that they must pay less.  Although it may seem foolish to pay more than necessary for labor, nonprofit leaders should think seriously about the consequences of choosing to pay wages that devalue the work being done, particularly in a world where the demand for services offered by nonprofits continues to grow.


Pennerstorfer, A. and Trukeschitz, B. (2012). Voluntary contributions and wages in nonprofit organizations. Nonprofit Management and Leadership. Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21046

Lynda St. Clair, Ph.D., is a retired management professor and co-author of Becoming a Master Manager, now in its fifth edition.    

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