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Open Access

Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes

Andrew C. Johnston and Carla Johnston
Published online before print July 15, 2021, 0319-10120R1; DOI: https://doi.org/10.3368/jhr.56.4.0319-10120R1
Andrew C. Johnston
*Andrew C. Johnston is an assistant professor of economics at the University of California, Merced.
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  • For correspondence: [email protected]
Carla Johnston
**Carla Johnston is a graduate student of economics at the University of California, Berkeley.
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  • For correspondence: [email protected]
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Abstract

We explore the nonprofit earnings penalty. To separate the influence of demand and supply, we leverage workers who change employers in administrative tax data. The average nonprofit worker earns 5.5 percent less than the average for-profit worker. Supply-side factors (worker selection) contribute 80 percent of the nonprofit differential. The remaining 20 percent is from demand (a nonprofit penalty). Within-worker nonprofit variation generates several insights about the influence of nonprofits on the labor market. Nonprofits compress the wage distribution and reduce inequality among earners. Nonprofit penalties are much more pronounced in classic charities than in “commercial” nonprofits, which sometimes exhibit nonprofit premia.

JEL Codes:
  • J4
  • J31
  • L3
Keywords
  • nonprofits
  • for-profits
  • employment
  • earnings
  • labor demand

This open access article is distributed under the terms of the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0) and is freely available online at: http://jhr.uwpress.org

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Journal of Human Resources: 60 (3)
Journal of Human Resources
Vol. 60, Issue 3
1 May 2025
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Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes
Andrew C. Johnston, Carla Johnston
Journal of Human Resources Jul 2021, 0319-10120R1; DOI: 10.3368/jhr.56.4.0319-10120R1

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Is Compassion a Good Career Move?: Nonprofit Earnings Differentials from Job Changes
Andrew C. Johnston, Carla Johnston
Journal of Human Resources Jul 2021, 0319-10120R1; DOI: 10.3368/jhr.56.4.0319-10120R1
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Keywords

  • J4
  • J31
  • L3
  • nonprofits
  • for-profits
  • employment
  • earnings
  • labor demand
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