The Gap Moves With the Labor Market

The nonprofit labor market changed substantially between 1994 and 2022, so its pay relationship with for-profit work cannot be read as a fixed feature of nonprofit status. This chapter follows two linked but different trajectories: how many workers entered the sector and how the raw and adjusted pay comparisons moved over time. The distinction matters because employment-share growth, cyclical resilience, and pay convergence describe different processes. A larger nonprofit sector can still contain a persistent adjusted penalty, and a narrowing estimate does not by itself identify the policy or mechanism that caused it.

A larger sector does not mean a uniform sector

The BLS time series begins with 5.4 million nonprofit wage-and-salary workers in 1994, equal to 5.0 percent of total wage-and-salary employment. By 2022, the nonprofit count had reached 10.2 million and its share had risen to 7.2 percent. Over the same period, the for-profit share changed little overall, from 78.0 percent to 77.8 percent, while the public-sector share declined from 17.0 percent to 15.0 percent. The sector that people often discuss as a small alternative to commercial employment therefore became a larger part of the paid labor market.

That growth changes the composition of the comparison. When nonprofit employment expands, new workers and employers do not necessarily enter the same industries or occupations as the workers already there. The BLS evidence places much of nonprofit employment in hospitals, educational and social services, religious organizations, and other professional services. Growth in a sector weighted toward these activities can alter its average wage even if the pay relationship within each activity does not change. A time series of sector averages is consequently a history of both pay and who makes up the sector.

The Census paper gives another view of the same scale. From 2001 through 2022, nonprofits made up just over 10 percent of workers but just under 10 percent of payroll on average, with the difference converging over time. A worker share above the payroll share is consistent with a lower average earnings level, but it is not a complete account of individual compensation or service value. Payroll is not the same as total benefits, hours, or social output. The statistic is useful because it places the pay question alongside the sector's labor-market footprint, not because it supplies a normative judgment about what nonprofit work is worth.

The sector also behaves differently over the business cycle. During the 2001 dot-com recession, the Great Recession of 2007–09, and the pandemic recession that began in 2020, nonprofit and public employment shares rose while the for-profit share declined. The BLS article interprets this pattern as consistent with nonprofit and public employment being less procyclical than private employment. In other words, the sector shares moved in a direction different from the for-profit share when the economy weakened.

A share movement is not the same as a guarantee of job security. A nonprofit share can rise because for-profit employment falls faster, even if nonprofit employment is also under pressure.