If you have ever made a decision about what career to take, you might be familiar with a common dilemma: should you prioritize earning money or do something you care about and earn pennies? Obviously this is an oversimplification of how things work, but it sums up much of the debate around the economics of the charity sector; the part of the economy that runs for ethical, social, health and environmental goals, rather than for profit.
Charities often rely on unpaid work, or on positions with considerably lower salaries than the equivalent level of responsibility would be paid in the private sector. Obviously this is partly to do with funding - charities are not profit making organisations and so have much less cash floating around than corporations, businesses and firms.
But it’s also to do with the morality of the sector. If people want to use their spare time to help others in need, then charities can act as the coordinators to help bring people with time and energy together with people who need help – and in some sense, doing this for free is seen as a positive thing for society, where payment would perhaps ‘ruin’ the intention behind what should be simply an act of goodwill.
But relying on unpaid work can be problematic. Not everyone is able to afford giving time away for free, and so without paying wages, charity work can only be done by people rich enough to be able to support themselves. This is particularly troubling when volunteering or doing an unpaid internship is seen as a necessary step to getting a paid job in the sector. As charities often aim to help the poorest and marginalised in society, it seems wrong for the very people who have personal experience with the social issues they’re tackling not to able to help tackle them.¹
So how much should charities pay? Those charities which do pay high wages to their executives often come under fire from people who say that donations to a cause shouldn’t be funding someone’s salary. Charities respond by saying they’re just trying to attract the best candidates for the job.²
One solution that has emerged to the problem of donors not wanting to fund high salaries, but high salaries being necessary to attract the best talent, is corporations filling the gap. More and more partnerships are emerging between big firms and charities, particularly when the work of the charity is in some way linked to what the firm does (e.g. pharmaceutical companies funding healthcare charities). One of many issues with this model is that corporations tend to want charities they sponsor to focus on single issue campaigns, rather than systemic solutions to social problems which are harder to quantify and might criticise the company’s activities.⁴