Employees in the US Nonprofit Sector
May 2026
Working Paper Number:
CES-26-33
Abstract
The nonprofit sector employs roughly 10% of the American workforce, making it the third largest workforce behind the retail and manufacturing sectors. Despite this, relatively little is known about its employees. This paper is the first to use comprehensive administrative tax data, covering the near-universe of workers in the US, to quantify and explain the causes of the nonprofit pay differential. Unconditionally, we find the nonprofit earnings penalty to be 12% relative to for-profit workers. Estimating an 'AKM' worker-firm job ladder model, we show that most of the penalty is causal and not driven by selection. We also document considerable heterogeneity across industries, both in terms of earnings premia/penalties and worker selection, and show that nonprofit and for-profit earnings have been converging over time.
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:
payroll,
quarterly,
earnings,
employee,
employ,
employed,
labor,
proprietor,
expenditure,
profit,
revenue,
workforce,
tax,
wage variation,
socioeconomic,
irs,
earner,
wage earnings,
earnings employees,
earnings workers,
employment firms
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including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Internal Revenue Service,
Standard Industrial Classification,
Employer Identification Numbers,
North American Industry Classification System,
American Community Survey,
Longitudinal Employer Household Dynamics,
AKM,
Employment History File,
Individual Characteristics File,
W-2,
Federal Statistical Research Data Center,
Form W-2
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