Local nonprofit experiences negative impacts of minimum wage increase
"Nonprofits are being squeezed, but demand for their services isn't going away."
Businesses are budgeting for new Washington state laws, like minimum wage increased to $13.50 an hour, but nonprofits like United Way of Benton and Franklin Counties doesn’t have the same options to absorb the impact.
LoAnn Ayers, president and chief executive officer of United Way of Benton and Franklin Counties, says 90% of their annual budget is allocated for personnel. I-1433 increased minimum wage to $13.50 an hour, a more than a 12 percent increase from 2019, and Ayers says that is a huge hit for the nonprofit because they cannot raise their prices like other businesses.
“Some retailers might be able to raise their prices somewhat to help absorb this, but our donors expect us to get the most out of every dollar,” Ayers said, “When we have this big hit on our personnel, it really means that some of the nonprofits are going to have to restrict services or reduce services.”
Those services include anything from food to those in need to mental health care. Ayers said those jobs have to be done by people and not-for-profits are “already operating on a very thin line” as the wage increases go into effect.
“It’s kind of a double hit to our community because at the same time, that minimum wage is going up for small businesses across communities. Some people are probably going to lose their jobs and they’re going to need services from nonprofits.
Ayers says the combination could lead to services being limited or longer wait lists for help in Benton and Franklin counties.
“It’s going to ripple throughout our community in a big way,” she said.
Non-profits rely on donors, or other businesses in the area, to provide money for many services. Through donor dollars and grants, these services can help anyone who may need them.
“We never know, we’re all one life experience away from needing the help of others,” Ayers said.
She raves about the generosity in the Tri-Cities and how volunteers and donors want to make a difference for others. She calls the nonprofit lucky because of the work people are willing to put in.
“People roll up their sleeves and volunteer and they donate,” Ayers said, “I think now more than ever before, that’s important because those nonprofits are being squeezed, but demand for their services isn’t going away. So we need our donors to be generous. We need our volunteers to pitch in a little bit more to help us continue to deliver services.”
Ayers recognizes that every business, whether for-profit or nonprofit, is experiencing the impact of the increase wages, but several new laws are going to continue to affect the area.
“Donors are being squeezed as well, so they can’t just open up their pockets more,” Ayers said, “So we have to figure out how to work within that limited budget to continue to serve clients. The minimum wage increase is coming at the same time that a couple of other things are rolling through from the state, like paid family medical leave.”
New paid medical leave laws also went into effect on January 1, 2020. The law offers employees more flexibility to start a family or take care of a sick relative. An employee can take off for up to 12 weeks and receive up to 90% of their paycheck.
“We all wants what’s best for our employees,” Ayers said, “We want to do what’s right by them, but the business reality is that an increase in minimum wage along with the paid family medical leave, ]we may have an employee out and have to hire and train someone for that 12 week period, which is an expense.”
Nonprofits will also experience a redefinition of non-exempt and exempt employee statuses in July. Not-for-profit businesses may experience waves in workloads, causing some employees to work over 40 hours in one week. The change in the definition could cause non-profits to pay overtime for the employee’s work or deny the hours and see their services diminish.
“Some nonprofits have one employee, they are probably the executive director and the bookkeeper and the do everything-er,” Ayers said, “When they have a big event, like a fun run or fundraiser, they need to put a lot of time in that week to rally all the volunteers and make sure everything works but then the next week is recovery time. As an exempt employee, they can do that. When that definition has changed and applied in July, nonprofits can’t afford to pay overtime, so they just have to shift to this new reality of how do we cover these cycles in our nonprofit life of paying over-rime or not getting the work done.”
Both raised minimum wage and paid medial leave laws immediately impact nonprofit and for-profit businesses. KAPP-KVEW spoke with several businesses in the region including Amethyst Creamery, Just Roses Flowers & More and Adventures Underground who all want the best for employees but are experiencing either setbacks or major increases in personnel costs.