`

Come on and do the Conga: The

Distribution of Pay in the UK
Voluntary Sector
Voluntary Sector and Volunteering
Research Conference 2014

Alasdair Rutherford, University of Stirling

I Introduction
While the voluntary sector has a reputation for paying wages that are lower than the
private and public sectors, there has been significant interest in recent times in the pay
of senior staff in voluntary organisations. The debate over executive compensation has
highlighted the gulf between how many members of the general public think a non-
profit organisation should operate (primarily with volunteers), and how many of the
larger voluntary organisations increasingly operate (with growing paid workforces).
Adding to this picture is previous work showing that there has been dramatic growth
in voluntary sector pay (at least until the start of the financial crisis) that has eroded if
not eliminated the nonprofit wage discount (Rutherford 2013). However, in many
sectors not all workers have been affected equally by recent developments, and the
voluntary sector is no exception. Widening pay inequality between the highest and the
lowest paid in the labour force more generally is an issue of concern to policy makers,
academics and wider society.
In this paper we explore how pay has evolved at different points in the distribution to
better understand how the growth in voluntary sector pay has been experienced by
the sectors workforce. We use UK Labour Force Survey data between 1997 and 2014
to explore pay in the voluntary sector, and how its distribution has changed as the
sector has grown.
A good starting point is to consider what we mean by pay distribution. Imagine if we
took all the workers in the voluntary sector and lined them up in order of their hourly
wage. At one end are all the workers on low pay, and at the other all the workers
earning the highest salaries. We can then compare the pay of workers at different
points in this giant voluntary sector conga line.
1
While it would not make for a great
party game, this is illustrated in Figure 1 below.
FIGURE 1: PAY DISTRIBUTION IN THE VOLUNTARY SECTOR

1
The conga line is a Cuban carnival dance that was first developed in Cuba and became popular in the US in the 1930s and
1950s. The dancers form a long, processing line, which would usually turn into a circle. It has three shuffle steps on the beat,
followed by a kick that is slightly ahead of the fourth beat. (Wikipedia, 2014)

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Source: UK Labour Force Survey 2013
The man in blue is right in the middle of the conga line. He earns 10.79 per hour, and
there are just as many people paid less than him as are paid more. The lady in green is
10% of the way down our conga line, and her hourly pay is 6.44. Most of the
workers in the voluntary sector are paid more than her. The man in red is 20% of the
way down line, and he earns a bit more, at 7.35 an hour. The lady in red is amongst
the higher paid voluntary sector workers. Earning 17.33 per hour, she is paid more
than 80% of the voluntary sector workforce. The man in green is earning 23.98 per
hour, and with 90% of voluntary sectors earning less, he is amongst the top 10% of
voluntary sector earners.
Examining pay distribution in this way is an alternative to looking at the average, or
mean wage. In this case the average pay in the voluntary sector is 12.20. Since this is
more than is earned at the median (the blue man in the middle of our distribution),
this means that more than half the voluntary sector workforce earn less than the
average. This is a common feature of pay distributions in general, as there is usually a
long tail at the upper end of the distribution with small numbers of individuals earning
large sums that skew the average, meaning that it is no longer a good guide to typical
pay.
The worry is that the dancers at each end of the voluntary sector conga line might be
getting further apart, with high earners pressing ahead and lower earners falling
behind. This stretching of the dance could risk breaking the bonds of goodwill and
altruism on which the voluntary sector depends, just like the enthusiastic dancers at the
front breaking the linked conga line by rushing ahead.
Even with a 1980s dance reference pay distribution is not a very sexy topic, and
detailed analysis of wages can easily become overly technical and impenetrable.
However, the public interest in senior pay highlights the importance of this issue and its
impact on the perception of the sector amongst donors, volunteers and funders. In
this paper we try to tackle the topic in an accessible way, and ask whether pay is a
significant issue for the voluntary sector as a whole feedback on whether we succeed
in this objective would be gratefully received.
II Literature Review
Wages in the voluntary sector are often found to be lower than equivalent wages in
the private or public sectors. This is usually attributed to a warm glow (Andreoni
1990) or pro-social motivation (Francois, Vlassopoulos 2008). Preston (1989) found a
significant nonprofit sector wage discount of 18% for US white collar workers, with a
larger differential for male workers than female workers. Leete (2001) found some
evidence sector wage differences at the disaggregated industry level using US census
data for 1990. Mocan & Tekin (2003) used employer-employee matched data on

3
child care workers in the USA, and found evidence of a nonprofit wage premium of
between 6% - 15%. However, the evidence is not that clear cut. While Ruhm and
Borkoski (2003) found little evidence of wage differentials in nonprofit pay, with
industry and worker heterogeneity playing a larger role, Ben-Ner, Ren & Paulson
(2011) find evidence of small sectoral differences in financial incentives, pay and wage
inequality.
However, against this background of lower voluntary sector pay has been the dramatic
growth of the voluntary sector workforce. Between 2001 and 2011 the voluntary
sector workforce grew by 40% (National Council of Voluntary Organisations 2011). In
previous work (Rutherford 2013), we have shown that over this period wage growth
was faster in the voluntary sector than the private or public sector. This shows the
importance of taking into account changes in wage differentials over time, particularly
where the sector is growing or contracting.
Recent attention has then been focussed on the growth of pay at the top of the
voluntary sector, and in particular the compensation of charity chief executives. Public
outcry at the relatively high salaries of management in the UKs largest charities
resulted in the establishment of the Executive Pay Inquiry to draw up guidelines for
setting the pay levels of senior executives. The resulting report (NCVO, 2014)
outlined principles for the setting of charity pay, including a number of
recommendations to increase the transparency of both pay levels and pay setting.
While the review considered a wide range of evidence on pay in the voluntary sector,
its remit focussed on the pay of senior executives. But the roles and pay levels that
feature prominently in media coverage of the issue are not familiar to most voluntary
sector organisations, which are much more likely to be small and with relatively small
numbers of staff.
In the analysis which follows we explore pay differences across the sector as
experienced by individual workers, and try to gain an understanding of how these have
evolved as the sector has grown.
II Analysis
Data and Methods
The dataset used is the UK Labour force survey (LFS). The LFS is a quarterly rotating
panel social survey, collecting information on 60,000 workers in the UK each quarter
that is used to produce a range of workforce statistics and trends, including measures
of unemployment. For our analysis, cross-sectional data from 1997 Q1 to 2014 Q1 has
been pooled, using the wave one data for each individual. Workers in the voluntary
sector have been identified using the set of questions on work sector.

4
Firstly, we describe the changes in sector pay ratios. This involves looking at how many
times more workers towards the top of our distribution earn than those towards the
bottom. A bigger number means that there is a bigger gap between the pay of
workers. We compare two standard measures: the pay at 90% divided by the pay at
10% (the green workers in Figure 1), and the pay at 80% divided by the pay at 20%
(the red workers in Figure 1).
Secondly, we estimate wage equations using quantile regression which allows
estimation of different points in the earnings distribution, rather than estimation of the
conditional mean that would be provided by more traditional OLS estimation. What
this means this that we are using the social survey data to estimate the effect that
individual characteristics like age, education, and occupation have on hourly pay. This
lets us separate the pay differences between the private and voluntary sector into the
portion that is due to differences in the composition of the workforce, compared to
the portion that is due to similar workers actually being paid a different wage to do a
similar job. We do this for three different points in the earnings distribution, rather
than just focussing on the average.
Lastly, we split the sample into nine different broad occupational classifications and
explore how the earnings differences within occupations have developed. This repeats
the quantile regression modelling above for each of the nine occupations in turn.
Pay ratios in the Voluntary Sector
The distribution of earnings in the voluntary sector is more concentrated than in the
private or public sectors, as pay is more equal. In particular, the high pay at the top of
the private sector distribution is not observed in the voluntary sector. This results in
mean hourly wages being significantly lower for voluntary sector workers, although the
median voluntary sector wage is actually above that of the private sector.
Figure 2 shows that workers in the private sector typically earn about 4 times more at
the top 90% of the distribution than they do at the bottom 10%, shown by the dashed
green line. The 90
th
/10
th
ratio is calculated by dividing the pay of the two green
dancers in our conga line. Voluntary sector pay is more equal, with workers at similar
points in our conga line earning only 3 to 3.5 times more at the top than the bottom,
shown by the solid green line. This seems to have fallen in the late 1990s, and then
held fairly steady. There is a similar pattern comparing those closer to the middle of the
distribution at the 80
th
/20
th
centiles, shown by the red lines, and calculated by dividing
the pay of the two red dancers in Figure 1.
FIGURE 2: WAGE RATIO (90
TH
/10
TH
AND 80
TH
/20
TH
) FOR THE PRIVATE AND VOLUNTARY SECTORS BY YEAR

5

(Source: UK Labour Force Survey 1997 to 2014)
This graph essentially tells us two things: pay is more equal in the voluntary sector; and,
since 1997 it has become more equal. What it does not take into account is how the
workforce might differ between sectors. This is where our regression modelling comes
in, which we move onto now.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
Private 90/10
Private 80/20
Voluntary 90/10
Voluntary 80/20

6
FIGURE 3: QUANTILE REGRESSION





(Source: UK Labour Force Survey 1997 to 2014)

7
Distribution of Pay in the Voluntary Sector
We model the logarithm of hourly pay as a function of a wide range of
individual, household and job characteristics, including age, experience,
education, job tenure, working hours, contract type, organization size,
occupation, sector, industry, and region. This allows us to compare wages
between the private, public and voluntary sector while holding all these
characteristics constant. Rather than present all the model estimates in one big
table (of nearly 100 numbers!), we have presented only the estimated sector
differences over time in the graphs shown in Figure 3.
The horizontal axis of the graphs represents years, from 1997 to 2014. The
vertical axis shows the percentage difference in pay between sectors, so 0.2
means that wages are 20% higher. In each year the private sector wage is the
reference point, so it is the flat dashed line at zero. The solid line shows
whether voluntary sector pay is higher or lower in each year, and the dot-
dashed line shows whether public sector pay is higher or lower in each year.
The grey shaded area represents the 95% confidence interval around the
voluntary sector estimate. This tells us whether the difference between private
and voluntary sector pay is likely to have arisen by chance; if the grey shaded
area does not cover the private sector dashed line in a given year then we can
say that the sector wage difference is statistically significantly different, and
draw conclusions that the effect is a real one.
These graphs show quite clearly that it is workers at the top of the wage
distribution who are driving the lower mean wages in the voluntary sector.
Workers at the bottom of the wage distribution earn wages that are not
significantly different from the private sector across the whole sample period,
with a small but statistically insignificant growth in wages for the lowest paid.
Workers at the median of the wage distribution also do not experience
significantly different pay levels from similar workers in the private sector, and
the relation between voluntary sector and private sector pay has remained
unchanged. The most volatility in pay is seen by the highest paid workers, with
those at the 90
th
centile experiencing significantly lower wages compared to
the private sector through most of the sample period. There is evidence of
wage growth pre-financial crisis, with wages no longer statistically significantly
different from private sector wages at their peak. However, in contrast with
the other points in the distribution, voluntary sector workers in the 90
th
centile
have seen a dramatic decline in relative wages since 2012 which has undone all
of the relative growth of the previous decade.
This information is brought together in Figure 4 which shows the absolute
wage growth for the private and voluntary sectors for three points of the wage
distribution. While it may look like a jumble of lines, the key points are

8
reasonably straightforward. The graph has three colours, one for each part of
the distribution. The voluntary sector pay is represented by the solid lines, and
the private sector pay by the dashed lines. The reference point is private sector
pay levels in 1997. The fastest wage growth has been experience by voluntary
sector workers in the lowest 10% of the pay distribution, while the slowest
wage growth is seen in the 90
th
centile of voluntary sector workers. The
financial crisis in 2007 did hit the wages of the lowest paid voluntary sector
workers the hardest, without slowing growth of higher paid voluntary sector
workers. However, this graph shows clearly that there has been a clear decline
in the pay of those at the top of the voluntary sector earnings distribution since
2012.

9
FIGURE 4: ABSOLUTE WAGE GROWTH BY SECTOR AND QUINTILE

(Source: UK Labour Force Survey 1997 to 2014)
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Private90
Voluntary90
Private50
Voluntary50
Private10
Voluntary10

10
Distribution of Pay by Occupational Classification
Finally we examine the evolution of pay differentials between the private and voluntary sectors within occupational categories. We
ran separate regressions of pay at three different points in the pay distribution (10
th
, 50
th
and 90
th
centiles) for each of the nine top-
level occupational classifications:
Managers, Directors and Senior Officials
Professional Occupations
Associate Professional and Technical Occupations
Administrative and Secretarial Occupations
Skilled Trades Occupations
Caring, Leisure and Other Service Occupations
Sales and Customer Service Occupations
Process, Plant and Machine Operatives
Elementary Occupations
With nine different models, three different points in the distribution, and around 30 estimates per model, you will be extremely
pleased to hear that we do not present here the over 800 figures which make up our results. As above, the pay differences between
the private and voluntary sectors over time are shown in Figure 5. While this may look like a jumble of figures, the graphs are
presented in the same way as in Figure 3, but without the shaded confidence interval that would make the graphs even busier. The
key thing to look for is where the patterns are similar, and where they differ from, Figure 3.
Managers, Directors and Senior Officials are paid wages comparable to the private sector in the bottom and middle of the earnings
distribution. The wage discount is largest (25%) for managers at the top of the distribution, particularly in 2001 and in 2014.
Workers in Professional Occupations are fairly consistently paid less than those in the private sector across the pay distribution,
although this has diverged in recent years. Associate Professional and Technical Occupations workers have a very similar profile to
Managers, Directors and Senior Officials, with only those at the top experiencing significant wage discounts in the voluntary sector.
Administrative and Secretarial Occupations and Caring, Leisure and Other Service Occupations are both generally paid a premium
over private sector workers across the pay distribution, although this may also have changed in the past few years. Although workers
in Skilled Trades Occupations, Sales and Customer Service Occupations, Process, Plant and Machine Operatives, and Elementary

11
Occupations do not experience any significant voluntary sector wage discount even towards the top of the earnings distribution, the
relatively small voluntary sector sample in these occupations makes drawing conclusions difficult.
FIGURE 5: QUANTILE REGRESSION BY OCCUPATION

Managers, Directors and Senior Official
N =64,918; N
VS
=2,161
Professional Occupations
N =67,352; N
VS
=1,843
AssociateProfessional and Technical
Occupations
N =63,706; N
VS
=2,826

3
Administrativeand Secretarial
Occupations
N =66,739; N
VS
=1,798
Skilled Trades Occupations
N =37,697; N
VS
=285
Caring, Leisureand Other ServiceOccupations
N =42,104; N
VS
=2,479


Sales and Customer ServiceOccupations
N =31,895; N
VS
=183
Process, Plant and MachineOperatives
N =31,953; N
VS
=110
Elementary Occupations
N =39,834; N
VS
=479
Note: N is the total number of individual observations included in the model for a given occupation. NVS shows the number of
individuals within that sample that are employed within the voluntary sector. Great care must be taken in drawing conclusions about

12
occupations where NVS is lower than about 500 as the small sample could provide misleading results.
(Source: UK Labour Force Survey 1997 to 2014)

13


This occupational analysis reinforces our finding that the most significant voluntary sector wage
discounts are in the relatively senior and higher-paying jobs. However, they also show the pattern
of an increasing voluntary sector wage discount in both management and administrative
occupations in the past three to five years for those paid at the upper end in the voluntary sector.
IV Discussion and Conclusions
The descriptive analysis has shown that the distribution of pay in the voluntary sector is much
tighter than in the private sector, as would be expected from previous work. However, further to
this we have shown that the dramatic growth in relative voluntary sector workers has been driven
mostly by growth at the bottom end of the pay distribution. In the past three years, in the period
in which concern about charity executive pay has reached its peak, voluntary sector workers at
the top of the pay distribution have actually seen a dramatic decline in their relative pay. This
pattern is found not only for those in senior management positions, but also for those working in
administrative roles towards the top of the pay distribution.
The story here is a positive one for pay in the voluntary sector. The workers at each end of the
conga line have moved closer to those in the middle. The distance between those at the back
of the line and those at the front is smaller, and the dancers are bunching together. Focussing
wage growth on the lowest paid fits with the ethos of the voluntary sector, and may reflect
moves by many organisations to pay living wages. It recognises the critical contribution of
thousands of workers in caring professions that are amongst the lowest paid professions. It also
suggests that pay at the top of the sector has not run away despite the professionalisation of the
sector. The more recent decline in the pay of those at the top of the voluntary sector may even
be related to the increased public interest in voluntary sector compensation (although we cant
test that directly with the data we have here).
Social survey data of this type is not able to provide a good description for individuals at the
extreme ends of a distribution, so our analysis does not describe the compensation of the highest
paid charity chief executives on which popular discussion has focussed. Instead it allows a
detailed exploration of different points in the wage distribution, and how they have evolved over
time. While there is undoubtedly a need for charity trustees to think carefully about how their
most senior executives are compensated, we have shown that the voluntary sector has increased
pay for its lowest paid workers while broadly moderating pay growth for senior staff. This is a
positive message about pay for voluntary sector workers that needs to be better understood and
communicated, as it is a better reflection of the situation in which the majority of the UK
voluntary sector finds itself.




References
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