Wage equity and employee motivation in nonprofit and for-profit organizations

In this paper, I argue that because nonprofit organizations rely disproportionately on intrinsically motivated employees, they provide a particularly interesting context for examining the relationship between wage dispersion and employee motivation; If certain hypotheses put forth in the literature on psychology and employee motivation are correct, then wage dispersion should be less apparent in the nonprofit sector than in the for-profit sector. I examine labor market data from the 1990 US Census on nonprofit and for-profit employees and find a strong link between wage equity and sector of employment. This finding is supportive of the view that wage equity is related to worker motivation. Alternative explanations for the observed wage patterns are examined and rejected. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: J31; L31.