gusaus
commented
2 years ago Surfacing some of our ongoing Slack convos here as a uniform compensation and rate structure would help us move forward with projects and collaborations referenced in https://github.com/specollective/collaboratory/issues/1#issuecomment-1089291311
Generally speaking, I like the structure and reasoning being proposed. As a partner, I would be fully down with OpenProducer having the same compensation and rate structure as SPEC. While I think the structure could work for trainees and entry-level contributors, the compensation for mentors, founders, and other experienced contributors needs to be competitive with similar roles in a given industry. Otherwise, it will be extremely difficult to recruit and retain talent across the board.
Would this be possible for orgs like SPEC and OpenProducer whose primary customers are nonprofits and open source projects/orgs? I think Open Collective provides inspiration and could serve as a model. Considering all the opportunities to benefit and partner on Open Collective Foundation's strategic projects and inititives, we already the means to build capacity along with a community of contributors, partners, and customers.
If we can clearly define our collective needs, compensation structure, and rates in this issue.... we can bounce over to https://github.com/specollective/collaboratory/issues/1 and secure some projects.
Community Contributor Compensation Structure
This issue proposes a Community Contributor Compensation Structure (CCCS) that provides a model to simplify collaboration between collectives in the Open Collective (OC) ecosystem and provide equitable compensation for their contributors. It defines a standard guideline for paying contributors working for one or more collectives in the OC ecosystem. It will ideally standardize pay rates for all contractors and employees to meet the living wage for each individual contributor.
The CCCS suggests using MIT's Living Wage Calculator, which accounts for cost of living (based on location), number of working adults, and family composition, as a basis for determining rates for contributors working in the ecosystem. This model recommends a standard base rate, but leaves room for individual collectives to define additional pay above the living wage for their area.
The living wage calculations can vary widely based on each individual contributor's location and living arrangement. The calculator provides a breakdown of brackets based on factors listed above. For each location the living wage is broken down as follows:
Number of Adults
Number of Children
To see an example for the living wage brackets for a specific location, check out the living wage bracket for San Francisco, CA. You can also search for any location in the USA at https://livingwage.mit.edu.
It is difficult to build a compensation structure based off the living wage for multiple reasons including issues with onboarding contributors, budgeting, factoring in life changes, and predicting labor costs. To simplify reasoning about using the living wage as a basis for pay bands, the CCCS uses publicly available census data to try to capture the most common scenarios for contributors across the USA. In practice this means the CCCS will select a living wage bracket that depends only on a contributor's residence. The other considerations the living wage takes into account, number of working adults and children in the household, are factored in through analysis of census data to select a living wage rate that applies to the greatest number of people. This means in practice that the wage rate selected through the CCCS may in fact pay some contributors more or less than that the living wage calculator recommends as the living wage, because the CCCS rate does not adjust based on family and living arrangement. To account for this variability the CCCS recommends using a combination of a Base Living Wage, a Happiness Factor, and compensation based on Contributor Levels and Competitiveness. This leaves room for collectives to modify total compensation for contributors to fill in gaps.
If collectives and their contributors mutually decide that they want base their rates based on all of the living wage parameters, the CCCS and community should allow for that approach as well. It will become easier budget for labor costs based on the living wage with historical data. In all cases, the primary goal of the CCCS is incorporate a base rate derived from the living wage, but allow collectives to enhance by factoring in happiness, contributor levels, and market competitiveness.
Family and Living Arrangements
Observation: The majority of people in the USA are living with a spouse or partner. Living Wage Brackets:
Research
According to a Pew Research Center analysis of census data, in 2019, roughly four-in-ten adults ages 25 to 54 (38%) were unpartnered (neither married nor living with a partner). The U.S. Census Bureau’s annual America’s Families and Living Arrangements table package estimates the percentage of adults living with a spouse decreased from 52% to 50% over the past decade, while the percentage of adults living with an unmarried partner also inched up over the past decade, from 7% to 8%.
Number of Children
Observations:
Living Wage Brackets:
Research
In 2020, there were an average 1.93 children under 18 per family in the USA. That is a decrease from 2.33 children under 18 per family in 1960. [1] Birth rates in the U.S. have been steadily declining since the 2008 recession. The birth rate hit another record low in 2020, falling 4% from the previous year.[2].
Employment Rates
Observations:
Living Wage Brackets:
Research
Consider the 2020 employment rates by age from the Statista on Employment rate by age in the United States from 2000 to 2020.
The majority adults between 25 and 54 are employed. Just under half of individuals between 16 - 24 are employed. People 55 and over had the lowest employment rates at 36.4%. New parents are tending to be older in general, with the average age of first-time mothers of 26, up from 21 in 1972, and for fathers 31, up from 27. [4]. It is important to point out that the U.S. has world’s highest rate of children living in single-parent households.
Another factor to consider is gender distribution of employment. According to the BLS,
Base Living Wage
An MIT analysis of the living wage, compiling geographically specific expenditure data for food, childcare, health care, housing, transportation, and other basic necessities found that average living wage in the United States is $16.54 per hour, or $68,808 (combined income) per year, in 2019, before taxes for a family of four (two working adults, two children), compared to $16.14 in 2018.
Assuming that the 2 Adults (Both Working) with 1 Child bracket is a cross-sectional representation of family composition in the USA, the average of the highest and lowest wages for this bracket, provides an estimate of the cost of paying contributors at this bracket across the USA. Consider the living wage rates for the 2 Adults (Both Working) with 1 Child in the following counties in the USA.
Averaging these rates we get $17.26 or $35,900.80 (per adult). In New York, you are looking at a base salary of $43,576.00 and $28,225.60 in Mississippi. These numbers can be used for budgeting purposes (including reasonable error margins). With historical data about the locations of contributor's, the base rates can become more sophisticated and adjusted accordingly over time.
The CCCS proposes basing each individual contributor's pay on the base wage derived from the 2 Adults (Both Working) with 1 Child bracket for their location. In practice that means asking contributors to provide their location when they are first employed and contributors informing collectives when their residency changes to adjust their pay accordingly.
Happiness Factor
The base wage ensure that collectives are paying their contributors enough to make a living. Studies have shown the happiness plateaus between $75,000 to $85,000 [6]. Our hope is collectives will opt to build on top of the CCCS base wage to continue to raise the quality of life for their contributors. In practice this would look like collectives deciding to raise their rates by a certain percentage. This decision could be made by an individual collective (for all their contributors) or multiple collectives agreeing on a shared base wage + 'happiness factor'.
Contributor Levels & Competitiveness
In order to be able hire individuals that have business critical knowledge and skills, the base wages may be not be sufficient to cover the cost or be competitive for certain individual contributors with desired expertise and experience. To factor in expertise and experience, collectives may adopt a structure like SPEC's Contributor Levels, and create pay brackets derived from the base wage + 'levels factor'. These levels should capture varying levels of responsibilities from interns to founders, and scale pay rates accordingly.
Project-based Rates
The CCCS should leave room for contractors that provide particularly niche services that may want to engaged with collectives on a project by project basis, either via fixed-price contract or their own consulting rates. Collectives will be responsible for negotiating this types of contracts and factoring them in when assessing the community labor costs.
Example Contributor Compensation Structures
These examples demonstrate how the Base Living Wage can be incorporated in a levels based compensation structure. This section IS NOT a formal recommendations on how collectives should structure their compensation beyond using the Base Living Wage and demonstrate how the wages could be scaled up from to reach certain organizational objectives.
Fixed Percentage Raise Scheme
In this scenario, the a collective has structured its compensation to ensure L1 meets or exceeds the Base Living Wage for each individual contributor and provides incremental raises based on level of role and responsibility. This collective is capping the highest level in the most expensive location at $85K. Raises are a fixed percentage for all locations.
Sliding Up Raise Scheme
In this example, the collective wants to bring up all contributors regardless of location up to $85,000 by reaching L3. In this scenario, the collective selects the target salaries for each level to split up raises to get all contributors up to the L3 salary cap.
Universal Base Living Wage Scheme
In this example, the collective decides to make the living wage for the most expensive location to be universal for all locations, but caps raises 150% of the living wage of each individual contributor's location.