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The Paradox of Compensating Volunteers: Social norms versus Market norms.

Updated: Feb 15

In the heart of a bustling city, where the spirit of community thrives amidst the concrete jungle, there lived a volunteer. Alex, with a heart as big as his ambitions, dedicated his weekends to a local food pantry, serving meals with a smile that could light up the dimmest corners of the room.

This story, while fictional, sets the stage for a profound exploration into the essence of volunteering and the intricate dance between gratitude, recognition, and compensation.

Volunteers or Employees?
The Fair Labor Standards Act (FLSA) recognizes the generosity and public benefits of volunteering and allows individuals to freely volunteer in many circumstances for charitable and public purposes. Individuals may volunteer time to religious, charitable, civic, humanitarian, or similar non-profit organizations as a public service and not be covered by the FLSA. Individuals generally may not, however, volunteer in commercial activities run by a non-profit organization such as a gift shop. 

A volunteer generally will not be considered an employee for FLSA purposes if the individual volunteers freely for public service, religious or humanitarian objectives, and without contemplation or receipt of compensation. 

Typically, such volunteers serve on a part-time basis and do not displace regular employed workers or perform work that would otherwise be performed by regular employees. In addition, paid employees of a non-profit organization cannot volunteer to provide the same type of services to their non-profit organization that they are employed to provide.


As the President/CEO of A Chance In Life (ACIL), I've witnessed firsthand the transformative power of volunteerism. It's a realm where passion fuels purpose, and the reward is the immeasurable impact on both the giver and the receiver. This brings us to a pivotal question: Should volunteers be paid? Drawing from the insightful Chapter 4 of Dan Ariely's "Predictably Irrational," we delve into the cost of social norms and why we are happy to do things, but not when we are paid to do them.


Alex's journey at the food pantry began as a pure pursuit of altruism. His motivation was rooted in the joy of helping others, a sentiment shared by many who step into the world of volunteerism. However, the dynamics shifted when the pantry, in an attempt to express gratitude, offered financial compensation for his time. Suddenly, the social contract transformed. Alex, who once measured his contribution in smiles and thank-yous, now found himself quantifying his worth in dollars and cents. The intrinsic satisfaction of volunteering was overshadowed by the extrinsic valuation of his efforts. He began to question, "Is my time only worth this much?" The shift from a social norm to a market norm changed everything.


Dan Ariely's research illuminates this phenomenon beautifully. When actions are framed within social norms, they are driven by our need for social approval and our desire to connect with others. These actions are inherently rewarding. However, introduce market norms into the equation, and the story changes. The introduction of money alters our perception, moving the activity from the realm of personal to transactional. Ariely's studies, along with others in the field, underscore the delicate balance between acknowledging the value of volunteer work and maintaining its intrinsic rewards.


This narrative is not unique to Alex or the food pantry. It's a reflection of a broader conversation within the nonprofit sector. Recognizing and appreciating volunteers is crucial, yet it's the manner of recognition that holds the key. At ACIL, we've found that expressions of gratitude, opportunities for personal growth, and creating a sense of belonging are far more impactful than monetary compensation. These forms of recognition preserve the social norms that underpin volunteerism, fostering a community where everyone feels valued and motivated by the shared mission.

In the heart of our discussion on the delicate balance between social norms and market norms within the realm of volunteerism, it's crucial to clarify that our focus is specifically on monetary compensation, particularly when offered as a one-time payment or "una tantum." The U.S. Department of Labor provides clear guidelines distinguishing between who qualifies as a volunteer and when a volunteer might be considered an employee. This distinction is pivotal, as it underscores the legal and ethical framework within which nonprofit organizations operate.

Our argument hinges on the premise that even occasional monetary compensation can disrupt the established social norms that underpin volunteer motivation and engagement. By introducing financial incentives, even on a one-off basis, we risk activating market norms that recalibrate how volunteers perceive their contribution and engagement. This shift from volunteering as an altruistic act to a transactional one can subtly undermine the intrinsic motivations that drive individuals to offer their time and skills for the greater good. It's a nuanced but significant transition that can have lasting impacts on the dynamics of volunteerism and the overall ethos of nonprofit work.

In the Volunteer Protection Act of 1997, the term "volunteer" is defined as an individual performing services for a nonprofit organization or a governmental entity who does not receive:
1. Compensation (other than reasonable reimbursement or allowance for expenses actually incurred) or
2. Any other thing of value in place of compensation over $500 per year.

The dichotomy between "social norms" and "market norms" is a fascinating area of study within behavioral economics, shedding light on how different types of incentives influence human behavior. Social norms are unwritten rules that govern behavior in society, driven by values, customs, and traditions. They are about cooperation, mutual respect, and doing things for others without the expectation of direct financial reward. Market norms, on the other hand, are based on transactions, where services and goods are exchanged for money. The introduction of market norms into situations traditionally governed by social norms can lead to a significant shift in behavior and motivation.


One significant study that delves into this topic is by Uri Gneezy and Aldo Rustichini, titled "A Fine is a Price." Published in the Journal of Legal Studies, this study explored how introducing a fine (a market norm) for late pickups at a daycare center affected parents' behavior. Interestingly, the introduction of the fine led to an increase in late pickups. This counterintuitive outcome was attributed to the fact that the fine changed the parents' perception of being late from a social transgression (violating a social norm) to a service they could purchase (a market norm). When the fine was removed, the rate of late pickups remained high, suggesting that reintroducing social norms after-market norms have taken hold can be challenging.


Another pivotal study comes from Harvard University, where researchers Michael Norton and Dan Ariely explored how perceptions of fairness and effort change when money is involved. Their experiments demonstrated that once financial compensation is introduced for tasks that were previously unpaid, individuals' expectations and perceptions of fairness are recalibrated. Participants began to evaluate their contributions and rewards through a transactional lens, diminishing the value of social recognition and satisfaction derived from altruistic acts.


Stanford University has also contributed to this body of research, particularly through studies conducted by Professor James G. March. His work on the psychology of decisions explores how individuals balance the normative expectations of their roles (social norms) against the economic incentives (market norms) presented to them. March's research highlights the complexity of human motivation and the delicate balance between doing things for intrinsic satisfaction and external rewards.


These studies collectively underscore a critical insight: the introduction of market norms can erode the intrinsic motivations that drive people to engage in pro-social behaviors, such as volunteering. When people perceive their actions within the framework of market transactions, the altruistic and community-oriented motivations can diminish, replaced by a focus on what they are "getting" in return. This shift not only affects individual behavior but can also have broader implications for organizational culture and societal values.


Integrating these insights into our understanding of volunteerism and nonprofit management offers a nuanced perspective on how to motivate and appreciate those who contribute their time and skills. It emphasizes the importance of fostering a culture that values and recognizes the social and emotional contributions of volunteers, rather than attempting to quantify their value in purely financial terms. By prioritizing social norms in the context of volunteerism, organizations can cultivate a more engaged, motivated, and cohesive community, united by a shared commitment to the common good.

Check out our diagram to determine who can be considered a volunteer.

In conclusion, our discussion reveals a fundamental insight into the dynamics of volunteerism and the impact of social versus market norms on motivation. The evidence from various studies underscores a crucial point: introducing financial incentives into a traditionally altruistic space can shift the underlying motivations and potentially diminish the intrinsic rewards that come from volunteering.


This shift from social to market norms affects individual volunteers and has broader implications for the culture and effectiveness of nonprofit organizations. It challenges us to find innovative ways to recognize and appreciate volunteers that preserve the essence of volunteerism—contributing to a cause greater than oneself without direct financial compensation.

Liability Protection:
The Volunteer Protection Act of 1997 is a critical piece of legislation designed to promote volunteerism by offering legal protections to volunteers serving nonprofit organizations and governmental entities. The Act recognizes the invaluable contributions volunteers make to society and aims to shield them from the discouraging effects of liability for their voluntary actions. Here's a detailed summary of the Act's key provisions:

Purpose and Scope
- Main Objective: To provide liability protection for volunteers against lawsuits arising from their voluntary activities, unless specific exceptions apply.
- Applicability: Covers volunteers working for nonprofit organizations or governmental entities, ensuring they can serve without the fear of legal repercussions for their goodwill actions.

Conditions for Protection
- Eligibility: Volunteers must be acting within the scope of their responsibilities at the time of the act or omission.
- Requirements: Volunteers are protected provided they were properly licensed, certified, or authorized (if applicable) for the activities in question and the harm was not caused by willful misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed.

Exceptions to Protections
- The Act delineates specific circumstances where volunteers do not receive protection, including:
  - Crimes, acts of violence, terrorism, hate crimes, sexual offenses, and violations of federal or state civil rights laws.
  - Situations where the volunteer was operating a motor vehicle, vessel, aircraft, or other vehicle for which the state requires a license or insurance.


As we navigate the complexities of motivating and retaining volunteers, it's important to continue the conversation and learn from each other's experiences. I encourage you to share your thoughts and experiences in the comments below.

  • How have you seen these dynamics play out in your own work or volunteer experiences?

  • What strategies have you found effective in balancing recognition and motivation without relying on financial incentives?


Your insights and perspectives are invaluable as we collectively strive to enhance the volunteer experience and ensure that the spirit of altruism remains at the heart of our efforts to make a difference.

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