How Pastors Will be Paid in 2019 and Beyond

Staffing costs typically account for 45 to 55 percent of a church’s budget. But with recent changes in costs, demographics, and giving in US churches, many are questioning that model.

Dan Navarra, a pastor at Monte Vista Chapel in Turlock, California, lives in a high-cost-of-living area, and his church, like many, is feeling the pinch of rising costs. Four years ago, the church dropped family medical insurance. Thankfully his children qualify for Medi-Cal, California’s Medicaid program for low-income families. Out of financial necessity, Navarra’s spouse also works—and she’s not alone. “All of the wives of pastors on staff have jobs,” said Navarra. “All of them.”

Becky Nance has worked as a pastor’s spouse for years. Her husband has pastored for over a decade, and they’re currently serving at the Grinnell, Iowa, campus of Prairie Lakes Church. She is now pursuing her own ministry vocation by attending seminary online, but she is anxious about making ends meet when she and her husband both have ministry salaries. “Will it be enough?” she wondered.

One question lingers in the minds of Nance and Navarra: as Navarra put it, “Is nonprofit, pastoral, full-time, exempt work going to be viable for me and my family?” That depends on the emerging trends in pastoral pay. Below are some of the most significant developments you can expect over the next year and beyond.

The housing allowance may not be here for long.
The clergy housing allowance is “the most important tax benefit available to ministers,” according to attorney and CPA Richard Hammar. Not only can ministers have a portion of their salary designated as a tax-free benefit for housing costs, but this costs the church absolutely nothing. Unfortunately, there are storm clouds on the horizon for this important benefit.

In October 2017, a federal judge ruled that “the housing allowance violates the establishment clause because it does not have a secular purpose or effect and because a reasonable observer would view the statute as an endorsement of religion.” In other words, the housing allowance was deemed unconstitutional.

As of the time of this writing, the case has yet to be heard in the federal court of appeals, so it’s yet to be determined if the initial verdict will be upheld. If it is, this would have two immediate effects for ministers. First, many pastors would “experience an immediate increase in income taxes,” said Hammar. Second, “many churches will want to increase ministers’ compensation to offset the financial impact. Such an increase could be phased out over a period of years to minimize the impact to the church.” However, without any increase in pay to offset the additional taxes, pastors would experience an immediate loss in take-home pay.

Younger pastors will face financial uncertainty.
According to PEW Research Center, Millennials now make up the largest share of the US labor force (35%), surpassing Generation Xers (33%) and Boomers (25%). Generation Z (those born after 1996) made up only 5 percent of the workforce in 2017, but that will grow rapidly over the next few years.

Even if pastors tend to work in ministry longer, younger generations will soon comprise the largest share of those working in ministry. What do these younger generations face in the ministry workforce?

Matthew Bloom, a researcher at Notre Dame’s “Wellbeing at Work” initiative, studies wellbeing for pastors. He has concluded that clergy wellbeing lessens the longer one serves in ministry. “Being a pastor is much more difficult than it used to be,” wrote Bloom in an article on the Wellbeing at Work website. “The ecosystem is not as conducive to flourishing: the demands are higher, the support systems are not as strong. As churches have seen their membership rolls drop, they have responded in ways that have sometimes been very detrimental to the well-being of clergy.”

Compensation is just a small part of vocational flourishing, but it is nevertheless crucial to vocational satisfaction—but not in the way most people think.

“The thing that we know about compensation is that it really is not a motivator of people,” said Chris Taylor, director of human resources at Seacoast Church in South Carolina. “It’s not going to motivate [church employees] for long, but man is it a demotivator if you don’t have it right.”

Compensation protects against many of the things that distract from ministry: stress, resentment, bills, and more. Like an immunization shot, fair compensation releases pastors to flourish in ministry.

Younger generations are seeing rising housing costs, rising student debt from undergraduate and seminary studies, rising healthcare costs, a pinch in benefits, and stagnating wages. The young pastors of today—the leading pastors of tomorrow—face a steep climb to financial stability. If churches want pastors to flourish, they must be aware of these economic realities. How a pastor is compensated will help to alleviate or exacerbate these stressors.

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SOURCE: Christianity Today, Samuel Ogles