The Pastor Salary Fallacy

preach for foodMany people promote a common half-truth about pastors’ salaries, and it needs to end.

I just heard it again last week. “Hey, I only make $50,000.” Well, that was true. Technically.

What it neglected was the $20,000 housing allowance this pastor receives. And the $4,000 utilities allowance.

The truth about pastoral compensation

Pastors’ compensation packages are arranged differently than most. Whereas almost everyone else in America is responsible for paying for their own housing and utilities, these expenses are usually covered for pastors. We usually receive either a parsonage (a house provided by the church) or a housing allowance that covers the cost of our mortgage, along with any furnishings, maintenance, and renovation. And then the church pays for our utilities. This will often include the cost for lawn care, and probably some other things I’m forgetting.

One other benefit: Housing and utilities allowance are exempt from federal income tax. And pastors still get to claim a deduction for the mortgage interest they pay. It’s a double dip, and I have no idea why the IRS allows it, but they do.

Those in parsonages will tell you that they get a bum deal sometimes. They get a house that’s far from ideal and poorly maintained. This is a reality for many, and a genuine concern. Church - if you provide a parsonage for your pastor that you would never consider living in, you need to do something. Then again, you’d be surprised at the quality of some other parsonages. I’ve seen them valued up to $600,000 (in an area where median is $158k).

In all, here’s what this means: The pastor I reference above who only makes $50,000 actually receives $74,000. And $24,000 of that isn’t subject to income tax. Which makes his relative compensation — when compared with people in other professions — roughly $88,000.**

Yes, the IRS allows this — although I expect that to be challenged sometime in the next few decades. But let’s stop telling half-truths about pastors’ salaries.

Pastors, please don’t tell people, “I [only] make $XX,XXX,” and leave out that all costs associated with your housing are taken care of on the side. The people you’re talking to have to use their salaries to pay for their rent/mortgage, their utilities, their home maintenance, their lawn care, their cable bill…

As I read over this, I know it could be taken in a bitter or antagonistic tone. That’s not my intention. I receive a housing allowance and utilities allowance, too. I’m just imploring us to be more honest when we talk and think about our compensation. The lowest compensation package for a United Methodist elder in Kentucky (where median household income is $42,000) is just shy of $60,000. As compensation goes, none of us have anything to complain about.

Thinking theologically about pastoral compensation

My greater hope is that we would stop thinking about pastoral compensation in the business-world pragmatic sense and start thinking theologically about compensation in the church. See this earlier piece: “Pastors’ Salaries and Church Buildings.”

The pragmatists will say we can’t do it or we’ll lose our most talented people. There are a number of problems with that, which I might try to address another time.

For now, I would venture this with the pragmatists in my Methodist tradition. When we look at the relative compensation of our pastors and the numerical growth of Methodism, I bet you’ll find the greatest growth in the times and places where relative compensation was the lowest. And I bet there’s a pretty surprising negative correlation (i.e. one number goes up while the other goes down) between those two numbers over the last 200 years. I’d love to run some numbers on this, but I feel pretty confident about it based on what I’ve seen.

—————–

** Some more details, for those who are really interested…

Because the pastor I reference was a UMC pastor, he has a pretty nice health insurance package, for which his church pays nearly $13,000 annually. They’re also required to make an annual $11,000 pension contribution on his behalf, regardless of whether he contributes anything. Ignoring any other expense allowances or continuing ed, this is a $98,000 pay package. I point all this out just so we know the reality for this person who claimed to make “only $50,000.”

One other unusual thing that comes into play for pastors: we file as “self-employed.” Odd, isn’t it? This means the church doesn’t make FICA/SECA payments on our behalf. If the pastor in this example pays SECA taxes, this is a loss of $5,661. Adjust that comparable compensation number back down to $82,339.

But the final unusual piece: pastors can opt-out of Social Security. That’s a great economic boon to them! It’s also highly questionable, as far as I’m concerned. Anyone who opts out has to sign a statement that states,

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister, member of religious order not under a vow of poverty, or a Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that, makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.)

Conscientiously opposed to […] the acceptance of any public insurance.” Hmmm… I see far more opt-outs out of economic convenience than out of troubled conscience.

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15 thoughts on “The Pastor Salary Fallacy

  1. The non-Methodist/denominational church I’m a minister in doesn’t hide the fact that we are compensated fairly and generously. What they add though is that our compensation (tax benefits and all) should be enough that we don’t need to find additional work or feel slighted about working in a church vs the marketplace.

    Additionally, our compensation is proportional to the level of burden we carry. In other words, if you’re going to be called to do funerals during family day and have to be accessible 24/7, you won’t live as a pauper (or a Rockefeller). It’ll be fair.

    Great post!

    • Rev. Kaufholz,

      Thanks for sharing. My long response…

      I’m glad your church works to share openly with the congregation about how they do compensation. That’s not always the case. I agree, too, about compensating people well enough not to find additional work, if that’s the intended arrangement. Of course, I think there’s a great value in bi-vocational ministry, too.

      I’m curious what you mean about “feel slighted about working in a church vs the marketplace.” How does this affect compensation? Is it based on the individual? If someone could leave tomorrow and get an executive position at NBC, we pay them something equivalent? If they have a Bible degree with a youth ministry masters, we pay them $8/hour and health benefits, since that’s what they’ll get at Starbucks when they leave? Okay, I know that’s not what you mean, but it illumines the problem. How, exactly, are we determining people’s worth relative to the marketplace? And how much should the marketplace set the standard for us?

      On compensation being relative to the level of burden… I think all but three people in the world agree to this rationale. Unfortunately, I’m one of the three. I understand doing this in the marketplace, just not the church — where we are supposed to live and reflect an alternative economy, a new creation (i.e. counter-cultural, or at least not-influenced-by-culture) economy. Honestly, if anyone can help change my mind, you may have one of the best shots. I’d sincerely love to hear why I’m missing this. If I could be convinced, life would become much easier.

      So here’s my case: regardless of the burden a pastor has, compensation doesn’t fix it. So, for instance, if the church is consuming so much of a pastor’s time that (s)he is never home with spouse and kids, there’s no amount of compensation that makes that okay. Corporate world justifies it. I don’t think we can. The burden you reference doesn’t fall into that category. But what you mention is still about time and availability, not money. Is an extra $20k or a bigger house the best way to make up for someone having less time and having to be more available?

      I’d rather take direct measures to help these people unplug and to be with their families more — acknowledging that their typical burdens make that harder for them than for most. So grant extra vacation time. Give (enforce, perhaps) a sabbatical. Offer paid counseling to deal with the extra stresses of public life. And yes — offer some money or resources so that extra vacation time or sabbatical are affordable. When I try to envision an alternative, new creation economy, these sort of ways of caring for those with the heaviest burdens seem more faithful than just paying them more than everyone else.

      Make sense? So what do you think? You may be my best hope for helping me conform to what everyone else thinks on this.

      • Okay, I believe I’m figured out how to subscribe in such a way that I’ll actually get email updates and not be a week late to the party. However, I’m here now, so let’s bust out the stale appetizers and get to writing…

        To your very fair marketplace push-back…

        I feel that there are two economies that are to be simultaneously considered when hiring someone to work in a church, para-church, or generally good-willed/Christian organization. The first is the economy of calling. To that end, I’m speaking about God’s leaning on a person to be a part of building His Kingdom through this particular organization. This calling can’t be quantified via a paycheck, and to do so cheapens the value. However, those doing the hiring have a responsibility to still consider the weight of this, as the person they’re hiring will likely be somewhat blinded to dollars because of the greater value. By way of example, when my church asked me what I “needed to make” as we were in the hiring process, my initial thought was about getting the opportunity to finally, fully engage, in what God had designed me to do — not what I could bring home. My answer to them was, “I don’t know, we’ll be fine with whatever, I just need you to hire me so I can do this.” There was no number that I needed — there was no quantifiable value to doing what I’m called to do.

        So knowing that that hiring for a church (universal church-God’s business) carries with it a greater value than 401k’s, I think they must consider the second economy when hiring, that is, the economy of compensation. They’ve got to know that the folks they’re hiring, if they’re hiring the right people, are talented. If they’re hiring an accountant, they should be hiring a good one. And if they’re a good one and they’ve got some experience, they’re making 50–60k a year in the marketplace. However, we think — “Oh no, we’re a church, we don’t pay 50–60 a year for an accountant — that’s not a good use of tithe!” So we prey on the “economy of calling” as a way to get someone to leave the marketplace for half of what they could be making under the auspices that they’re doing God’s work — which is true. But if we can’t put a value on the economy of calling, why do we then pay them half of what they’re worth? I have no idea, but we do it all the time. We take something like the privilege of baptizing people, and we subtly tell the CEO that if she wants to be an Executive Pastor, she’s going to have to make 30k less a year to get to do it. I don’t think it’s fair, and I think it’s the churches job to be as above board as possible when mixing the economies of compensation and calling. However…

        Most people who work in a Christian organization could be making twice, thrice, or a millionth more than what they’d make in the marketplace. So at some point, we need to just have a conversation with the person and find an agreeable and honoring medium between their monetary worth and the churches ability to pay. Additionally, this conversation must include some education about the full package (i.e. all of the tax benefits, housing allowances, etc.) so they know that 40k+“benefits”=55k in the insane tax free church world.

        And this leads to your second point of response regarding proportional pay to burden…

        You’re right, an extra 20k a year isn’t going to make your burden easier. And you’re right, taking extra measures to care for those who care for others is key. My counter question is, where does the care end? I think it doesn’t. If you can give them a week off between Christmas and New Years for family — you do it. If you can provide retreats — you do it. And if you can pay them more so they can enjoy the limited but real spoils of monetary compensation — then do it! Granted, the person would probably do their job for peanuts and that may look great on the overall budget if you lowballed them. But again, we’re leaning on the wrong economy (see paragraph 2’s monologue) if we’re paying them what we know they’ll work for. Money doesn’t equate to happiness, but it’s nice to not have to open an Etsy business or stress about raising two kids on 32k a year. And, it’s one of a million ways we can, as a church, communicate value to those who work here.

        In closing, for the one person who’s still reading, I think we do everything I said AND everything Pastor/Rev./Dr./Teddy Ray said and empower pastors/church workers to make great strides for the kingdom with a little left over to tour the National Parks in a Winnebago when they’re 65. There should be no reasonable limit to how we should compensate these folks.

  2. totallly agree on the social security side. no one has ever told me that they opt out b/c of moral/ethical issues. They have told me “I’m sure you could find something in the bible to support your belief.” Also, if you are UM it is STUPID to opt out b/c that means you opt out of Medicare and if Medicare does not pay in your retirement neither does the UM Health Care. I told someone who was opting out about this and he said, “I’ll worry about that when I get older” and b/c my filter is never on I used the above word and added some emphasis, “That is stupid!” He smiled. 🙂

  3. The problem is on the other side for pastors who still live in parsonages…

    Yes our housing is “exempt” from wages, but it still counts on the SS/FICA side and is appraised at FMV. So you might be two people living in a parsonage that appraises for 15000 to 24000 a year…which they then have to “pay” tax on. So you could have a pastor who makes 32,000 a year living in a parsonage that appraises for 15,000…this means that the pastor would have to make quarterly payments of 1900 or 7600 for the year…

    So now said pastor is living on 24400.

    And yes I know all these numbers because this was me. 🙂

  4. Eddie — thanks for such a helpful response.

    1 — I’d love to know what was causing subscription problems. Perhaps the masses are trying to subscribe and I have a setting mixed up. Just think of how many people could be engrossed in salary conversations right now…

    2 — I think your case for handling pay this way is a strong case. Actually, I think most of the people who would disagree with your case are people I would disagree with. Their typical argument goes along the lines of calling people to “sacrifice” since they’re working for the church. Or acknowledge that they’ll make less for the “privilege” of working in the church. I’m with you against those flimsy arguments.

    I think, though, that we’re coming from different starting places, and we’ll probably just talk past each other as long as that’s the case. And I’ll own this — yours is the normal-person starting place, mine is the one that seems out of sync with the rest of the world.

    At root, I’m looking for the Church to live as an alternate society (by no means separate from the world, but by all means very distinct from the world), a society that in many ways provides a prophetic critique of the rest of society, a counter-culture. This is some of what I was getting at in the post, Prophets and Pragmatism: http://teddyray.com/2012/10/16/prophets-pragmatism

    And in a culture submerged in capitalism, I think one of the most important parts of that alternate society is an alternate economy. (Although maybe capitalism doesn’t matter — Scripture always seems to describe an alternate economy. One that would have been shocking and rubbed right against the grain of the rest of the world’s economy.) All of this is making me want to critique at best, or ignore at worst, the marketplace when considering how the church uses money. Can we re-imagine how money would be handled in the new creation without being terribly influenced by the capitalist US marketplace?

    For instance — why are we concerned to be sure our high-level people have enough for that Winnebago when they’re 65 and to have a nice house with nice vacation options for their kids, but we don’t seem nearly so concerned for the same with our custodians and secretaries? I get why the capitalist marketplace differentiates these, but why the Church? What does this reflect about a new creation, Christian economy?

    So I need to spend more time thinking and writing more on this. Perhaps it will help me realize the fallacy of my own thinking. Perhaps it will convert someone else to my position. (Then there will be four in the world!) Most likely, we’ll all just keep talking in different directions. But at least we’re all trying and talking.

    Those most influential for me in all of this: William T Cavanaugh, James KA Smith, and John Wesley. For those still paying attention, I’ll post links to a variety of their work on these things…
    — Cavanaugh video on the Myth of Consumerism: http://www.youtube.com/watch?v=HtB9k8Cai2A&feature=relmfu
    — Also read anything Cavanaugh ever wrote — especially “Being Consumed” — http://www.amazon.com/s/ref=sr_st?qid=1350934095&rh=n%3A283155%2Cp_27%3AWilliam+T.+Cavanaugh&sort=popularity-rank
    — James KA Smith’s symposium on Faith, Economics, and Globalization is a perfect example of how two Christians with different starting points can talk completely past each other on matters of economics: http://forsclavigera.blogspot.com/2012/04/faith-economics-and-globalization.html
    — In my post on pastors’ salaries and church buildings, I use the Wesley quote that was pretty influential in my own thinking and re-imagining: http://teddyray.com/2012/06/04/pastors-salaries-and-church-buildings/

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  7. Just came across this post.

    I have no problem with my salary. I don’t do it just for the compensation package.

    Keep in mind, though, that every conference is different. Salaries in my conference start out mid/upper 30,000s and include parsonage (mostly) or housing allowance. Also, 8% of our salary goes toward our health insurance (and clergy couples, like my wife and I, pay 8% of both salaries toward one health insurance plan that we share).

    Again, no complaints. Just want to point out it depends on your context. I am grateful for a place to live, for health insurance and a pension plan, and mostly, that I get to be a pastor! 🙂

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