The rising cost of replacing existing staff is threatening to drown the finances of many churches. The problem is especially acute among senior pastor successions or retirements.
In conjunction with our 2024 State of Church Compensation webinar, I sat down with Matt Steen, Co-Founder of Chemistry Staffing, to discuss the high cost of pastoral succession and what churches can do to keep their heads above water.
Senior and associate pastors have been retiring and moving between churches for a long time. Why is the cost of replacement such a big problem now?
According to Steen, “three streams or trends are converging to make this problem worse.”
First, Baby Boomers are still retiring at high rates. While the average age of senior pastors is actually in the mid-50s and most Baby Boomers are older than 65 already, there are still a lot of Baby Boomer pastors who haven’t retired.
According to a recent report, “as many as 4.1 million Americans are poised to turn 65 this year and every year through 2027.” Many are calling this the “silver tsunami” as it “represents the largest surge of retirement-age Americans in history.”
We highlighted this problem in Chapter 8 of our report on The Impact of COVID-19 on the American Church, “Baby Boomer pastors are continuing to retire and exit the pastorate” which is “creating a historic level of turnover.”
This is creating a problem for churches because, as Steen noted,
“These pastors have been in place for 20 years at the same churches. And for many of the years where the church budget was rough or tight they’ve decided to not take a cost of living adjustment. Year after year, this caused their compensation package to gradually fall behind the market.”
Second, recent increases in the cost of living (particularly housing) are squeezing families, especially those who need to relocate. Steen laid out the stark choices churches and pastors are facing in today’s real estate marketplace:
“If the candidate to replace one of your pastors lives outside of town, churches are not only asking candidates to relocate their family, they are asking them to buy a house in a market with limited supplies, sky high prices, and interest rates close to 7%. Candidates sitting on a mortgage rate of 3% are shocked when they realize a similarly-priced house can cost twice as much.”
Churches are not just paying someone more money because they need to catch up to the market, they are having to offer incentives for pastors to sell their house and take on a higher interest rate.
Finally, generational changes in seminary funding are amplifying the cost of succession. Based on his interactions with the pastoral job marketplace, Steen pointed out that:
“The older generation doesn’t have student loan debt but newer pastors do. In addition to there being fewer seminaries and Bible colleges in general, the cost of vocational ministry training has increased exponentially over the last several decades.”
The long-term impact of higher seminary debt is that up-and-coming associate pastors looking to replace retiring senior pastors or simply enter the ministry cannot get by on the same salary as previous generations who graduated with little to no debt (or who paid it off years ago).
One of the unintended consequences of these market pressures, as Steen pointed out, is that “the compensation packages of incoming candidates are dwarfing the outgoing senior pastor’s pay. And in those situations, it doesn’t matter how holy you are, it’s hard to not be resentful.” And no church leaders want to say goodbye to and celebrate the legacy of a senior pastor who is struggling inwardly with anger and resentment over years of poor pay.
If a church is looking to replace a member of their pastoral staff—especially their senior pastor—what should they expect?
“I’ve been telling churches that they should expect that succession will cost twice what your existing pastor’s] salary currently is,” noted Matt Steen. “In terms of senior pastors, specifically, you will need to cover the cost of the search, to bump up the new person to match the market, and give a gift to your departing senior pastor on the way out (maybe even set up a rabbi trust to help them with retirement).”
At a minimum, ChurchSalary believes these steep costs will disrupt the church finances of medium to large-sized churches in the short-term. But in the long-run, the wave of these costs may be so high that smaller and/or rural churches find themselves underwater and unable to replace existing staff.
The threat to small and rural congregations is especially acute because, as the chart below illustrates, their solo pastor’s total compensation package may already be consuming as much as 75% or more of the church’s budget. At this point, paying twice the annual cost to replace a senior pastor or staff member is simply impossible without dipping into savings.
Ultimately, if the congregation has not trained or raised up a leader from within, the cost of a search and the price to relocate a pastor and his family for a very small congregation may simply be too high.
What do you think the long-term impact of these replacement cost pressures will be in terms of pastoral compensation and overall job market for pastors?
“I’ve been saying for a while now that it is a candidate's market,” Steen replied.
Normally, the ripple effects of succession are a ladder effect. Qualified associate pastors move up into senior roles and youth pastors and recent graduates move up into associate positions. Unfortunately, senior pastors haven’t been encouraging young people to enter the ministry.
“I was at a conference recently and this topic came up,” said Matt. “One of the senior pastors was shocked when he realized out loud, ‘I can’t remember the last time I encouraged someone to go to seminary or enter the ministry!’”
“The end result of this, as I’ve been telling churches,” said Matt, “is that the days of paying your youth pastor $45K with no benefits are over.”
Paying and retaining these associate pastors is going to get harder for churches with a succession looming on the horizon. Higher pay for incoming replacements will make inequality among the staff even more acute. And the cost of these new compensation packages will eat more out of the church budget, shrinking the amount available to pay and retain associate staff.
These are big problems and they aren’t going away.
If your church needs help pricing and preparing for pastoral succession, consider becoming a ChurchSalary member. With an annual membership, your church can generate customized salary reports and immediately start bridging the gap between the market and your budget.
