Typically when people think about nonprofit organizations, most immediately think of their causes and the positive impacts these organizations have on the community. Nonprofits do everything from helping the less fortunate to sponsoring research to cure diseases. One area that nonprofits influence, which often is not considered, is the economy. Nonprofits and the economy have a closely tied, mutually beneficial relationship.

As most would assume, economic performance often affects contributions to nonprofits. During recessions, when contributions decline, nonprofits often have to scale back their operations. When the economy is growing, contributions to nonprofits increase, thus allowing them to invest in their operations through new employees or expanding initiatives.  Some interesting facts showing this relationship include1:

  • Total giving in the US rose 2.7% in 2016.
  • Between 2006 and 2016, total giving increased by $93.96 billion to about $390 billion in 2016.
  • Inflation adjusted giving increased by 1.4% from 2015-2016, while the US GDP also increased by 1.7% during that same period.

While economic growth plays a key role in funding nonprofits, the nonprofit sector also plays a key role in maintaining and even driving our economy. The nonprofit sector is extremely resilient and has shown signs of being “Recession Proof.” For example, during the 2007-2009 recession, when overall annual giving decreased, the nonprofit sector maintained an average annual employment growth rate of nearly 1.5%2. This sector employs a large portion of the workforce and contributes billions of dollars back into our economy annually. Some surprising facts include3:

  • Over 14.4 million people are employed by nonprofit organizations in the US.
  • The nonprofit sector accounts for more than 10.6% of the US workforce.
  • About $938 billion is contributed to the US economy by the nonprofit sector which accounts for about 5.5% of that national GDP.

While the nonprofit sector does not come to mind as an industry that helps drive the economy, it is evident the two are closely tied. This relationship can be looked at as a research tool to gauge the health of the economy. Research indicates that contributions could be a leading indicator of overall economic health. This brings about a good question: should the nonprofit sector be looked at more closely to determine future economic trends? Whatever the answer may be, it is clear that, in addition to it societal impact, the nonprofit sector also has a positive impact on the overall US economy.

 

1 Brice McKeever IUPUI Lilly Family School of Philanthropy, “Giving USA 2017: Highlights. An overview of giving in 2016,” Giving USA, 2017.

2 Erik Friesenhahn, "Nonprofits in America: new research data on employment, wages, and establishments," Monthly Labor Review, U.S. Bureau of Labor Statistics, February 2016.

3 Brice McKeever and Marcus Gaddy, “The Nonprofit Workforce,” NPQ, October 24, 2016.

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