The Economic Impact of Nonprofit Employment

I was doing some research recently on a book I am writing about the nonprofit industry when I read a business finance article in which certain economic data from the business sector and from the government sector were presented and analyzed. I reflected for a moment on the total absence of any data from the nonprofit sector, the “Third Sector” as it is referred to, that might have made the article more informative and interesting. Like most who work in the nonprofit sector, I see nonprofit research reports and articles all the time that provide the latest statistics on this or that. But what about at the macro level? What is the economic impact the “Third Sector”? I started digging into the subject and found some amazing data.

As reported by the National Center for Charitable Statistics (NCCS), there are approximately 1,570,000 tax-exempt organizations in the United States. Over the past several decades, the steady increase in the scope and scale of the nonprofit sector has put more light on the important contribution of public charities to our national economy. Because the very nature of delivering charitable services is labor intensive, these nonprofits make a huge contribution to the economic health of the nation as employers. Nonprofit organizations pay nearly $635 billion in annual wages to approximately 14.4 million workers according to the most recent data. This accounts for nearly 10% of all wages and salaries paid in the United States according to The Nonprofit Almanac.

Not surprisingly, the largest nonprofit industry pushing the growth in wages is healthcare, primarily hospitals and related health and social service providers. About 55% of all nonprofit workers are employed in these nonprofits. During the ten-year period from 2003-2013, healthcare employment added nearly 1,000,000 jobs to the US economy. Even in the Great Recession, nonprofit employment rose 3.5% while business employment declined 8.2%.

The NCCS also reports that public charities currently generate about $1.7 trillion in total revenue. That’s 5.3% of the GDP according to the Bureau of Economic Analysis. This revenue includes some $373 billion that Americans contributed to charities in 2015, a new record, as reported in Giving USA, annual publication of The Giving Institute.

In addition to the paid workforce, nonprofits enhance their human resource capabilities through the use of volunteers. In fact, nonprofit organizations could not do what they do without dedicated volunteers. According to the Bureau of Labor Statistics, one in every four Americans over the age of 16 volunteer their time and talents through or for a public charity. That’s roughly 63 million people who donate in excess of 7.9 billion hours of volunteer service every year as reported by the Independent Sector. From a financial perspective, the dollar value of volunteerism, even when calculated at current federal minimum wage level, equates to more than $57 billion worth of additional capacity that supports the delivery of nonprofit services. This is a statistic that is rarely reported in economic impact studies.

The nonprofit sector is still the smallest of the three sectors (business employs seven times more workers) but its impact on the economy has grown in importance. It will continue to play a significant role in the economic well-being of our nation that neither government or business will be able to fill.

Rick King
Chairman