December 28, 2012

Philanthropy’s Effect: Millions of Jobs Over Many Decades

U.S. foundation investments have major impact on economic activity, new report finds

Grant making by U.S.foundations supports millions of jobs, and produces billions of dollars in GDP, wages and tax revenues, according to a new research by The Philanthropic Collaborative.

The report, “Economic Impacts of 2010 Foundation Grantmaking on the U.S. Economy,” was released last week as Congress and the Obama administration were debating the role of the sector and considering caps or limits on incentives that encourage charitable giving.

According to the report, foundation grant making supports many diverse areas, including health care, scientific research, educational opportunities and safer neighborhoods.

The study found that $38 billion in grant making in 2010 led to the immediate creation of some 500,000 jobs at the time of disbursement and nearly a million jobs within about a year once the grants had flowed through the economy.

The study’s researchers also looked at longer-term effects for grantees and communities, using return on investment data and the IMPLAN economic model: 

  • Over the long term, some nine million jobs will be created, and the effects will be felt for a generation or more. The report cited as an example a foundation grant to support early childhood education, which will increase the likelihood that more young people will attend college, improving their lifetime earnings and their quality of life.
  • American foundation grant making will generate nearly $970 billion in goods and services transactions and contribute upward of $570 billion to GDP based on long-term return on investment and economic multipliers.

“Foundation investments set off a cascade of benefits in our communities over the course of decades,” Steven Peterson, an economist at the University of Idaho and lead author of the report, said in a statement.

“We now have a stronger understanding of the link between the short- and long-term impact of foundation grants and their significant contribution to economic growth.”

The study also examined the effect of foundation investments broken down by foundation giving, impacted nonprofits and each economic sector across time. And it included eight case studies that show the effects of foundation grant making at the community level.

According to the report, foundations support almost nine million jobs in America, and the nonprofit community as a whole employs more than 13.5 million people, or about 10% of the workforce.

Nonprofits pay nearly $670 billion annually in wages and benefits, and employ more people than the finance, insurance and real estate sectors combined.

“Although public and elected officials may be familiar with specific foundation-supported charitable organizations, the broader importance of the sector to our society and the size of its impact are less well known,” John Tyler, chair of The Philanthropic Collaborative, said in the statement.

“Fortunately, appreciation is growing for the far-reaching effect that foundations and charitable giving have in our communities. That is a good trend, but there is more to be done.” 

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