March 15, 2013

Nonprofits: a Global Economic Powerhouse

Philanthropy contributes less than thought to nonprofit revenue, study finds

Nonprofit organizations are major employers and contribute significantly to economic growth in countries throughout the world, a new study by the Johns Hopkins Center for Civil Society Studies reveals.

The study drew on data generated by statistical offices in 16 countries: Australia, Belgium, Brazil, Canada, the Czech Republic, France, Israel, Japan, Kyrgyzstan, Mexico, Mozambique, New Zealand, Norway, Portugal, Thailand and the U.S.

The nonprofit workforce, comprising both paid and volunteer workers, made up 7.4% of the total workforce on average in the 13 countries on which full data were available. This placed it ahead of major industries, such as transportation and finance.

In six of the 16 countries for which data were available, nonprofits employed a tenth or more of the total workforce, making them one of the largest employers of any industry in these countries.

The nonprofit sector is not only a major economic presence in countries throughout the world, but is also a growing one, the report found.

From the late 1990s to the mid-2000s, nonprofits contributed to GDP growth at an average rate of 5.8% per year in the eight countries for which longitudinal data were available. This compared with 5.2% for the economies as a whole in these countries.

Among the eight countries, nonprofits declined only in the Czech Republic. Absent this outlier, the average annual growth of the nonprofit sector would have been 7.3% versus 5.2% for the full economies of these countries, and would have been even faster in Thailand, Norway and Australia.

The nonprofit sector accounts for an average of 4.5% of the GDP in the covered countries, roughly equivalent to GDP contribution of their construction industries.

In the fields in which nonprofit institutions operate, their GDP contribution is even larger than this. Take Portugal, where nonprofits account for 94% of the value added by membership organizations and 76% of the value added in the social assistance field.

In Mexico, where nonprofits contribute just 2% to overall GDP, they account for 21% of all value added in the field of education, 12% in arts, entertainment and recreation, and nearly 5% in health and social assistance.

The study found that nonprofits, on average, receive far less of their revenue from philanthropy than was commonly supposed:

  • 43% of the revenue comes from fees for their services
  • 32% is from government sources
  • 23% comes from philanthropic giving—“and even this is likely an overestimate given limitations of the data sources,” the report said.
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