Nonprofits and the Economy

When I first launched Carolyn’s Nonprofit Blog, America lingered in a punishing recession. I wrote, “Economy and Philanthropy” in 2011. I considered the “trickle down” theory of Arthur Laffer, and why nonprofit organization should care about the economy. I still find nonprofits rarely consider themselves integral parts of the economy, and sadly, neither do many America civic and corporate leaders. But in fact they are substantial contributors not only to society’s well being, but to the economy.

The National Council of Nonprofits has an excellent page on its website devoted to the economic impact of nonprofit organizations. A few highlights:

  • Nonprofits employ 12.3 million people, with payrolls exceeding those of most other U.S. industries, including construction, transportation, and finance.
  • Nonprofits also create work opportunities for millions of individuals above and beyond the millions they employ directly.
  • Nonprofits consume goods and services that create more jobs.
  • Nonprofits spur economic activity.

And like for-profit businesses, most nonprofits have fewer than 500 employees (99%). The Small Business Administration notes in, “Spotlight on Nonprofits” that, “like for-profit businesses, the bulk of nonprofits are small. And small nonprofits employ
about half of all nonprofit workers.”

I find since moving to Austin in 2013 and working with “startup” nonprofits, they frequently want to be perceived of as social good ventures. “Nonprofit” as a term for the nonprofit sector sounds weak, suggesting donors should pity (and condescend) to them. But nonprofits – especially startups – are quite innovative, with a driving motivation to help others and to improve society as a whole. And they embrace innovation to get the work done. I find they are unstoppable and that positive energy is very inspiring for someone like me.

Little discussed in terms of fundraising specifically (my specialty), is that consulting firms do frequently consider nonprofits to be unsophisticated, requiring professional assistance to work with philanthropists in a meaningful way. In fact, I was hired by such a firm in the 1990s, and saw this attitude at work, first-hand. And I departed after six months. Having witnessed how hard nonprofit staff work and how devoted to success they can be, I couldn’t stomach the arrogance. Still today, some of our nonprofit support organizations retain this same opinion, and they promote expensive consulting firms to get major gift fundraising done, for example. I think this is a mistake, and I am constantly showing nonprofits how to do it themselves.

From BrainyQuote, I appreciate this observation:

Every small business will give you an entrepreneurial way of looking at things. I guarantee you that for every plant that closes, if you gave it to one small-business person in that community, he or she would find a way to make it work. The small-business attitude is you always find a way to make it work.

Hamdi Ulukaya, Turkish businessman (b.1972)

The same is true of nonprofits! Our sector needs attitude change from within and from without. I would argue that we need to view nonprofits just as we do “small businesses”: integral, innovative, economic powerhouses focused on social good.

You Might Also Enjoy

    • Wharton Knowledge, “Does Trickle-down Economics Add Up – Or Is It a Drop in the Bucket?” (2017). “It’s not clear that most Americans believe that anything good will eventually trickle down to them from the still-unfinished [Trump Administration] overhaul. When asked who the Republican tax plan would help most, 76% of respondents to a December 2-5 CBS poll of 1,120 adults nationwide said it would be large corporations, with 69% saying wealthy Americans would benefit most. Just 31% named the middle class as winners, with “you and your family” trailing at 24%.”

    Just as enough tiny droplets of water slowly fill a bucket, the growth of small businesses fills the U.S. economy. Big corporations might get a lot of attention when it comes to creating jobs, but small businesses employ more people and are more resilient when times get tough. Before coming up with something innovative that propelled them into growth, all big businesses once started out small. Not only are small businesses driving the U.S. economy, but they also keep the American dream alive.

    Martin Rowinski for Forbes

    For more thoughts on finance, economy and Wall Street, see the section in the main menu of Carolyn’s Nonprofit Blog for similar discussions.

    Financial Literacy: The M in STEM

    “We teach our children to wear seat belts. Schools invest in programs aimed at helping kids practice smart internet habits. But few are talking about the dangers of too much debt or the blessing that is compound interest.”

    – Greg Iacurci for InvestmentNews (2019)

    State of Texas Representative Vikki Goodwin (District 47, Travis County), filed House Bill 1182 in 2019. The Bill required a personal financial literacy course for high school students. Vikki remarked:

    “I filed this so that we can ensure young adults are getting out of high school with an idea of how to handle their personal finances. I have kids of my own who are young adults, who are on their own now and have had to learn how to budget, and of course as a realtor I’ve come across a lot of young adults who are trying to buy a home or lease a home and who just don’t know a whole lot about finances, interest rates, credit, credit cards, and credit scores.”

    Some educators fear high school students have a lot of requirements already, and this would involve a new requirement. But Vikki emphasized, “We’re trying to make it as flexible as possible. It could either take the place of an elective, or we’re also looking into having it take the place of one semester of math or maybe one semester of economics.” (Texas Standard)

    Goodwin’s measure passed in the Texas House of Representatives, but then died shortly thereafter in the Senate. It is my personal hope the bill will be reintroduced and passed in the future.

    When it comes to being financially literate, Americans fall short globally.

    “Although the U.S. is the world’s largest economy, the Standard & Poor’s Global Financial Literacy Survey ranks it No. 14 (tied with Switzerland) when measuring the proportion of adults in the country who are financially literate. To put that into perspective: the U.S. adult financial literacy level, at 57%, is only slightly higher than that of Botswana, whose economy is 1,127% smaller.” Greg Iacurci for InvestmentNews (2019)

    How do we go about solving this issue and putting America back at the top of the list?

    Last fall, I had the good fortune to meet Maura Cunningham, founder of Rock The Street, Wall Street, a new financial literacy nonprofit based in Nashville, Tennessee that is expanding across the United States. With a focus on young high school age women, Rock The Street is unique. It departs from traditional, passive classroom learning models by engaging volunteer female financial professionals as teachers and mentors. This “real life” program dovetails seamlessly with the normal fall and spring semesters of the school year.

    Using an open source curriculum, Rock The Street professionals both teach and mentor. Field trips to financial institutions are part of the mix. Rock The Street has developed an extensive national network of financial service companies eager to provide leadership support, both in terms of funding and female financial professionals who can be tapped to help lead classes and to serve as mentors.

    The statistics for this startup (launched in 2013) are impressive. Rock The Street, Wall Street served 2,325 young high school age women last year. Its alumnae demonstrate a 92% increase in financial literacy and they are four times more likely to pursue degrees in finance, economics or related fields than the national average. In terms of Texas, Rock The Street has been offered in two schools in the Fort Worth area. We hope to see it expand statewide in the months and years ahead.

    The sad truth is, without financial security women are more prone to domestic violence, they have fewer job opportunities and reduced income. And, 41% of families with children under age 18 include mothers who are the sole or primary source of income for the family. The likelihood that future mothers will also be the sole family breadwinner means the existing gender wage gap and savings gap will have a negative impact on generations to come.

    High School Class
    Photo courtesy of Adobe Creative Cloud.

    Our high school years are a critical time of life. This is when self confidence and self esteem are strengthened and future career choices are made. Unfortunately, comprehension of basic financial principles today is staggeringly low: only 27% of young adults know basic financial concepts such as interest rates, inflation, and risk diversification.

    Oxford Learning notes, “Some students dislike math because they think it’s dull. They don’t get excited about numbers and formulas the way they get excited about history, science, languages, or other subjects that are easier to personally connect to. They see math as abstract and irrelevant figures that are difficult to understand.” Oxford suggests making math “real” to students by showing how the M in STEM relates to everyday life.

    What better way to engage young women in high school than with female financial professionals actually working in the field!

    “In the U.S., we start to lose girls in math at age nine. As they age, girls report significantly lower confidence in math, despite earning equal scores to boys. 80% of teachers self report that they are not competent teaching financial literacy. With girls falling out of math at such an early age and teachers reporting that they are not qualified to teach financial literacy, it’s no wonder two out of three women state they know little to nothing about finance or financial products.” (Rock The Street, Wall Street)

    I am heartened to see a growing number of support organizations and startup underwriters focusing on women today. Particularly exciting is Melinda Gates’ recent financial commitment to promoting gender equality and expanding women’s power and influence across the United States. Thanks go to them all, including educational innovators like Maura Cunningham and Rock The Street, Wall Street!


    Jumping forward to 2022 …

    Sharing an Instagram taken from my seat at the RTSWS “table” at the SXSW Edu expo in 2022.

    I enjoyed volunteering to staff the SXSW Edu expo display for Rock The Street, Wall Street. The conference is always inspiring and many innovative educators attend. Check out Maura Cunningham’s presentation during SXSW Edu 2022 below.

    No Time Like The Present: Disaster Planning Helps Your Nonprofit and Community

    My experience with most nonprofits is they are short on staff and constantly trying to do more with less. Staff have their heads down, working hard to accompany their many worthy missions. They sometimes fail to look up and see the big picture. And the big picture is they are playing an increasingly important role in society, both in terms of their missions and the good work they are accomplishing, and in terms of their economic impact.

    The nonprofit sector as a whole packs an economic punch. The National Council of Nonprofits asserts, “Nonprofits employ 12.3 million people, with payrolls exceeding those of most other U.S. industries, including construction, transportation, and finance.” Further, “Nonprofits also create work opportunities for millions of individuals above and beyond the millions they employ directly.”

    This comment is eye-opening:

    “Have you ever noticed how brochures for local chambers of commerce often identify local nonprofits as a top reason for businesses to locate there? Many boast about beloved cultural amenities, such as nonprofit museums and performing arts venues. Other common features are nonprofit colleges to showcase the value of an educated workforce and nonprofit healthcare facilities to reinforce a commitment to well-being. While the brochures seldom label these local icons as being ‘nonprofits,’ business leaders intuitively recognize the immense value that local nonprofits contribute to the community’s quality of life.”

    Yet, why do our elected officials and those seeking elected office so often ignore nonprofits?

    Recent statistics on volunteer service in America are astounding. The Corporation for National and Community Service finds 77.4 million Americans volunteer annually. What would it be like to pay those volunteers for their service? That would mean America’s bill would amount to $167 billion! Our nation owes volunteers a debt of gratitude. In fact, America remains great in large part because of volunteer service. We are getting the job done.

    Turning now to the importance of disaster preparedness, I had the good fortune to be part of a Texas team working with TechSoup to develop a disaster preparedness course last year. The program – available online and constantly updated as new information becomes available – was funded with a grant from the Center for Disaster Philanthropy. The project focused initially on nonprofits recovering from Hurricane Harvey, but the information applies readily to any nonprofit organization, anywhere in the world.

    One point I made to the curriculum team and to our first class of students is that nonprofits continue to assume greater importance in the lives of the citizens of our state and nation. America’s Charities notes that today, “71% of surveyed employees say it is imperative or very important to work where culture is supportive of giving and volunteering.”

    The work your nonprofit does in the community – whether feeding the hungry, encouraging pet adoption, exhibiting works of art, conserving wildlife habitat or teaching coding – makes for a thriving community where people want to live and work. Nonprofits are no longer just an “option” for healthy cities and communities today. We must have them.

    Along with the growing importance of nonprofits across our nation comes a responsibility. Because an ever-growing number of people turn to nonprofits for greater meaning in life and a sense of “belonging,” nonprofits must protect their staff and constituents. By preparing in advance for potential emergencies, you show you care. And by caring, you increase your chances of attracting more volunteers and charitable donations, which leads to a stronger, more vital organization as time moves forward.

    I suggest nonprofits include the organization’s disaster plan in the staff “onboarding” process, and in volunteer orientations. Review the plan once a year with all of them. Don’t keep moving so fast and become so focused on individual tasks that you forget the bigger picture and the role your nonprofit plays in the community. You might also invite local disaster response professionals to visit your facility and to become familiar with it, so that if and when an emergency occurs, they can respond more easily.

    Members of your community have your organization in their hearts and minds. Your nonprofit is also part of the economy, although you may not realize it. You both provide goods and/or services and you hire staff, rent/own a facility, and purchase goods in order to operate. You also convey a positive public image that makes the entire region shine.

    The sooner you get back up and running after a disaster, the better the entire community will be. Be a leader. Don’t scramble when disaster strikes. Be ready, be prepared!

    Right before COVID-19 lockdowns were imposed, our TechSoup curriculum team held an in-person workshop in Houston. To view a few Instagram photographs from the event, follow this link to my WordPress photo blog.

    If your community would benefit from some in-person coaching, reach out to anyone on the team: Gray Harriman, Shuya Xu; Dhruv Khattar; Joe Hillis and/or me. And sign-up to take the TechSoup course today. There are recorded and written components, downloadable “prep” documents to make your planning easier, and as you move through and finish each section, there are certificates of completion.

    It is also my hope that our elected representatives will take the time to learn about the importance of nonprofits to society. We are an essential part of healthy, thriving American communities from coast to coast. Let’s all recognize that fact, and keep the good work going.

    The image on this page was made with Adobe Spark. To read more articles along these lines, see the menu below.

    During Good Times, Don’t Forget to Prepare for Rainy Days

    “A recession is a significant decline in economic activity that goes on for more than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.”

    – Investopedia

    This post on Carolyn’s Nonprofit Blog was written originally in 2018. Needless to say, with the onset of COVID-19, the war in Ukraine and global uncertainly about the dramatic changes witnessed in all aspects of our lives, having a reserve fund makes sense. Smart, forward-thinking nonprofits will continue to add to their reserve funds while diversifying their fundraising techniques and conducting ever more in-depth research to identify a larger pool of prospective donors. Not everyone is negatively impacted by a recession, so let cool heads and smart thinking prevail during challenging times.

    I continue to conduct research online from a wide range of global financial experts about the possibility of a recession in the United States. While opinions remain divided, constantly resurfacing concerns that rough waters lie ahead causes me to revisit the idea of nonprofit organizations establishing “rainy day,” or reserve funds.

    From USLegal, “A reserve fund is a fund of money created to take care of maintenance, repairs or unexpected expenses of a business.” 

    Having watched nonprofits suffer intensely during the last recession of a decade ago – an experience we all hope will never be repeated – my advice for nonprofits during every year-end fundraising season is to be prepared.

    Take some of your charitable donations and sock them away into a savings account or other fund where you can get to them easily if and when needed. You might even consider a specific major gift campaign to establish a reserve fund. Regardless, having such a fund in place can help with myriad situations, from recession and lagging donations, to helping your nonprofit launch an entirely new project or fund a new staff position. #JustDoIt

    Rainy day funds are important.

    Noteworthy Media Coverage Since 2018

    National Council for Nonprofits, “Operating Reserves for Nonprofits” (timeless advice, helpful resources)

    • Independent Sector video discussion on YouTube about nonprofits and the economy (September 17, 2020) – be sure to check back on YouTube for updates over time in the series, “This Week in Washington.”
    • Daniela Cambone for TheStreet, “The ‘Greatest Depression’ Is Coming; This Is How to Prepare” (November 1, 2019). “Celente added that the Fed’s latest rate cut can be likened to ‘monetary methadone,’ where liquidity is pumped into a credit system that is already over-levered. ‘It’s just shooting in more money to keep the addicted bull running. It’s not boosting economies around the world, we’re looking at a global slowdown, and the numbers are there, and even people like the IMF, the World Bank, one after the other, they’re warning of a recession,’ Celente said.”

    I have an article on Carolyn’s Nonprofit Blog called, “Economy and Philanthropy” you might also enjoy. It dates back to when I launched my blog during the economic downturn of the late 2000s and early 2010s. Looking back to those days, I would also say, not every business nor philanthropist suffers during a recession. Adjust your fundraising accordingly and do your research.