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