Nonprofit Growth Outpaces For-Profits in U.S.

 

March 9, 2014; New York Times

Although the overall economy has been expanding slowly, the nonprofit sector is vibrant, according to a recent report in the New York Times.

From 2001 to 2011, the Times reports that the number of nonprofits in the United States grew 25 percent, while the number of for-profit businesses rose by half a percent, quoting recent figures compiled by the Urban Institute.

There are still four times as many businesses as nonprofits, but over that decade-long span, nonprofits also outpaced businesses in the percentage growth in hiring, wages, and contribution to the gross domestic product, the paper quotes the Urban Institute as having found.

About 1.6 million nonprofits employed 10 percent of the domestic work force in 2010 and comprised five percent of GDP. Nonprofits are exempt from corporate taxes, but are otherwise diverse—most are charities, for which donations are tax-deductible, but the sector also includes advocacy groups that are not charities and for which contributions are not tax-deductible.

The Times theorizes some reasons as to why nonprofits have multiplied faster than for-profit businesses:

  • As the population ages, greater demand for healthcare services drives growth in hospitals and health care organizations, many of which are nonprofits.
  • Charities focused on the needs of poorer Americans have experienced higher demand after the Great Recession.
  • Family foundations have grown in popularity, providing a “convenient repository for untaxed wealth that often remains under the control of the donor.”

“Because none of these factors seems ripe for change, it seems likely that nonprofits will play a growing role in the economy,” the Times writer concludes.

NPQ would be interested in your thoughts on these speculations. We think there may be much simpler explanations.—Larry Kaplan