The nonprofit job market expanded for the 10 years that positions in the general workforce shrunk. And, that growth made nonprofits the nation’s third largest employer behind retail and manufacturing.

But according to a new Johns Hopkins University report, nonprofits are starting to lose market share to for-profits entering the space, such as in long-term care, health and education.

Nonprofit jobs increased an average of 2.1 percent each year from 2000 to 2010, while for-profit employment decreased by an average 0.6 percent annually. During the recession years between 2007 and 2009, employment in the private sector decreased each year, compared to a 1.9 percent average annual growth among nonprofits.

Nonprofits employ nearly 11 million workers. In half of the states, nonprofit employment exceeds that of the manufacturing industry, which the study cites as an “engine of economic strength.”

Across the decade, the nonprofit sector outperformed businesses every year except 2005, when both sectors reported an approximately two percent increase in jobs.

“The nonprofit sector in our country is an enormous employer, something that is not well understood,” said Lester Salamon, Ph.D., co-author of the report for the Baltimore, Md.-based school. “It has been a dynamic growth engine in…its production of jobs, representing about 10 percent of the workforce and accounting for 25 percent of growth in employment.”

The study presented data on annual changes in employment in the private and nonprofit sector measured from January 2000 through June 2010. Researchers paid special focus to nonprofit employment activity during the recession, compared to how for-profit entities fared.

“The entire economy has moved in the direction of services… [nonprofits] are increasingly a necessity for a pretty broad population.” Salamon said, noting nonprofits should not be considered luxury services. “We are a population that is aging, more people are looking for various types of care, nursing home care, drug abuse problems, a variety of social problems. It was important that these services be continued during the recession.”

Salamon added that the economic stimulus strengthened Medicare and Medicaid, which supported the nonprofit sector at a crucial time. The two insurance programs support a significant portion of healthcare and homecare institutions, as well as social services, he said.

“We titled the report ‘Holding the Fort’ to show that [while] the rest of the economy went the wrong way, the nonprofits continued to grow,” Salamon said. “The real question is, what does the future hold? I have some concerns that changes that are proposed…in Medicare and Medicaid will severely impact the nonprofits.”

The greatest increase in jobs was in healthcare, education and social assistance entities, the three largest employers in the nonprofit sector, according to Salamon. Healthcare jobs make up 57 percent of the nonprofit workforce, according to the report. The nation is experiencing a dramatic boom in small, localized nonprofits, Salamon said, but data suggests instead that larger, nationally managed nonprofits contributed most significantly to the increased employment.

Surveys taken did not specifically identify whether the nonprofit industry created skilled labor and management jobs versus non-skilled labor. However, the federal Bureau of Labor Statistics’ Quarterly Census of Employment and Wages denotes in the main nonprofit industries, workers received higher average wages than for-profit workforce in the same space.

California, Minnesota, Arizona and North Carolina fared the best among the states with the highest nonprofit workforce, all recording increases of over 3.0 percent, according to the study. Each of the 45 states saw an increase in nonprofit jobs over the decade, and throughout each year. Comparatively, only nine out of the 45 states recorded an increase in for-profit employment during that time, with the greatest rise in Alaska.

“[Politicians] should recognize…when nonprofits are supported you get jobs and services, and also you build a sense of community,” Salamon said. He added that it is essential to realize the important relationship between the nonprofit and public sectors. “The public sector does what it does best: raise revenue through taxes and go through a democratic political process. It doesn’t do a very good job at delivering services, so it designates [that responsibility] to small, local nonprofit agencies. We need to be careful that we don’t destroy that.”

Yet despite the increase in employment within the pillars of the nonprofit sector, employment growth among for-profit businesses actually outpaced the nonprofits in social assistance, education and nursing home care, according to the study. Nonprofits operating in these fields have thus lost market share to for-profits. Insiders blame market conditions coupled with moral tenets of competing industries, which may become muddied in desperate economic times.

“The continued loss of nonprofit market share is a cause for real concern, particularly since it results from the unequal playing field nonprofits confront in accessing capital and their resistance to slashing employee benefits or skimping on the quality of services,” noted Larry Minnix, CEO of Leading Age, in Washington, D.C., an association of nonprofits serving senior citizens. “We need to be careful that human needs don’t simply become commodities.”

The study of nonprofit organizations included private and nonprofit hospitals, higher education institutions, day care centers, nursing homes, social service agencies, museums, orchestras and other cultural institutions, environmental and advocacy groups, clinics and similar entities.

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