Nonprofits’ Recovery Slower Than Broader Economy
Nonprofits’ Recovery Slower Than Broader Economy

Nonprofits appear to be recovering more slowly than the overall economy through the first quarter of 2022, with almost a half-million nonprofit jobs still not recovered from the pandemic, while charitable giving is not keeping pace with economic growth rates.

The quarterly report, Health of the U.S. Nonprofit Sector: Quarter Review, from Independent Sector (IS) analyzes federal data that nonprofits can use to strengthen the sector’s health. The latest report complements data and recommendations in the 2021 annual Health of the U.S. Nonprofit Sector report.

As of Q3 2021, giving appeared to be steady compared to year-over-year rates but it may not be keeping pace with Gross Domestic Product (GDP) growth rates of 10% to 14%. “It remains unclear the role the temporary universal charitable deduction, which sunset at the end of 2021, is playing in these numbers or how the policy’s expiration in 2022 will impact overall giving,” according to the 16-page report.

The gross value added by nonprofits has varied between 5.5% and 5.7% of GDP over the past three years. The percentage of GDP reached a high in Q2 of 2020 – the same time that the economy felt the full effects of the COVID pandemic. In 2021, the gross added value of nonprofits returned to a more typical range of 5.6% of GDP.

Nonprofits contributed $1.4 trillion to the economy in the first quarter of 2022 but 495,000 of the 1.6 million jobs lost at the height of 2020 still have not been recovered. The racial and ethnic composition of the nonprofit workforce largely tracks with the broader workforce, according to the report, however, it became “whiter in the fourth quarter of 2021.”

In Q4, the nonprofit workforce became less racially and ethnically diverse, with the proportion of white workers (78%) remaining higher than before the pandemic (about 70%). Racial and ethnical proportions, however, generally track with demographics of the broader workforce, except for Hispanic employees.

The proportion of workers earning $40,000 to $150,000 increased while the proportion of low- and high-income nonprofit workers declined. Income from nonprofit employment appears to remain ahead of overall workforce income, according to the report.

The proportion of women in the nonprofit workforce reached pre-pandemic levels in Q4 but it “does not necessarily mean women do not continue to experience unique barriers as workers.”

IS estimates that it may take 11 more months for the nonprofit sector to operate at 2019 employment level.

Among actions the report recommends are:

  • Communicate to policymakers the urgent need for timely data on nonprofit jobs to better track recovery and identify potential disparities;
  • Leverage research and the lived experience of nonprofit employees to better understand workforce trends, particularly the broader trends that apply to nonprofit staff; and,
  • Encourage policymakers to consider modifying economic metrics to more accurately reflect the full breadth of the social sector’s economic contributions.

“As the nonprofit sector continues to be the underpinning of civil society and healthy, equitable communities, our goal is to spur deeper discussions, greater action, and more collaboration so that everyone in the U.S. can thrive.”