The Nonprofit Sector is an Economic Engine

By Dr. Alicia Schatteman

The Economic Facts

  • Nonprofits employ more workers than manufacturing in over half of the states.

  • One of every 10 employees works for a nonprofit organization.

  • Nonprofits pay higher wages than for-profit social assistance organizations, educational institutions, and hospitals.

  • From 2007-2016, nonprofit employment grew by 16.7% while for-profit employment grew by 4.6%.

Nonprofit organizations have responded to this current crisis as they do every day; diligently, often quietly, meeting the needs of their communities.  This reliable, dependable, trustworthy, honest, and hard work is rewarded by public support.  However, what this crisis has shown once again is a general lack of a broad understanding of what the nonprofit sector contributes to the social fabric of our lives and is a powerful economic engine.  These are not mutually exclusive and nonprofits need to claim both benefits for their sake and for the sake of the communities they serve.

Nonprofits work very hard to meet their mission, which the public mostly understands, from feeding individuals, preserving historic sites, advocating for children, providing senior services and the list goes on and on.  These nonprofits come in all shapes and sizes.  Their legal structure is a private organization, with registration as a corporation in the state in which they operate, then they also are granted nonprofit status by the Internal Revenue Service.  So nonprofits are private organizations, like businesses. They operate independently with a variety of revenue sources, many with large professional staff.  Just like private for-profit businesses, nonprofits focus their missions in many areas.

This pandemic has affected every aspect of our society, from the government to business, to nonprofits.  But what is missing from the policies and discussions in this current pandemic is the realization of nonprofit organizations as significant private employers, which they are.  Nonprofit organizations are an economic powerhouse and an economic engine of recovery, and the sector needs to claim this.

The United States has nearly 1.6 million nonprofits with over 12 million employees (Nonprofit Impact Matters).   These employees account for over 10% of all private jobs, making nonprofits the third largest workforce in the United States, and tied with manufacturing (Johns Hopkins Center).

In the state of Illinois, there were over 66,000 nonprofits with total revenue of $111 billion and total assets of nearly $300 billion.  Just over 11% of all private employees work for a nonprofit in Illinois.  In our Center’s most recent study of the nonprofit sector in DeKalb County, with a population of 101,000, there were 542 registered nonprofits.  Combined, they had annual revenues of nearly $500 million and manage total assets of over $1 billion. That’s just for DeKalb County.  Our Center does and will continue to do applied research to better understand the nonprofit and NGO sector across Northern Illinois.

Yet in this current pandemic, there has been often only vague or cursory acknowledgments of the economic impact to nonprofit employers.  Nonprofits are suffering economic consequences of declining revenues and yet they are facing increasing demands for services.  The provision of services does not mean additional revenue.  Nonprofits ideally operate with 3-6 month cash reserves, considered best practice for nonprofits and for-profit businesses.   Yet there hasn’t been enough recognition of these economic consequences for nonprofits and their employees in public dialogue and public policy.   We hope this pandemic highlights the need for services provided by our nonprofit employees. They have been there for us. We need to be there for them.


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