How Nonprofits Stepped In During the Recession

According to a recent Bureau of Labor Statistics report, the charitable nonprofit sector saw higher levels of employment during the recession years between 2007 and 2012, even as the private sector as a whole declined. Here's how they did it.

The jobs reports these days are looking a lot more positive—the latest, released Friday, showed brisk hiring and an unemployment rate below 5 percent—but one sector that was doing well even during the economy’s nadir was the nonprofit sector.

That’s according to a recent report by the Bureau of Labor Statistics (BLS), which found that all of the key signifiers of employment growth (e.g., wages, employment rates, and the total number of nonprofits) grew between the 2007-2012 recession, even as the economy as a whole stumbled. In fact, the study found that nonprofits grew even during the weakest point of the recession, between 2007 and 2009.

“The resilience of the nonprofit sector during the 2007–09 recession demonstrates its importance to the U.S. economy,” the BLS report stated.

The report, published as part of the BLS’s Monthly Labor Review, implied a cyclical style in the nonprofit industry’s growth.

A few key points from the study:

Most nonprofits are 501(c)(3). The study reported that there are 29 different classifications of nonprofits, including 501(c)(3) charitable nonprofits, 501(c)(4) social welfare organizations, and 501(c)(6) business groups. Despite the numerous types of nonprofits out there, roughly two-thirds of them are 501(c)(3) nonprofits, focused on charitable, religious, and welfare-related issues. The study largely focused on this type of nonprofit.

Consistent growth every year: The study found that, even as the employment sector as a whole declined during the 2007 to 2012 study period, the 501(c)(3) sector saw an increase in average employment of 8.5 percent, compared with a 3 percent overall decline. Most significantly, the nonprofit sector saw total annual wages increase by 26 percent at a time when the private sector as a whole saw only a 7.6 percent increase.

The biggest nonprofit sector? Based on employment levels, that would be the world of healthcare. More than two thirds (68 percent) of employees in the 501(c)(3) nonprofit sector in 2012 was made up of healthcare and social-assistance groups, with hospitals (35 percent) making up the largest segment of the nonprofit healthcare sector by employment levels. Other notable nonprofit sectors included educational services (16 percent) and the arts (3 percent).

In comments to The Washington Post‘s Wonkblog, Shena Ashley, director of the Urban Institute’s Center on Nonprofits and Philanthropy, said the report was reassuring.

“In times of greatest human need, the nonprofit sector is there,” Ashley told the Post. “As a field, we’re really excited about these results. They show that the model works.”

However, the Urban Institute’s own data noted that private giving was down during the recession, falling to a five-year low in 2009. Despite this, federal government funding, the decision by nonprofits to dip into rainy day funds, and a willingness by employees to accept lower wages helped make up the difference during this low period, according to The Washington Post article.


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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