CEO Weekly INsights
January 10, 2018
Three Ways Nonprofits Bolster the Economy.
And Potentially Your Business.
Nonprofit organizations are essential to our quality of life. They are also vital to the economic well-being of the community and all businesses that serve it.
Nonprofits do a wonderful job serving the humanistic values of the community, which helps businesses thrive as well as the people living there.
They help shape the quality of life – from education to health to the arts and social services.
The valuable work they do makes a community more attractive for people of talent to move or stay there.
This creates a pool of well-educated, high-performing people that companies need for innovating and growing their businesses.
Nonprofits are businesses
Like for-profit businesses, the principles of free enterprise apply to nonprofits as well.
To succeed, they need to raise their own funds, attract their own constituents and fulfill their missions within their budget. If not, they will fail.
But when successful, they not only bring the quality-of-life services that make a city desirable. They also are a vital part of the community’s economy.
1. Nonprofits are a steady source of employment
Nonprofits employ people. A lot of people. Each adds to the economy.
A report published by the National Council of Nonprofits showed that 10.6% of total employment in the United States was in the nonprofit sector in 2013 (14.4 million workers).
The report also revealed that nonprofits have been responsible for a faster rate of job creation than their for-profit counterparts. Nonprofit employment grew by 2.4% a year from 1990 to 2006, while for-profit businesses increased the size of their work forces by 1%.
During the recessions of 1990-1 and 2001-2, nonprofits increased their number of employees by 2.38% a year, bolstering the economy when truly needed, while for-profit jobs declined at an annualized rate of 2.2%.
2. Nonprofits consume third-party goods and services
Nonprofits, like all businesses, need goods and services for their day-to-day operations.
Nonprofits require computers, internet and phone services, building materials, utilities, furniture and more to operate. This generates more business for companies that supply these goods and services, providing added economic stimulation.
The National Council of Nonprofits reported that the nonprofit sector contributed an estimated $937.7 billion to the US economy in 2014, which made up 5.4% of the country’s gross domestic product. The nonprofit sector would rank as the sixteenth largest economy among the 199 nations tracked by the World Bank.
3. Nonprofits stimulate endless other facets of the economy
By providing employees with a source of income, nonprofits, just as for-profits, indirectly spur economic growth. This further benefits companies, both large and small.
When people have money, they spend it. People make mortgage and car payments, pay utility companies and buy insurance policies. Discretionary income goes to restaurants, theaters and other luxuries and entertainments. Many people invest part of their income in the stock market and other financial institutions.
The economic impact of nonprofit organizations is indisputably far-reaching and vital to the growth and prosperity of communities as well as to businesses of all sizes. It is another reason why nonprofits are true partners of business in creating dynamic communities that thrive.
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