The Economic Importance of Nonprofits
Throughout the United States, nonprofit organizations provide essential social and health services as well as opportunities to experience arts and culture. Additionally, nonprofits are incredibly important features of the United States economy at the local, state, and national levels, directly and indirectly influencing economies of any scale. Nonprofit organizations make significant contributions to employment, employee compensation, and expenditures on goods and services.
The United States economy is comprised of diverse industries and business types, yet nonprofits alone account for a significant portion of the national economy. Nationally, nonprofits employed 12.3 million Americans out of a 164 million person workforce at the beginning of 2020. Employing 7.5% of working Americans results in significant spending on wages, salaries, and benefits. Nonprofits spent roughly $2 trillion in 2019, $826 billion of which was spent on payroll (salary, benefits, payroll taxes, etc.). The remaining $1 trillion was spent on goods and services, ranging from large expenses, like medical equipment for hospitals, to everyday purchases such as office supplies, food, utilities, and rent.
In large metropolitan areas, such as New York City, and across less population-dense states, such as Missouri, nonprofits are as essential as they are at the national level. Nonprofits exist across broad geographic and socio-economic ranges supporting local communities and economies across the nation. In New York City, nonprofits employ rough 662,000 individuals, making up 18% of total private employment in NYC and paying $42 billion in wages. In the Bronx alone, over one-third of all privately employed individuals work for nonprofits. The entire nonprofit sector in NYC contributes $77 billion (GDP $1.5 trillion) to the city’s economy every year and numerically makes up 5% of total businesses operating in NYC. In a state with smaller urban centers than New York, Missouri, there are 32,000 nonprofits reporting to the IRS across the state. That number is even greater considering religious organizations are not required to file for nonprofit status so long as their religion is recognized by the United States’ Federal government. In the Show-Me State, from 2002-2012, nonprofits expenditures grew 63% from $21 to $35 billion and have continued to grow. In addition to significant spending, nonprofit employment in Missouri accounts for 10% of Missouri jobs, employing over 246,000 workers and paying more than $10 billion in wages. These numbers show the incredible impact nonprofits have not only through their mission but on the economy as well.
In addition to the direct economic benefits generated by nonprofits, these organizations create a ripple effect with their presence, creating additional benefits for local economies. Cultural centers such as museums or performing arts centers are often nonprofit organizations and serve as attractants to businesses, employees, and tourists alike. Businesses look to establish themselves in vibrant cities and employees looking for work often seek the same criteria. Being able to live and work within walking distance of museums, parks, theaters, and libraries is desirable for many young professionals seeking employment in urban centers. It is not by accident that chambers of commerce display cultural centers and nonprofits at the forefront of their advertisements. Finally, cultural centers attract tourism, and tourism creates revenue for cities as visitors spend money on food, parking, transport, hotels, and retail.
Nonprofits continue to increase their economic impact across the country and remain vital features of the economy. They contribute through expenditures, employee compensation, and by creating a cycle of economic growth in local communities. By being beneficial in several ways both socially and economically, nonprofits are essential features to support healthy communities, states, and the nation.
Looking to help donors understand your economic impact? Contact NMBL today to see how the NMBL team’s 30+ years of nonprofit executive experience can help your organization thrive.
