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How the Nonprofit Sector is Like a Giant Potato

by James Weinberg

There’s an old Irish folktale about Jamie O’Rourke, a man who grew a giant potato in his garden.  It was so big that it could feed his entire village. However, the oversized tuber caused a series of logistical challenges that threw the hungry townspeople into a tailspin. Eventually, Jamie’s wife suggests that the potato can be cut up and eaten, thus saving the day.

In today’s labor market, the nonprofit sector is sort of like that giant potato. For the past several years, the nonprofit sector has been growing at such a rate that it’s become tough for most folks to know what to make of it. Our nation is hungry for employment opportunities, and there is a giant ready-to-bake solution standing right in front of us. However, we might need to do some sub-dividing first to really understand how to take advantage of it.

Lester Salamon and his colleagues at Johns Hopkins are pointing the way. Perhaps like Jamie O’Rourke’s wife, their research has helped to make sense of some nonprofit employment realities that have otherwise confounded much of the village. You see, it hasn’t been easy to systematically disaggregate “nonprofit” jobs from the rest of the labor pool. Like many of us, the government has been somewhat slow to recognize and adapt to the rate at which the nonprofit sector has grown over the past several decades.  Salamon collaborated with the Bureau of Labor Statistics to crack open the data and tell the story. Consider these findings:

  • Nonprofit organizations currently employ over 10.5 million workers, or about 1 in 10 of all American workers. This makes the nonprofit workforce the third largest of all U.S. industries, behind only manufacturing and retail trade.
  • From 2008 to 2010, while for-profit employment declined by more than 8%, nonprofit employment grew every year and expanded by more than 4.5% in that timeframe.  While other sectors have shed jobs during the economic downturn, nonprofits as a group actually grew their employment.

So why doesn’t our job-hungry political system get to work on making the most of this giant opportunity?  Why haven’t we seen more policies aimed at cultivating and catalyzing the nonprofit sector job growth that seems to be happening organically?  Why don’t we see elected officials showing up in front of struggling nonprofits in their districts and vowing to fight to save those jobs just the way they might if it was a machine factory employing 500 people?

To begin to answer these questions, we need to think about the sector differently. Unlike “retail” or “manufacturing” sectors, the nonprofit sector can be difficult to grasp as a singular entity, For example, many nonprofit jobs are based within hospitals, universities, and other institutions that don’t fit some of our traditional notions of a charitable organization. We may need to slice and dice the sector in order to better understand what to do with it. 

Almost all nonprofits do, however, share common elements of IRS tax exemption, which can be tremendously beneficial to organizations in many ways.  However, this designation leaves legislators without access to their traditional tax incentive-based approaches to job stimulation.  This is part of the reason that it has been tough to include nonprofits in many jobs bills. Since most nonprofits are essentially small businesses, they should have access to all of the considerable resources of the Small Business Administration (which is largely not possible at the current time).  Our legislature needs to invent new ways of directly stimulating nonprofit sector health and employment levels just like any other major industry from farm subsidies to TARP.

Is the potato too big to comprehend?  Then cut it up a little bit!  Target specific parts of the nonprofit sector with a variety of different policies and programs.  The Obama Administration has developed several solutions along these lines over the past several years and Congress needs to work hard to continue building on this trend. 

In 2009, Congress passed the most bi-partisan legislation of this Administration to create the Social Innovation Fund (SIF) within the Serve America Act.  Now in its third year, the SIF has demonstrated a highly effective new model for government investment in scaling proven social solutions and leveraging private matching dollars.  There is now enough early evidence to seriously explore replicating similar funds within every federal agency and state government.  One hundred new federal and state innovation funds created over the next ten years would leverage about a BILLION dollars every year in new nonprofit stimulus even if every fund was only able to carve out an average of $5 million in government dollars and required a 1:1 match of private dollars.

What we really need, however, is a wide range of policies and investments that all focus on stimulating nonprofit growth, scaling what works, sustaining current nonprofit employment, improving nonprofit employment practices to cut down on turnover and burnout, and increasing leadership development investments across the sector.  In November of 2011, Commongood Careers was proud to help convene the first White House Forum on Nonprofit Leadership to explore these very themes and continue to identify high-impact investment opportunities.

The largest challenge to implementing new solutions is the difficulty of breaking out of old paradigms, realizing the true nature of nonprofit employment in 2012, and having everyone from philanthropists to legislators change their perceptions and actions in response.  Failing to do is certain to have dire consequences for our nonprofit sector and thus also for our economy.

In the same paper cited above that presented such exciting statistics, Lester Salamon also warns that the rate of nonprofit job growth has clearly been faltering over the past few years, falling from 2.6 percent in 2008 to 1.2 percent in 2009, and then to 0.8 percent in 2010 (the most recent year for which data is available).  At this delicate stage in our nation’s economic recovery, can we really afford to have the one sector that has been adding jobs follow right in the footsteps of the sectors that have been losing them?  What are we willing to do to protect the jobs of the 1 in 10 Americans working in the nonprofit sector today? 

If we are willing to act boldly, what else is possible from the sector that manages to do so much with so little for the common good?  Maybe we could at least feed the entire village.



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