Nonprofits Grow but Face Competition from For-Profits

by Linda M. Lampkin, Senior Nonprofit Compensation Specialist 1. August 2012 08:50

Some interesting trends are uncovered in the most recent Nonprofit Economic Data Bulletin #39 from the Johns Hopkins Center for Civil Society Studies.  Entitled Holding the Fort: Nonprofit Employment During a Decade of Turmoil, authors Salamon, Sokolowski, and Geller use data collected as part of the Unemployment Insurance program to track trends in nonprofit employment.

While there are caveats about what is included and how entities are categorized, the authors paint an interesting picture of changes in nonprofit employment in the U.S. from 2000 to 2010. Read the whole report for the details.

A quick overview follows:

  • Nonprofit employment totaled nearly 10.7 million in 2010, about 10% of U.S. private employment.
  • The nonprofit sector is the third largest among U.S. industries, behind retail trade and manufacturing.
  • 57% of all nonprofit jobs are in health care; 15% are in educational services; 13% are in social assistance (e.g., individual and family services, community food services, housing services, vocational rehabilitation and child day care).
  • From 2000 to 2010, nonprofit employment grew at an average of 2.1% per year, while the for-profit sector lost jobs an average annual rate of -0.6%. 

So why is overall nonprofit employment growing so much faster than overall for-profit employment?  The authors conclude that the major reason is the concentration of nonprofit employment in the service fields (e.g., health, education, and social assistance) that have experienced continued growth.  But interestingly, within these service fields, especially where nonprofits are concentrated, the growth in for-profit employment has actually outpaced nonprofit employment.  For example, a significant amount of health care services are increasingly provided by for-profits.

This means that nonprofits are facing much more competition from for-profits that are moving into services traditionally provided by nonprofits.  What does this mean for the quality of services?  Will there be a significant change in costs for taxpayers, clients, and customers?  Will wages paid to workers providing these services vary by sector or become more uniform across sectors? 

Stay tuned, as the academics will analyze the data in a few years. In the meantime, ERI will be collecting data, defining the labor market, and documenting the impact of these structural changes in employment for the practitioners who are tasked with setting appropriate wage levels.  Check out the Nonprofit Comparables Assessor for nonprofit executive salaries and the Salary Assessor for the rest!