Charities, universities, cultural organisations, and other non-profit organisations have long campaigned for greater recognition of the benefits their activities provide to society as a reason for increasing public and private investment. Until now, they have relied primarily on moral and ethical arguments to make their case. But a recent report by Johns Hopkins University in the U.S. gives new credibility to their claims. It confirms that the non-profit sector makes a far greater contribution to the economy – in real financial terms – than previously thought.
The report reveals that, within the eight countries involved in the study, the non-profit sector contributes significantly to overall economic growth, adding 5 percent on average to the gross domestic product (GDP). The weight of these findings may well help non-profits, particularly those in Asia, gain much-needed additional support from governments, agencies, grant makers, and the public at large.
According to the report – the result of a collaboration between Johns Hopkins and the United Nations – the non-profit sector accounts, on average, for 5 percent of the GDP in the eight countries studied: Australia, Belgium, Canada, the Czech Republic, France, Japan, New Zealand, and the United States. In Canada and the United States, non-profit institutions and volunteering account for more than 7 percent of GDP, while in Australia, it is 4.7 percent, employing 6.3 percent of the economically active workforce.
By comparison, the utilities industry, including gas, water, and electricity, in these same eight countries accounts, on average, for just 2.4 percent of GDP. The construction industry accounts for 5.1 percent, and the financial intermediation industry, including banking, insurance, and financial services, accounts for 5.6 percent. Non-profit organisations and their volunteers in Japan – the only Asian Pacific country besides Australia and New Zealand included in the research – contribute 5.2 percent to GDP.
The research has important implications for a wide range of organisations in Asia, including universities, schools, social service agencies, non-government hospitals, and organisations promoting the environment, the arts, religion and political reform. Asian societies have not, for the most part, given these organisations, or the professionals who work in them, the same level of respect as their profit-making counterparts. This is due, at least in part, to the regionís almost single-minded focus on economic growth and its benefits. It is also a result of how generations of Asian families have defined success, giving priority to the hard sciences and selected professions, which has ensured that local non-profits remained relatively anaemic, under-funded, understaffed and – some might also say – under-appreciated.
The Hopkins study may ultimately help to bolster philanthropic activity in Asia, where the sector has, as a whole, been excluded from discussions of economic contribution, impact and growth. It is part of a broader UN effort to convince countries to implement the United Nations Handbook on Non-Profit Institutions in the System of National Accounts. So far, 28 countries, including Korea, Vietnam, and the Philippines, have agreed to do so. The non-profit sector in Asia varies hugely in its development from country to country, but is generally under-developed compared to Western countries. Some believe that the tax codes in the west provide greater financial rewards to generous donors, but itís hard to make that case when many Asian economies have no capital gains or estate taxes at all, which can be seen as the best possible tax benefit of all if youíre philanthropically minded.
Many Asian governments have been slow to develop their non-profit sectors, due to an association they make between philanthropy, political activism and social change. This represents a threat to the social and political status quo. In the case of corrupt and repressive regimes, the spectre of an empowered underclass with democratic aspirations is downright frightening. Consequently, there is little incentive for economists or policy-makers in those countries to single out the sector in their calculations.
Volunteerism, or giving of one's time, accounts for the largest single omission from GDP calculations. Millions of hours of valuable services are donated every year by citizens and company employees, who perform everything from street canvassing, to meeting the needs of the elderly and young, to serving on governing boards. Because these efforts are off-payroll hours, they are seldom reported by charities or counted in government statistics. But according to the Hopkins study, such gifts of time "outdistance gifts of cash by almost two to one, and volunteer work accounts, on average, for about one-quarter of the economic contribution of non-profits to the overall economy."
Government officials and politicians in Asian countries may find in these statistics evidence that they can use to guide policy, possibly expanding funding for non-profits and increasing their capacity. They could institute tuition reductions for students who contribute to the charitable sector for a period of time after graduating. They could develop educational curricula to include non-profit studies. They could revise their tax structures to provide additional incentives for making charitable contributions (including those of time), and for forming public-private partnerships.
As the economic contribution of the non-profit sector becomes better understood, the wider benefits of altruism become clearer. The non-profit sector, forever battling the image of the poor cousin to its dynamic, profit-making counterpart, should proudly tout its economic contribution. Companies that sponsor charitable organisations, either with funding or volunteers, can take partial credit for the additional contribution to GDP. Individuals in non-profit careers can take additional pride in the contribution that they are making to economic growth as well as to civil society.
In the near term, Asian governments should modify their GDP calculations to provide an accurate reckoning of the full contribution the non-profit sector makes to their economies. Implementation of the United Nations Handbook on Non-Profit Institutions in the System of National Accounts would be a good start.
