2006 December 24 Sunday
Non-Profit Employment Growing Faster Than Economy

In the United States employment in non-profit organizations is growing faster than employment in the overall economy.

Employment in the U.S. nonprofit sector has grown faster than overall employment in 46 of the 50 states, according to a new report by the Nonprofit Employment Data Project at The Johns Hopkins Center for Civil Society Studies.

As of the second quarter of 2004, the latest year for which data on nonprofit employment are available, American charities employed 9.4 million paid workers and engaged another 4.7 million full-time equivalent (FTE) volunteer workers for a total workforce of more than 14 million workers.

Between 2002 and 2004, the nonprofit workforce, including paid and volunteer workers, grew by 5.3 percent, with both the paid and volunteer portions of the nonprofit workforce growing by more than 5 percent. By contrast, overall employment in the economy declined by 0.2 percent during this same period.

"The nonprofit workforce, including volunteers, now represents 10.5 percent of the country's total workforce," said Lester M. Salamon, director of the Center for Civil Society Studies within the Johns Hopkins Institute for Policy Studies and a leading expert on nonprofits. "Put in perspective, this means that American charities boast a larger workforce than the utility, wholesale trade, and construction industries combined."

But the wages in those other industries combined are much larger. See below.

Do the Northeast and Midwest have more non-profit hospitals? Did the rapid population growth of the southeast give for-profit hospital chains the opportunity to build lots of new hospitals and pick up market share?

1. The nonprofit share of the total workforce is especially high in the Northeast and Midwest, where it ranges from 10.7 to more than 14 percent. In the South and West, as well, the nonprofit workforce still accounts for a considerable 8.1 to 9.5 percent of the total workforce.

2. Nonprofit-paid workers received $321.6 billion in wages in 2004, more than the wages paid by the utility ($50.1 billion), construction ($276 billion), and wholesale trade ($283.7 billion) industries, and almost as much as the finance and insurance industry ($355.8 billion).

More than half of non-profit employment is in health services. That probably explains the rapd growth in non-profit employment.

3. Charitable nonprofit employment is scattered across a wide variety of fields, from information and scientific services to religion and civic affairs. The bulk of this employment, however, is in human services, with hospitals alone accounting for one-third of all nonprofit employment, and other health providers, such as clinics and nursing homes, accounting for another 21 percent.

4. The average weekly wage in the nonprofit sector, at $627, was well below the $669 average in the for-profit sector. However, in the fields where nonprofits and for-profits are both actively engaged, average nonprofit wages were actually higher. For example, average wages among nonprofit hospital workers were 7 percent higher than they were among for-profit hospital workers, and average wages among nonprofit social assistance workers were 25 percent higher than their for-profit counterparts.

A doctor in private practice who also sees patients at a non-profit hospital makes far more money than the nurses working in that same hospital. I suspect that doctors who see their patients in hospital aren't showing on as employees of those hospitals. Likely the hospitals pay the doctors for services billed corp-to-corp rather than as employees. So those wage figures are misleading. All the other service providers that non-profits use similarly do not show up as employees. The prevalence of out-sourced information processing services means software developers and computer administrators aren't going to show up on the employment rolls of many non-profit hospitals and clinics either.

Since over half of non-profit sector workers are in the medical industry and medical spending is rising rapidly we should epxect a continued rapid growth in the non-profit sector.

In 2004 (the latest year data are available), total national health expenditures rose 7.9 percent -- over three times the rate of inflation (1). Total spending was $1.9 TRILLION in 2004, or $6,280 per person (1). Total health care spending represented 16 percent of the gross domestic product (GDP).

U.S. health care spending is expected to increase at similar levels for the next decade reaching $4 TRILLION in 2015, or 20 percent of GDP (2).

In 2006, employer health insurance premiums increased by 7.7 percent - two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,500. The annual premium for single coverage averaged over $4,200 (3).

Effectively, a growing fraction of the economy occurs in institutions that are exempt from the corporate income tax. I wonder if this fact has been modelled by economists to project future corporate income tax revenue. I suspect this just translates into more wages for employees of the non-profits and since they pay taxes on their income the effect might be a wash.

Share |      By Randall Parker at 2006 December 24 10:10 AM  Economics Industry

John S Bolton said at December 26, 2006 2:22 AM:

Subsidize something retrograde in terms of productivity, and you get more employment in it.
Those numbers: $6,280 and $11,500
fit with what is reported on the ~1/2 share taken by over-65's
2875 x 2= not a lot less than 6280
that is, $5,750 is a good estimate of what an immigrant with one dependent, and both being under 65,
hits the net taxpayer for, just by walking or flying into alternawelfarica, or the NAU of the future
and equipping himself with an implicit medical insurance with an implied premium of that amount
Even if there were no other subsidies, there is no way taxes on median personal incomes can cover that

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