Need for Social Sector

Something For Everybody

Nonprofits deliver many of the fundamental services provided in the
U.S. including …

• 1/2 nation’s hospitals, 1/3 of the health clinics, 1/4 of the nursing homes

• 80% of individual and family service agencies and 30% of daycare centers

• 70% of vocational rehabilitation facilities

• 90% of orchestras and operas

• Delivery vehicles for 70% of foreign disaster assistance

Source: The State of Nonprofit America (Salamon)

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 Need for Social Sector
A Few Facts to Consider
• Conservative estimates put the total number of 501(c)(3) and (c)(4) organizations at
1.3 million, including 700K public charities and 400K religious organizations

• As of 1998, these organizations employed close to 11 million paid workers, or over

7% of the U.S. workforce, and enlisted the equivalent of another 5.7 million full-time
employees as volunteers
Paid employment alone in nonprofit organizations is three times that in
agriculture, nearly 50% greater than that in both construction and finance,
insurance, and real estate
With volunteer labor included, employment in the nonprofit sector, at 16.6
million, approaches that in all branches of manufacturing combined (20.5 million)

• Between 1977 and 1997, revenues of America’s nonprofit organizations increased

144% after adjusting for inflation, nearly 2x the 81% growth rate of the economy

• During that same period, the number of nonprofits registered with the IRS increased
115%; by comparison, the number of businesses increased only 76%.

Source: The State of Nonprofit America (Salamon)

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 Need for Social Sector
Role in U.S. Economy
The nonprofit landscape
Between 1993 and 1998, the nonprofit
sector grew at an annual rate of 5.1
percent, faster than GDP (which grew by
3.1 percent annually).

A decade-long effort by government to shift

responsibility for social services to the
private sector continues. In the mid-1990s,
federal support for many social goods was
cut by an average of 18 percent, with many
areas taking much greater cuts (25 percent
in social services, 48 percent in
international aid, and 50 percent in housing
and community development).

Source: Not-For-Profit Management (McKinsey Quarterly)

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 Need for Social Sector
Drive to Diversity Revenue
The combination of government cuts and flat individual, corporate, and
foundation funding have driven nonprofits to develop other revenue sources.

Source: Not-For-Profit Management (McKinsey Quarterly), The State of Nonprofit America (Salamon)

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 Need for Social Sector
Big Sector, Tiny Institutions
Few nonprofits have the time to hone their strategy or improve their
effectiveness, nor do they have the incentive or the ability to grow, …

Of the nearly 670,000 501(c)(3)

organizations in 1998, only about 1/3 filed
the IRS form required by all organizations
with expenditures of $25,000 or more
• Even among filers, the top 4%
accounted for nearly 70% of the
reported expenditures while …
• The bottom 40%, with expenditures of
less than $100,000 each, accounted
for less than 1% of the total

… which results in a sector dominated by tiny institutions.

Source: Not-For-Profit Management (McKinsey Quarterly), The State of Nonprofit America (Salamon)

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