The Johns Hopkins Gazette: November 9, 1998
Nov. 9, 1998
VOL. 28, NO. 11


Nonprofit Sector Is A Burgeoning Economic Force

By Glenn Small
Johns Hopkins Gazette Online Edition

Despite a widespread perception that the United States leads the world in terms of nonprofit activity, that is not the case, according to a Johns Hopkins-led study on the nonprofit sector that was released yesterday.

"The assumption of American superiority in this field is just that, an assumption, a myth," said Lester M. Salamon (pictured at right), professor at IPS and director of the study, which is known as the Comparative Nonprofit Sector Project.

Salamon and other researchers involved in the study presented their findings yesterday at an international nonprofit conference in Turin, Italy.

Measured as a percentage of overall employment, the United States lags behind such countries as the Netherlands, Ireland, Belgium and Israel, the study found.

More than 150 researchers in 22 countries participated over the last four years in this ambitious international study, closely examining what is called the nonprofit sector in the United States but what is variously called the "voluntary," the "civil society," or the "independent" sector in many other countries.

This sector, which turns out to be a major economic force, includes organizations that are voluntary and private but that do not distribute profits, such as hospitals, universities, social clubs, professional organizations, day care centers, environmental groups and others.

The results are significant. Worldwide, the nonprofit sector is a massive economic as well as social force that is growing rapidly, partly in response to growing doubts about the ability of the state to respond to social welfare and developmental and environmental problems.

"A veritable Œglobal associational revolution' appears to be under way, a massive upsurge of organized private voluntary activity in literally every corner of the world," Salamon said. Nearly 19 million people are employed in the nonprofit sector in the 22 countries studied, making it a $1.1 trillion industry. Taken as a separate economy, it would be the eighth largest economy in the world, ranking ahead of Brazil, Russia, Canada and Spain.

And in the countries for which comparative data was available, the nonprofit sector has shown signs of recent, rapid growth. Between 1990 and 1995, nonprofit employment jumped 23 percent, compared to 6 percent in the for-profit sector.

Interestingly, the majority of revenues for nonprofits worldwide does not come from private philanthropy but rather from fees and government funds. Fees alone account for 47 percent of nonprofit revenues, compared to 42 percent from government funding and 11 percent from philanthropic giving.

This is Phase 2 of the Johns Hopkins Comparative Nonprofit Sector Project. Phase 1, released four years ago, examined eight countries.

Among the study's other findings:

* Spending by nonprofit organizations in these countries amounts, on average, to 4.7 percent of gross national product. "This little sector turns out to be a mighty economic force around the world," Salamon said.

* The scale and character of nonprofit activity varies from country to country and from region to region. In Western Europe, most nonprofit employment is in education, health and social service organizations, while in Central and Eastern Europe it leans more heavily toward recreation and culture, the study found.

* Health and social services are the dominant sources of growth in the nonprofit sector. Forty percent of job growth in the nonprofit sector came from the health field, while 31 percent of job growth came from social services.

* Rates of employment growth in the nonprofit sector are among the highest of any industry in virtually every country studied. "The nonprofit sector has become a major contributor to employment growth," Salamon said.

"These findings send a powerful message to countries that are plagued by high unemployment and sluggish job growth," said Helmut Anheier, associate director of the project.