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Trends in employment and earnings in the philanthropic sector.

While small, the philanthropic portion of the nonprofit sector is an important dand rapidly growing component of the U.S. economy. Philanthropic organizations are those privately controlled, tax-exempt nonprofit institutions to which donor contributions are tax deductible. The classification includes religious, educational, health, scientific, cultural, and social service organizations.

There has been a tendency on the part of analysts and the media to slight the role of philanthropic activities in the employment of human resources and the creation of personal income in the form of wages and salaries. In part, this is because official sources of economic data are dominated by the for-profit and government sectors. This article attempts to fill the knowledge gap by presenting the results of a systematized estimation and analysis of philanthropic employment and earnings for the period 1972--82. The study, based on data from the Bureau of Labor Statistics and from the Bureau of Census special 1977 Census of Services for Tax-Exempt Service Organizations, yielded point estimates and trend information for both the sector and many of its subsectors. I thus allows one to gauge the relative importance of specific philanthropic activities and to make comparisons among them. And because the structure and classification system of the data base are consistent with those used in other Federal employment and earnings series, it was possible to make comparisons with the for-profit and government sectors. The study covered both full- and part-time employees. An overview

Philanthropic employment was about 93 percent (6.5 million) of 1982 total private nonprofit employment (7.0 million). (see table 1.) This was about 7 percent of the total U.S. labor force. (See table 2.) The sector paid wages and salaries of $81.7 billion that year, or 5.4 percent of total U.S. payroll.

Like all service industries, philanthropic organizations tend to be labor intensive. Productivity depends heavily on competence, skills, and motivation of employees and volunteers. Labor costs thus account for a substantial portion of the total expenditures of philanthropic organizations: Wages and salaries and supplements ($75 billion) were 58 percent of 1980 total costs in the philanthropic sector, with cost of goods and services bought from other sectors and the cost of capital resources used by the sector accounting for the rest. Labor input was 84 percent of value added by the sector. (Value added excludes goods and services purchased from others, such as energy, materials, and so forth.)

Between 1972 and 1982, the philanthropic labor force grew by 43 percent, outpacing the 35-percent increase in for-profit service industries. (See table 2.) Both increases are rather large comapred to those for other industry groups, reflecting the rapid relative growth of the service economy after World War II in both the profit and nonprofit segments. By comparison, there was virtually no growth in for-profit goods-producing activities. The importance of the philanthropic sector as a job creator is evident in that the 1.9 million new jobs it generated over the study period was greater than the total number of 1982 jobs in such important inudstries as mining, railroad transportation, trucking, apparel manufacturing, banking, and insurance.

The activities of four subsectors--hospitals, colleges and universities, social service organizations, and religious institutions--accounted for 81 percent (5.2 million) of 1982 philanthropic service jobs, and 82 percent ($66.8 billion) of philanthropic payroll. The average 1982 wage over the four subsectors was $12,841. Employment in nonprofit hospitals was the major share--40 percent--of philanthropic employment. Colleges and universities employed 12 percent, while social service organizations and religious institutions employed 15 percent and 14 percent, respectively. The remaining 19 percent was distributed widely among the other philanthropic services. (See table 3.)

The relative importance of these services in terms of payroll also varied considerably. Hospitals accounted for 49 percent of total 1982 philanthropic payroll, colleges and universities contributed 13 percent, religious institutions, 11 percent, and social services, 10 percent. The relatively higher hospital payroll reflects not only more jobs in that area, but also higher average 1982 wages and salaries than for the philanthropic sector as a whole. The reverse was true in the social service area.

Hospital employment understandably dominates the health sector. A similar dominance occurs in the area of education; employment in private universities and colleges was 2.3 times greater than in private elementary and secondary schools, but payroll in higher education was 3.2 times that of elementary ans secondary schools, reflecting higher average wages and salaries in higher education. Relationship with for-profits

What is the relative importance of for-profit and philanthropic organizations in the activities in which both operate? A comparison of philanthropic employment with total private employment of sectors in which these nonprofits operate yields some interesting differences from sector to sector. (See table 4.) Many service industries, such as private higher education and elementary and secondary schools, operate overwhelmingly as nonprofit organizations. (In this study, the representation was 100 percent.) On the other hand, correspondence schools and vocational schools had relatively few nonprofit employees. Nonprofit employment accounted for 86 percent of total hospital employment. There was considerable variation within cultural activities, where philanthropic employment in theatre, orchestras, and other performing arts (exclusive of television and radio) was 26 percent of employment. Only 5 percent of employment in radio and television, comapred to almost 100 percent of employment in the visual arts, was nonprofit. The study also revealed that philanthropic employees earned substantially less on average than the rest of the U.S. labor force. The average sector wage, $12,525 in 1982, was less than three-fourths the average for all employees, $16,797. Comparison with government

Because philanthropic services are public goods provided by private organizations, it is useful to compare employment in government--the major provider of public goods--with that of the philanthropic sector, the private provider. Overall, governments employ 2.4 times as many workers as the philanthropic sector. Philanthropic employment, at 6.5 million in 1982, substantially exceeded the numbers of Federal workers (2.7 million) and State employees (3.6 million). Employment in local governments, however, at 9.4 million, was much greater than total philanthropic employment. In 1982, all levels of government had combined payrolls of $266 billion, or more than 3 times that of the philanthropic sector. But the philanthropic payroll (excluding religious organizations) of $73 billion more than matched the $69 billion Federal outlay. Comparative growth analysis

Philanthropy versus the total economy. Between 1972 and 1982, philanthropic employment grew at a 3.6-percent annual rate, compared with increases of 2 percent for all wage and salary workers in the economy; 0.1 percent for goods-producing industries; 3.1 percent in for-profit service industries; and 1.7 percent in government. Accordingly, the philanthropic sector's share of employment increased from nearly 20 percent of that of the goods-producing sector in 1972 to slightly more than 27 percent by 1982. The differential growth rate between the philanthropic sector and its partnt service-producing sector (private and government) over the same period translated into a moderate increase in the employment representation of the philanthropic sector among service industries from 9.2 percent in 1972 to 9.9 percent by 1982. Similarly, the philanthropic sector's annual rate of employment growth was higher than that recorded for government over the decade.

Looking at recent experience, philanthropic employment has fared better than employment generally, despite the severe 1980--82 recessionary period and Federal budget cuts in Social programs. A reasonable explanation is that philanthropic activities, like other service industries, are not prone to the swings in output that result from changes in the rate at which businesses and consumers add to or diminish their inventories of goods. Although its rate of employment growth declined, the philanthropic sector actually expanded its labor force by some 350,000, or 6 percent, between 1980 and 1982, so that its share of total nonfarm wage and salary workers increased from 6.8 percent to 7.3 percent. And the decline in the rate of change in employment, 1982--82, was about four times as great for the total economy than among philanthropic organizations.

Much less fortunate was the goods-producing sector, which experienced a 7-percent drop (1.8 million) in employment from 1980 to 1982. The back-to-back 1982 and 1981--82 recessions speeded up the already declining trend in the sector's employment, which fell from 28 percent of the labor force in 1982 to 27 percent in 1982. The precipitous drop in the goods-producing sector could not be offset by the 2-percent employment increase in the for-profit service-producing industries. Consequently, total U.S. employment declined from 90.4 million in 1980 to 89.6 million in 1982.

Within-sector comparisons. The philanthropic sector experienced differential growth among its four major component industries between 1972 and 1982. Together, hospitals, colleges and universities, social services, and religious organizations accounted for about 80 percent of total sector employment growth. Over the period, however, hospitals and social services increased their employment shares, while those of colleges and universities and religious organizations declined. (See table 3.)

An aging population, increased availability of private health insurance, and Federal financial support for the medicaid and medicare programs bolstered demand for hospital services between 1972 and 1982. This, in turn, stimulated the expansion of employment in hospitals. In 1972, hospital employment was 1.7 million, 37 percent of the philanthropic labor force. By 1982, employment had reached 2.6 million, and accounted for 40 percent of the sector total. This represents an increase of 52.2 percent over 1972, or average annual growth of 4.3 percent.

Between 1972 and 1982, employment in social services more than doubled from 455,000 to about 935,000, reflecting growth of 9.4 percent per year. This trend slowed considerably from 1980 to 1982, with employment increasing only slightly to around 960,000. Despite the recent slowdown, significant 1972--82 increases were recorded among all components of social services.

The problems faced by colleges and universities over the study period, which included declining enrollments and rising operating costs, are apparent in employment trends. The labor force in these institutions grew very modestly from some 640,000 in 1972 to about 755,000 in 1982, or by only around 1.7 percent per year.

Religious organizations constitute the other major group with a declining relative employment position over the study period. All told, employment increased from just under 870,000 in 1972 to nearly 900,000 in 1982. This translates into a growth rate of only 0.3 percent per annum. Earnings growth

Total earnings, or the "wage bill," for the philanthropic sector more than tripled, from an estimated $25.3 billion in 1972 to $81.7 billion in 1982. This increase of 222.9 percent (41.2 percent in constant 1972 dollars) is related to changes in both employment and average annual wages. However, while the 1.9 million new jobs in the sector accounted for part of the change, much of the growth in total payroll resulted from the rising average earnings of philanthropic workers.

Average annual wages and salaries in the sector rose from $5,529 in 1972 to $12,525 in 1982. "See table 3.) This increase was 10.4 percent greater than that for all nonfarm wage and salary workers, with the result that the average philanthropic wage grew from 67.9 percent to 74.6 percent of the nonfarm average over the study period. (However, it should be noted that when this 126.3 percent current-dollar increase in average wages is stated in constant 1972 dollars, it amounts to no real gain at all.)

As one would expect, hospitals were a major factor in the increase in total philanthropic payroll. While hospital employment grew faster than the average for the sector, average relative wages and salaries rose even faster. Conversely, both employment and earnings in private higher education grew more slowly than the sector averages.

THE ESSENTIAL VALUE of employment and earnings data for significant segments of the economy is indisputable. The need for such information on the philanthropic sector will increase if the sector continues to grow in line with predications by Victor Fuchs in his seminal study of the service economy. According to Fuchs, the outcome of the growth of nonprofit enterprise and government is indeterminate, as such growth will give rise to costs as well as benefits. Unless we prepare for the future with measurement systems and methods of analysis, which will require the support of both the private and government organizations, some of these costs and benefits may not be identifiable, much less quantifiable. We believe our study represents a major step forward in the derivation and presentation of such information on the philanthropic labor force.
COPYRIGHT 1984 U.S. Bureau of Labor Statistics
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Article Details
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Author:Rudney, Gabriel; Weitzman, Murray
Publication:Monthly Labor Review
Date:Sep 1, 1984
Previous Article:State and regional employment and unemployment in 1983.
Next Article:Worker participation and productivity change.

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