NCPA - National Center for Policy Analysis

BLURRING THE LINE BETWEEN CHARITIES AND BUSINESSES

October 24, 2007

In a few decades we could find that most people will produce services and products that could be produced as easily in the nonprofit sector as in the profit-making one, says Gene Steuerle, senior fellow at the Urban Institute.

According to Steuerle and Professor Joseph Cordes of George Washington University:

  • Data on output by industry and employment by occupation show that many charities and profit-making businesses are beginning to look alike.
  • Industries involving businesses that could organize as charities and pass the charitable purpose test are predicted to grow by almost 3.5 percent a year through 2014, compared with about 1 percent for other industries.
  • Similarly, occupations with a nonprofit bent will collectively grow by 23 percent over that decade, compared with about 13 percent for other types of employment.

Some cities like Washington, D.C., are harbingers of that new reality:

  • Nonprofits employ 25 percent of private-sector workers in the city and more than 10 percent in the region, according to a report of the Nonprofit Roundtable of Greater Washington.
  • Roughly half of the area's private-sector workers are in fields related to information and health care; add in government workers, and these fields dominate.

These forces are probably unstoppable, but they must be channeled to maximize the public good, says Steuerle:

  • Tax laws governing charitable giving and charitable status must continually be reexamined.
  • Consumer protection and tax laws must help protect the charitable purpose of  contributions in this mixture of joint and competing ventures.

As businesses and charities increasingly cooperate and compete to meet both public and private demand, we will spend more of our time providing and receiving services once defined as primarily charitable, says Steurle.  Whether all these changes beget greater generosity is an open question.

Source: Gene Steuerle, "Blurring the Line Between Charities and Businesses," Washington Post, October 8, 2007.

For text:

http://www.washingtonpost.com/wp-dyn/content/article/2007/10/07/AR2007100701167_pf.html

 

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