On August 19, OMB Watch released a new report, "Recent Trends in Nonprofit Employment and Earnings: 1990-2004," which examines the recent history of employment and compensation trends in the nonprofit sector. It found that while growth in nonprofit employment continued during the 2001 recession and immediately after, it stalled over the past year, with significant declines in average hours worked, weekly earnings, and hourly wages. Data on individual states reflect this nationwide pattern.

According to government data, employment in the nonprofit sector has grown by only about 0.5 percent in the year ending July 2004 -- which is well below its average rate of 2.4 percent annual growth over the past 15 years. Average weekly earnings dropped significantly over the past year, indicating a weak labor market. This was due in part to declines in both hourly compensation and the average number of hours worked weekly, which had been stable through early 2003.

In the year ending June 2004, real (inflation-adjusted) weekly earnings fell by 5.2 percent. Also during this time period real hourly earnings fell by 3.9 percent.

The nonprofit sector of the economy is traditionally asked to help support the nation in times of economic weakness, and is currently expected to make up for reductions in publicly provided government services. The current data indicate that the sector is being asked to do more with less labor input.

Why does this matter?

The nonprofit sector is a large part of the economy, employing millions of people (nearly 11 million in 1998 according to Independent Sector) and supporting the volunteering efforts millions more. A downturn in this important sector is harmful for the overall economy.

Nonprofit organizations are also asked to perform a wide variety of public services, such as sheltering the homeless, providing support for the elderly, protecting the environment, promoting children's welfare, building parks, promoting the arts, and so on. A downturn in this area has consequences that extend far beyond the nonprofit organizations themselves.

Finally, cutbacks in government services as a result of Bush administration policies and state budget crises will place even more demands on the nonprofit sector, which is being asked to do more with fewer resources. While many organizations will be able to struggle to get by, the current situation cannot continue without seriously harming nonprofits, the issues they care about, and the people they serve.

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