Nonprofits’ Impact on City Larger Than Expected

The idea of the nonprofit organization and how that business model is sustainable can be quite confusing to some. Maybe it’s the capitalistic mantra of the Red, White and Blue, but really, how do you survive if you’re not bringing in profits?

Screen Shot 2014-06-16 at 9.37.46 AMSurvive might not be the correct verbiage, according to a recent survey conducted by the Long Beach Nonprofit Partnership in accordance with the CSULB Office of Economic Research. A more suitable word choice is thrive, as nonprofits continue to grow and become a more integral part of the economy.

The nonprofit sector both in Long Beach and nationally have been doing exactly that: thriving, with nonprofit revenues from 2000—2010 (41% increase) outpacing Gross Domestic Product (16.4%)—adjusted for inflation—during the same time period. Employment figures in the city also reflect national trends with the nonprofit sector accounting for over 10% of jobs in Long Beach, up 4% from 2007. The employment numbers trump those in the city’s tourism sector.

Locally, 417 nonprofits (including Associated Students/49er Shops, YMCA of Greater Long Beach, and the Aquarium of the Pacific) employ 19,230 people generating an average annual payroll of $687M. Over half of Long Beach nonprofit employees work in healthcare and the average salary of those employed at area nonprofits is just over $35K.

The largest percentage of the Long Beach nonprofit pie is taken up by human services (18%), community/social justice (16%) and healthcare (16%) although healthcare accounts for over half of nonprofit employees in the city. That number is expected to grow with the implementation of the Obama administration’s Affordable Care Act.

The Urban Institute, a nonpartisan economic and social policy research group reported in 2010 that nonprofits added $779B to the nation’s GDP and were also a major source of employment, accounting for over 10% of jobs and 9% of the nation’s wages. It also estimates that there are over 1.5 million registered nonprofits nationally with the total easily exceeding two million.

A large part of what makes the nonprofit business model possible is volunteer hours. The survey reported that over 120,000 volunteers put in over 4.9M hours per year accounting for an estimated payroll of over $100M. According to the release, the employment numbers and resulting incomes account for an estimated $4.9B impact on the city and its surrounding economies.

So what does this mean for the future of nonprofits?

Although the nonprofit sector grew by about 25% during the period of 2001—2011 out-gaining the private sector’s modest gain of half a percent, there are conflicting arguments about the sustainability of the model and the roll the nonprofit will play in the economy for years to come. Some claim that the idea of shared access and the proliferation of information and goods outside the normal medium is conducive to solidifying nonprofits as a player in the future economy.

The prominence of nonprofits and the large percentage of the city’s workforce that employed by them does bring up an interesting issue for the new mayor-elect. With so much money being generated by this niche sector of the economy, perhaps nonprofits should share the same breath as tech companies and progressive starts-ups in discussions about solidifying the city’s future economic well being.

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Jason Ruiz covers City Hall and politics for the Long Beach Post.