Wednesday, June 9, 2021

New study measures nonprofits' impact on Nashville economy, but I am taking the findings of this study with a grain of salt.

by Rod Williams- There was this growing company looking to add someone to their finance department and the CEO placed an ad for the new position and after receiving several resumes narrowed the choices to three candidates; a mathematician, an accountant, and an economist. The CEO arranged personal interviews with the three potential employees.

After the normal interview questions and discussions of each candidate's work history and qualifications, the CEO said to each of the candidates, "I have one more question for you.  It is kind of an unusual question and fairly simple, but please tell me, what is two plus two?"

The mathematician answered confidently and quickly and said, "That's simple; it's four."

When he asked the accountant, he replied, "There is a plus or minus factor of .05 that there is a 99.3% probability that it is four."

The economist was asked the same question. He looked at the CEO, looked to the left, looked to the right, leaned in close, and in a low voice said, "What do you want it to be?"

I have seen study after study like the one reported below.  Whether asking about the contribution of public transportation, greenways, libraries, food stamps, or any enterprise or government service, the study will always report that the endeavor produces an enormous benefit.  Consultants always seem to reach a conclusion that will please the person commissioning the study.

The studies do not consider the people involved in the endeavor would be producing value by doing something else if not doing what they were doing. In fact, they may have been producing more value doing something else.  The studies do not consider that the income to produce the good or service would be spent creating other economic activity and producing value elsewhere.  That is called opportunity cost.

I contribute to causes myself and spent most of my working career working for a non-profit and I value the contribution of non-profit organizations and volunteers.  However, I am taking the findings of this study with a grain of salt.

New study measures nonprofits' impact on Nashville economy

By Jon Styf,The Center Square – The more than 1,100 nonprofit organizations in the 13-county Nashville region contributed $14.4 billion to the regional gross domestic product, according to an economic impact study by the Center for Nonprofit Management. The group, in conjunction with the Nashville Area Chamber of Commerce, recently completed the study since the nonprofit sector had not been analyzed since 2013 by the Business and Economic Research Center (BERC) at Middle Tennessee State University, CNM said. 

In 2020, 78% of nonprofit organizations reported an increase in demand for services related to the COVID-19 pandemic, according to a survey that was part of the study. For comparison, 57% said an increase in demand during the economic downturn of 2009. 

“Where would we have been without them all this past year when the EF-3 tornado did a horrific tap dance across the city, you all were there,” Nashville Mayor John Cooper said during a Zoom call presenting the findings. “When the global pandemic arrived in Nashville and people were hurting and in need, you responded. When a violent blast hit Second Avenue on Christmas Day, you all said ‘How can we help?’ 

”The study found 71,779 people are directly employed by nonprofits in the region, which paid $4 billion in wages and led to an employment-based economic impact of $24.6 billion, which accounts for the creation of 100,000 additional jobs within the economy based upon those wages. That number is computed by looking at the total amount of accumulated change in employment, labor income and GDP based on the existence of those businesses. 

“Very significant numbers for a very important component of our economy,” said Ralph Schulz, president and CEO of the Nashville Area Chamber of Commerce. The study also showed the significance of volunteerism in the Nashville area, which accounted for 346,900 volunteers in 2015 and 42.5 million hours of service.  That’s the equivalent of 1-in-4 people volunteering more than three weeks of time. In 2017, Nashville was ranked 16th in the country in volunteerism, according to the Corporation for National and Community Service. 

That work is the equivalent of 20,432 full-time employees worth $1.1 billion in wages. 

“You remind us all about what we stand for,” Cooper said to the nonprofit leaders and volunteers. “We stand for caring … being good neighbors and goodwill. Every day, you remind us of what’s important in building a community and what’s important in serving a community.” 

One challenge for nonprofits is that capital expenses rose 200% – or $1 million, on average – between 2015 and 2019. In-kind contributions over that period, however, rose 97% – or about $244,600 per organization. 

“50.4% of all residents make charitable contributions of $25 or more, and among those who volunteer, 82.3% donate (double the rate of non-volunteers),” the study said. “... This growth in volunteering matters. … Growing the volunteer base increases not only the work a nonprofit is able to undertake, but also grows a nonprofit’s donor base.”

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