What Is the Nonprofit Sector of a Future, Equitable World?

For decades, nonprofit organizations have played an increasingly central role in social justice campaigns in the United States, providing legal support, advocacy, and public education. Unlike the mid-20^th century movements that once led such work, nonprofits are often the primary drivers of these campaigns today. By the end of the last century, the unions and large civic organizations once central to American civic life were in a steep decline. The student and church-led civil rights movements of the 1950s and 60s had likewise dissipated. Advocacy nonprofits filled the gap.

Meanwhile, income inequality has steadily risen. Frequently cited as a major contributing factor to decreased social mobility, such inequality is also increasingly seen as a threat to representative democracy—core issues of many social justice movements today. But as part of the larger nonprofit sector, left-leaning social justice nonprofits have a complicated if largely hidden relationship to income inequality. Understanding this relationship is crucial to effectively shaping the evolution of the nonprofit sector and the movements we support.

Growing Nonprofit Sector, Rising Inequality

The past three decades have seen an explosion in the nonprofit sector’s size and diversity. According to the National Center for Charitable Statistics, there are more than 1.6 million registered nonprofit organizations in the US today, up from less than 400,000 in 1967. As nonprofits have proliferated, they have also grown larger in scope, workforce, and budgets. Between 1977 and 1999, the number of Americans employed by nonprofits nearly doubled to 9.7 million; 10 percent of the American workforce is now in the nonprofit sector.

Philanthropy in the US is a powerhouse, with charitable giving now in the mid-hundreds of billions of dollars each year.¹ The effect on nonprofits has been transformational. Budget growth has created new jobs and enabled nonprofits to develop specialized skills. Training and professionalization have produced highly skilled, differentiated workforces that manage increasingly complex organizations and strategies. Wages have risen, and decent benefits have become the norm. Nonprofit employers are competing for an educated, skilled, and in-demand pool of candidates.

Over the same period, income inequality has also risen dramatically. After the “Great Compression” of the 1940s—when the gap between wealth and income distribution to the rich and poor contracted in unprecedented fashion—changes to tax policy and executive compensation, among other factors, began expanding the gap between the wealthy and the rest of society. According to research by Berkeley economist Emmanuel Saez, income inequality today is at a level not seen since 1928. In 1944, the top one percent of earners took in 11.3 percent of national income, and the bottom 90 percent captured 67.5 percent. This stayed relatively constant until the mid-1970s, after which point the wealthy’s cut of national income began to rise. As Drew DeSilver summarizes, “Saez’s preliminary estimates for 2012…have [the top one percent] receiving nearly 22.5% of all pretax income, while the bottom 90 percent’s share is below 50% for the first time ever (49.6%, to be precise).” While this gap narrowed slightly during the pandemic due to government support, at the same time, billionaires added $2.1 trillion to their personal wealth.

The chart for both trends—nonprofit growth and rising income inequality—rises over roughly the same timespan (nonprofit growth arguably lagging by a decade). For several reasons, this is unlikely a mere coincidence.

With few exceptions, nonprofits run on concentrations of wealth. Foundation grants are made from endowments often valued in the tens or hundreds of millions of dollars. Governments aggregate collective wealth for the common good, including grants and contracts to nonprofits, but the bulk of charitable giving in the US comes from individuals: roughly 85 percent of annual nonprofit revenue comes from individual giving, from small online gifts to multimillion dollar bequests.

Here, too, deep pools yield more than shallow seas. It is a fundraising truism that 80 percent of income comes from 20 percent of an organization’s donors. Indeed, some claim that the ratio is closer to 90:10. Whatever the exact numbers, the overwhelming bulk of nonprofit funding comes from individuals capable of making large gifts.

Looking at these concurrent trends and the role of major gifts in the nonprofit revenue budget, it is no stretch to think that the expansion of the nonprofit sector has been fueled by the rise in wealth inequality. During the Great Compression, mass membership organizations, to which ordinary people paid a small amount to belong, were the norm. This model was well suited when wealth was more equitably distributed but is difficult to sustain as the middle class shrinks.² Today, while many people struggle to make ends meet, concentrated wealth means more disposable income is available to the wealthy, who bestow such income on the nonprofits of their choice. The shift from membership organizations to our professionalized nonprofit sector is logical given how resources are best obtained as the country has changed.

Social justice is not only a matter of economics, but income inequality complicates many of the already complex problems that we deal with. Rising inequality correlates with declining opportunity for the less affluent. Tax policy that favors the wealthy leads to declining infrastructure investment, leaving poor communities more isolated, public schools underfunded, and higher education increasingly unattainable. As economic insecurity spreads, competitiveness and a sense of scarcity undermine opportunities for ordinary people to come together to advance their common interests.

And so, we are caught between two mutually (and perhaps paradoxically) reinforcing realities. Social justice nonprofits work for a more just society even as they are entwined with and dependent on an increasingly unjust economic system.

This in no way means that social justice organizations are beholden to an economic elite. And it is good that the wealthy are taking to philanthropy, choosing to use what they have in support of some of society’s most creative and beneficent sectors. The American nonprofit sector is stronger, more vital, and more diverse than ever, contributing to our economy and cultural and political life. Indeed, American society today would be radically different if not for the vitality of our nonprofit sector.³

But we must understand our world, and our place in it, if we are to change it. In particular, we must grapple with the link between rising income inequality and the nonprofit sector’s vitality to prepare for the egalitarian future we collectively strive for.

Social Justice Philanthropy: Past, Present, and Future

There is little doubt that the contributions of American philanthropists have strengthened the nonprofit sector. Today’s highly professionalized nonprofit organizations have an array of sophisticated tools with which to advocate for social change. Salaried jobs allow activists to dedicate their lives to a cause without needing a “day job.” As the sector has grown, the number of professional activists has increased dramatically, adding to the sheer number of hours dedicated to social justice endeavors. Because many nonprofits attract and rely on volunteers and engage in broader outreach to the public using online tools, they engage with more people than they employ. In sum, a bigger, better resourced, more professionalized sector brings considerable benefits to the causes we champion.

But while such benefits are clear, nonprofit funding models also bind us to economic inequality in ways that we rarely pause to recognize. As the nonprofit sector has grown stronger and taken center stage in social justice struggles in the US, it has winnowed away what was once a more diverse advocacy ecosystem.

Protests against police violence in 2020 brought mass protest movements back to the fore of public consciousness, a reminder of the citizen activism of half a century ago. These informal modes of political association and activism have waned in recent decades. While the causes of this decline are complex, advocacy nonprofits may have outcompeted these other forms of organizing. As nonprofits proliferated, offering job security, clear organizational structure, and enhanced technological and financial resources, they lured justice advocates, many of whom were unsurprisingly drawn to the possibility of making a career out of the causes they were passionate about.

But those older modes of activism that nonprofits potentially displaced—such as student and protest movements, community organizing initiatives, and organized labor coalitions—are often closer to the root causes of social injustice. While nonprofits have stakeholders that they must be responsive to, labor movements and organized protests against police brutality are the stakeholders they represent.

Informal and largely unfunded forms of activism, moreover, are resilient in several respects. Unlike registered nonprofit organizations, they are not embedded in regulatory schemes that can be used to stifle their activism, as is happening in dozens of repressive regimes around the world today. Just as crucially, their relative lack of access to grants and donors means that they are not subject to the shifting sands of philanthropic interests (guided by elite donors and executives), shifts that often profoundly impact what issues get attention and how those issues are addressed.

These changes to the Left’s ecosystem matter: they threaten our attempts to realize a more just and equitable future. But as a sector, we are conflicted: in a world where wealth was shared more equally, much of our sector would be unsustainable. If social justice nonprofits have greater economic equality as a goal, we must prepare for what success will mean for our organizations and stakeholders.

So, what would happen if we were to achieve a new Great Compression? We would see a stable middle class, more investment in education and infrastructure, and clearer pathways out of poverty. Most Americans would benefit from decent wages and the collective security of a stronger middle class. But what about the nonprofit sector?

A more equitable future could well be a death knell for the sector that helped us get there. Given the revenue models in use today, fairer income distribution will require a radical overhaul of how nonprofits seek funding. Disposable philanthropic income will be more diffuse and will be available in smaller chunks. More effort will be required per dollar raised, less money will be available, and fewer organizations will have the infrastructure to compete for this funding.

In the nonprofit field, we sometimes say that our goal is to put ourselves out of business, to wither away, as it were. But this is not realistic. Ensuring that all people enjoy their fundamental rights is a never-ending task, and another Great Compression would not necessarily guarantee just treatment for all Americans (recall that the New Deal excluded African Americans and others from enjoying the full benefits of an affluent society). Rights-based watchdog and advocacy groups will remain necessary regardless of whether wealth is more fairly distributed. New threats and injustices will emerge, requiring new generations of advocates and some form of infrastructure to support their work.

At the same time, changes along the lines of a Great Compression will be slow, and a slow transition poses its own risks. As inequality gradually shrinks, there will likely be an incremental drain on philanthropic resources. Nonprofits will find themselves dipping into a leaky old bucket, even as it drains. Organizations will weaken and fail, and new inequities will emerge in who gets what is left. Cascading financial problems would complicate social justice advocates’ effectiveness, compounding our fiscal troubles with a crisis of legitimacy.

In short, if we envision a more just world, we must begin to create a nonprofit sector that will be sustainable in a more economically equitable society. Such sustainability is likely to be the product of an amalgam of models suited to different contexts and lines of work. Some see a place for hybrid social ventures that generate revenue and turn profits into advocacy. Online fundraising and campaigning have much in common with the old model of nonprofit sustainability. The broad reach and low cost of shifting from direct mail to email may enable more organizations to thrive on small donations. Online campaigns are also a form of mass mobilization, reaching millions of people with specific advocacy goals. And increasingly, we are seeing similarities with the membership-based organizations of a bygone era. The participatory governance of Avaaz, for example, and its subsequent ability to operate solely with individual gifts, demonstrate the power of initiatives that pair direct engagement with financial support.

We might also consider adapting older models to our times, such as broad-based membership organizations that advocate for members’ interests. Supporting activism outside the nonprofit structure has always posed difficulties for philanthropy, in part because of the tax implications and in part because it’s hard to write a check to a diffuse, citizen-led movement. But finding a way to move beyond the nonprofit monoculture to encourage more robust civic engagement is essential to ensuring equal treatment and protecting basic rights in the future we envision.

Such solutions are but the beginning of how we might address the (still distant) potential crisis of our own success. But so long as a more equitable distribution of opportunity and income is a broad social justice goal, we must move forward with our eyes open and a clear sense of how we can and want to exist in the future.

Notes

According to Giving USA, charitable giving in 2020 was $471 billion, nearly 300 times the amount in 1960 (Burke, p. 177).
Cf. Skocpol Theda. Diminished Democracy: From Membership to Management in American Civic Life. Norman, OK: University of Oklahoma Press, 2003.
According to US Bureau of Labor Statistics data, the nonprofit sector is also more economically resilient: during the 2007-09 recession, the nonprofit sector showed steady job growth compared to the much more volatile private sector. This resilience that is attributable to a significant degree to philanthropy’s continued support of nonprofits despite lower investment returns. (see http://www.bls.gov/opub/mlr/2016/article/nonprofits-in-america.htm.)