THE BLOG
08/27/2014 11:59 am ET Updated Dec 06, 2017

A Huge Economic Impact But Who Knew?

Do you know that there is a sector of the economy that is larger than the construction industry, employs more people than real estate, and creates 50 times more jobs than agriculture... but this sector is almost totally ignored? You may not even think of it as a sector, yet you are likely to be involved in it yourself. If not, you know people who are involved.

In California, this sector brings billions of dollars into the state. It created (did not lose) jobs during the recession. It generates $37 billion in federal, state and local taxes, even though it is often dismissed as too small to matter.

What is this sector? It is the nonprofit sector.

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Jan Masaoka, CEO of the California Association of Nonprofits asserts that something important is happening that is not obvious. In fact, she says, "It is hidden in plain sight." In her attempts to stir up public opinion, Masaoka could be today's Christopher Columbus shouting, "The earth is not flat." Nonprofits are making a huge impact in today's economy, but who knew?

CalNonprofits commissioned a study to find out exactly what economic impact the nonprofits have on California's economy. The research was conducted by a team of researchers under the direction of Dr. Laura Deitrick at The Caster Family Center for Nonprofit and Philanthropic Research at the University of San Diego. Over 72,000 nonprofits were studied between Winter 2013 and March 2014. This month, the results were presented at a conference in Los Angeles and published in "Causes Count: The Economic Power of California's Nonprofit Sector."

The report shows the unexpectedly strong economic power of the nonprofit sector. According to Jan Masaoka, nonprofits drive the California economy but their influence is going unnoticed. She says, "Just as we need to understand the economic impact of tourism...we need to understand the significant role that nonprofits play in our state's economic landscape."

Based on the results of the study, Masaoka is calling for government and business leaders to pay more attention to the nonprofit sector. She warns that nonprofits need to be included in discussions about California's future. As the report concludes "Causes Count." Masaoka says, "Whenever the Chamber of Commerce, for instance, is asked to bring a business perspective to the discussion, the nonprofit sector must be asked as well."

Some key findings of the report:
• Nonprofit economic activity contributes 15 percent or 1/6 of California's gross state product.
• California nonprofits generate $208 billion in annual revenue and hold $328 billion in assets.
• Nonprofits rank as the 4th largest industry in California by employment. Nearly one million people in the state are employed by nonprofits, accounting for six percent of total state employment.
• One out of 16 California jobs is at a nonprofit organization. In comparison: 1 out of 25 California jobs is in a restaurant. 1 out of 50 California jobs is in agriculture.

Where do nonprofits get their money?
If you answered, "from donations," you'd be wrong (but you would be in agreement with most people.) The study polled 1,639 randomly selected California residents to learn about their perceptions and awareness of nonprofits. 84 percent of respondents in the study believed nonprofits acquired the majority of revenue from donations.

This study reveals that actually, only 20.2 percent comes from contributions. 76 percent of revenue is generated by the nonprofits themselves by charging fees for services and programs, and contracts. Unfortunately nonprofits have not done a good job of helping the public to understand this.

To read more about this study: www.calnonprofits.org/causes-count