Operating Reserves on Empty for Many Nonprofit Organizations

In a study finding that probably won’t shock anyone working with a nonprofit, it has been found that an organized nonprofit sector is linked to reduced unemployment rates in the surrounding community.

By categorizing an organized nonprofit sector to include the number of nonprofits per capita in each community and the degree to which nonprofits directly engage local residents, the study, “Civic Health and Unemployment II: The Case Builds,” presented three key findings:

There is less unemployment within counties that have a higher density of nonprofits than in similar counties that have a lower number of nonprofits,
Social cohesion, or “the level at which citizens trust, talk to and help neighbors, and socialize with family and friends,” is another strong factor in preventing unemployment, and that
The organizations most likely to be linked to lower rates of local unemployment are those that “provide direct, tangible benefits to their members” and those “whose supporters perceived themselves as genuine members.”

Further emphasizing the importance of an organized nonprofit community that is involved with those in the local area, the study suggests that while nonprofits directly contribute to a lower unemployment rate by creating jobs, there also appears to be a ripple effect in which organizations that engage with local residents create a change in the local unemployment rate.

Released by the National Conference on Citizenship this study may well become highly influential for those who most often are called upon to discuss the importance of establishing strong nonprofit sectors. And although it doesn’t offer all the answers as to why organized, involved nonprofits are able to directly impact unemployment rates, there will undoubtedly be more information to come in the next few months as the unemployment rate continues to trend downward.

Read the original NPQ article here.

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