Not for Profit

This morning’s Crain’s brings in the news that the city’s nonprofit service sector has expanded to the point that jobs in private schools and universities, hospitals, and social service agencies now account for 22% of all nongovernment jobs in New York.There’s plenty of good news in all this. New York is blessed with some of the finest private schools, hospitals, and charities in the country, and they make the city a more pleasant and healthier place for us all, not to mention providing paid work for plenty of for-profit law firms, caterers, accountants, and construction companies. The prosperous among us — and even some of those who are merely comfortable — have been extraordinarily generous with their private gifts to these institutions, so that we New Yorkers help our poor out with charity in the form of everything from hot meals to college scholarships and free medical care. We’re reminded of this particularly during this season, when the urge to give is heightened by the approaching end of the tax year and, for some, the holiday spirit.But we are among those who look at the astounding growth of the nonprofit sector — and the corresponding sluggishness in the for-profit part of the city’s economy — and see reason for concern. Crain’s reports that since the start of 2003, “The city’s nonprofit services sector has added 12,700 jobs…while the overall private-sector workforce has shrunk by 8,700 jobs.” Long term, this is an unsustainable trend. After all, nonprofits are exempt from most forms of taxation. They don’t pay property taxes on their facilities and they are not subject to taxes on their surpluses. Yet many of the nonprofits are funded, in one way or another, by tax revenues, whether they are funneled through Medicare and Medicaid to the hospitals or through research grants and federal scholarships to the universities or through government contracts to the social service agencies.The numbers for 2003 are stunning enough. A broader context shows the growth is part of a trend. Crain’s puts the city’s nonprofit service sector at 664,600 jobs, citing the state labor department. That’s a sharp increase from 2000, when the size of the city’s nonprofit workforce was 528,000, according to a study by the New York City Nonprofits Project. That study said the 528,000 figure in 2000 was an increase of about 25% since 1990,during a decade in which overall employment in the city increased by only 4%.New York’s nonprofit workforce is almost certainly larger, on a percentage basis, than the national average. The Independent Sector, a trade association for nonprofits, said that in 1998 the entire nonprofit sector employed about 10.8% of American workers. They didn’t break that out as a percentage of the non-government workforce, but by our calculations, it’d be about 13%.And that national figure includes categories like religious workers and those at private grant-making foundations and museums — jobs not included in Crain’s 22%, but representing tens of thousands more jobs at New York City nonprofits.Again, we’re not saying that New York shouldn’t have a strong nonprofit sector. But at a certain point, the sector gets so large and politically powerful and absorbs so much tax money that, in a downturn, taxes are increased merely to sustain it. Now the combination of state and local taxes in New York City is a national high, according to a Citizens Budget Commission study. And that discourages private-sector job growth. Which means more poor people for the charities to take care of. It’s a vicious cycle.

Not for Profit

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