Canada Boasts Second Largest Nonprofit Sector in the World
March 28, 2005
By Nicole Zummach
If you are a bit surprised by the title of this week's Cover Story,
you're not alone. Even the researchers that came to this conclusion
were somewhat surprised to learn that Canada has one of the largest
nonprofit and voluntary sectors in the world, second only to the Netherlands.
Last week, Imagine Canada (formerly the Canadian Centre for Philanthropy)
unveiled this and many other interesting findings in a new report. The
Canadian Nonprofit and Voluntary Sector in Comparative Perspective
is part of the Johns Hopkins Comparative Nonprofit Sector Project,
which examines the nonprofit or civil society sector in 37 countries
around the world. Aside from giving the Canadian nonprofit sector an
idea of where it stands relative to other countries, the Imagine Canada
report also sheds light on a very vital segment of the Canadian economy
that, for the most part, is not recognized as such by government or
the general public.
An economic powerhouse
Although the United States has long been considered to have the most developed
nonprofit sector in the world, Canadian nonprofit and voluntary organizations
employ 12% of the country's economically active population, compared to
9.8% in the US. That translates into more than two million full-time equivalent
(FTE) workers, two-thirds in paid positions and the remainder as volunteers.
To put it in perspective, Canada's nonprofit and voluntary organizations
engage nearly as many full-time equivalent workers (2.073 million) as
all branches of manufacturing combined (2.294 million). Aside from the
size of the nonprofit workforce, the sector also contributes about 6.8%
of the country's gross domestic product (GDP). As of 1999, that output
equaled $61.8 billion (Canadian). If you include the value of volunteer
work, that figure jumps to an estimated $75.8 billion, or 8.5% of GDP.
Despite having the second largest nonprofit workforce in the world, the
volunteer share of this workforce is lower in Canada than in most other
countries. Only 25% of the full-time equivalent workforce of Canadian
nonprofit and voluntary organizations are volunteers, compared to an average
of 38% among all 37 countries included in the Johns Hopkins Comparative
Nonprofit Sector Project. However, the report asserts that this is not
because of any absolute shortage of volunteer activity. Expressed as a
percentage of the economically active population, Canada's volunteer force
equals 3% versus 1.6% for all 37 countries. Still, it does lag behind
a number of other countries, including Sweden (5.1%), Norway (4.4%), the
United Kingdom (3.6%), and the United States (3.5%).
We aim to serve
Researchers found that the bulk of Canada's nonprofits are service organizations
- those involved in the delivery of direct services such as education,
health, housing, and economic development promotion. Almost three-quarters
(74%) of all Canadian nonprofit and voluntary organization workers, paid
and volunteer, are engaged in these activities. This is about 10% higher
than the overall average for countries included in the Johns Hopkins project.
Health and housing are two of the more prominent Canadian service activities
that are larger here than in other countries. About 31% of the nonprofit
and voluntary sector workforce in Canada is involved with health care,
compared to an overall average of 14%. The housing field absorbs about
11% of Canada's nonprofit workforce, versus 8% overall. Fifteen percent
of Canada's nonprofit workforce is involved in education, and another
18% work in social services.
Those nonprofit employees and volunteers not involved in service delivery
make up the remainder (22%) of Canada's nonprofit workforce (excluding
foundations and international groups). Their activities provide avenues
for the expression of cultural, spiritual, professional, or policy values,
interests, and beliefs. This includes cultural institutions, recreation
groups, professional associations, advocacy groups, community organizations,
environmental organizations, human rights groups, and social movements.
This is below the average of 32% among all countries. When paid employees and volunteers are examined separately, volunteers are proportionally twice as likely to be engaged in expressive functions than are paid staff (36% vs. 17%).
Philanthropy accounts for very little nonprofit revenue
With all the government cutbacks in the past decade, it might come as
a shock to learn that the majority (51%) of all nonprofit and voluntary
revenue still comes from government. However, Michael Hall, vice
president of Imagine Canada and lead author of the report, points out
that the reason for this is largely because government is really supporting
individual Canadians through nonprofit and voluntary sector service delivery.
Perhaps even more surprising than the large government contribution is
the fact that only 9% of nonprofit revenue comes from philanthropy, something
that most nonprofits spend a lot of time and effort cultivating. Even
when religious organizations are included, philanthropy accounts for only
13% of the sector's income. The remaining 39% of nonprofit revenue in
Canada results from fees, service charges, and investment income. These
figures change somewhat if hospitals, universities, and colleges are excluded
from the analysis. Then government support falls to 39% of total revenue,
and fees emerge as the dominant revenue source (48%), with philanthropy
still accounting for only 12% of nonprofit income.
A sector not without its challenges
"This is the second largest nonprofit sector in the world, but it's a sector
under strain," Hall points out. The biggest concerns raised by nonprofits
include their ability to plan for the future, to recruit volunteers and
board members, and to obtain funding. Organizations reporting the most
serious problems are those that rely on external funding from governments,
corporations, and foundations. "We have a high level of reliance on government
funding and organizations are facing a number of challenges that are attributable
to the way in which they relate to government," Hall notes. "For those
that are funded by government, I think a lot of it has to do with what
I think is a dysfunctional funding regime that focuses on short-term funding,
is unpredictable and changeable, and requires a high degree of administrative
overhead to deal with the funding."
Another funding concern is the fact that "public support is dangerously
shallow," with just 9% of donors contributing 46% of all donations and
40% of all volunteer hours. "We need a renewed commitment from individual
Canadians to give and to volunteer," says Hall. "As a country, we are
not investing in our nonprofit sector, which, as our research shows, is
really a surprisingly big part of Canadian life."
Looking beyond organizational challenges, there are broader public policy
issues to contend with. For example, many organizations have difficulty
obtaining registered charitable status, in part because of the antiquated
definition of 'charity' still employed by the Canada Revenue Agency (CRA).
The CRA also places legal restriction on the advocacy activities of registered
charities, which in some cases severely hinders the charity's ability
to fulfill its mission. Another concern is the potential personal liability
of volunteer members of nonprofit boards and the fear that this will deter
potential board volunteers.
Solutions to these challenges might not come easily, but Imagine Canada
hopes this report will have some influence in bringing more recognition
to the sector and the issues it is facing. "I hope it shines a light on
what a significant asset we have in this country," says Hall. "It's an
asset that we as Canadians have created collectively, and an asset that
we really haven't understood until now. It's at risk of depreciating,
but we are now in a position to better understand its strengths and limitations,
and how to best support it so that we have an asset that continues to
grow into the future."
To download a copy of the report in PDF format, visit www.nonprofitscan.ca/pdf/jhu_report_en.pdf.
