The Nonprofit Boom
By Arnold Kling
in a few decades we’ll find that most people will produce services and products that could be produced as easily in the nonprofit sector as in the profit-making one. Some cities like the District are harbingers of that new reality. It’s not just that nonprofits employ 25 percent of private-sector workers in the city and more than 10 percent in the region, according to a report of the Nonprofit Roundtable of Greater Washington. Roughly half of the area’s private-sector workers are in fields related to information and health care. Add in government workers, and these fields dominate.
For several years, my line has been, “I’m hoping that one of my daughters works for a profit.” I thought that their goal of working for non-profits reflected misplaced idealism. Instead, it apparently represents catching the wave of business trends.
In fact, daughter #2’s first job is as a research assistant for what amounts to a consulting firm organized as a nonprofit. It shows that Steuerle is correct about the fuzzy boundary between profit and nonprofit.
Why the trend toward nonprofits? Steuerle says that on the demand side, as we get wealthier, there is more government spending, some of which is channeled through nonprofits, and also more private charitable spending.
On the supply side, the information-intensive white-collar sector does not require much in the way of capital. If you don’t need investors, then you do not need to organize as a for-profit corporation. I would add that if you organize as a nonprofit then you can avoid paying corporate income taxes, which are unusually high in this country.