The Goldie Company

Parley: December 2006 - Satellite Account of Non-profit Institutions and Volunteering 1997 - 2003

Economic activity in the non-profit sector, as measured by gross domestic product (GDP), outpaced that of the economy as a whole between 1997 and 2003, according to data on the economic contribution of non-profit institutions and volunteering.

During this seven-year period, GDP for the non-profit sector grew at an annual average rate of 6.4%, faster than the average of 5.6% for the total economy.

For 2003 alone, GDP for the overall non-profit sector increased 6.3%, topping $80.3 billion. Again, this rate of growth outpaced the total economy, which rose 5.6% for the year.

For the purposes of this analysis, the overall non-profit sector is split into two groups. The first consists of hospitals (including residential care facilities), universities and colleges, which account for the lion's share of non-profit economic activity.

The second consists of a diverse range of other generally smaller organizations, known as the "core non-profit sector". They operate in numerous fields and play an increasingly important role in society.

Between 1997 and 2003, economic activity in the core non-profit sector grew 7.6%, significantly faster on average than the 5.8% gain for hospitals, universities and colleges. As a result, the core non-profit sector saw its share of GDP in the overall sector rise from 34% in 1997 to 36% in 2003.

Non-profit organizations not only play an important role in the well-being of Canadians, they also constitute an economic force.

The GDP of the core non-profit sector amounted to $29.1 billion in 2003, representing 2.6% of the total economy. When hospitals, universities and colleges were included, this share nearly tripled to 7.1%.

Economic activity generated in the overall non-profit sector in 2003 was larger than the mining, oil and gas extraction industry, and retail trade industry.

The significantly smaller core non-profit sector was roughly twice the size of Canada's agricultural industry, and was larger than the entire accommodation and food services industry. Hospitals, universities and colleges are the sector's heavyweights, core non-profit organizations span myriad activities

Hospitals, universities and colleges accounted for nearly two-thirds of economic activity in the overall non-profit sector between 1997 and 2003. The generally smaller organizations in the core sector accounted for the remaining third.

Hospitals generated $34 billion in economic activity, twice as much as the $17.2 billion generated by universities and colleges.

In the core non-profit sector, the share of GDP generated by each field changed little during the seven-year period. The social services group, which led all fields during the period, accounted for nearly 26% of GDP for the core segment in 2003.

The development and housing field has consistently held second place, followed by culture and recreation; religion; business and professional associations; and health (other than hospitals). Combined, these six areas of activity accounted for 81% of GDP in the core segment in 2003.

Between 1997 and 2003, economic activity increased at the fastest pace in the large social services group, after education and research (other than universities and colleges). It also rose at a strong pace in all the others, except for the health field (other than hospitals), which experienced sluggish annual average growth of 2.2%. Core non-profit organizations rely on diverse sources of revenues

Between 1997 and 2003, revenues for core non-profit organizations increased at an annual average rate of 7.4%. This was slightly faster than the gain of 5.9% in revenues for hospitals, universities and colleges. The composition of revenue sources was notably stable over the period.

Hospitals, universities and colleges received the vast majority (95%) of their revenue from government transfers and sales of goods and services between 1997 and 2003.

However, organizations in the core non-profit sector relied on a significantly broader set of revenue sources.

As they did in the six previous years, sales of goods and services accounted for 42% of total revenue for the core non-profit sector in 2003. This was followed by government transfers, which contributed a further 20%, membership fees, 17%, and individual donations, nearly 13%.

Membership fees, donations from households and investment income combined accounted for 37% of total revenue for the core segment in 2003. In contrast, hospitals, universities and colleges derived only 2.3% of their revenue from these sources.

The core non-profit sector received the vast majority of individual or household donations — on average over 90% for the period. However, the share of these individual donations received by hospitals, universities and colleges has risen steadily, from only 6.3% in 1997 to 10.1% in 2003.

Provincial governments remained, by far, the main providers of public funds to both hospitals, universities and colleges as well as core non-profit organizations between 1997 and 2003. They provided nearly one-half of all revenue to the overall non-profit sector.

However, the federal share of government transfers to the core non-profit sector rose from 17% to 23% during the period. In 2003, the core segment received over 70% of total federal transfers destined to the overall non-profit sector, up from 67% in 1997. Value of volunteer work: More important than individual donations

Because non-profit groups rely heavily on volunteers, in this analysis the standard measure of GDP is extended to include an imputed replacement cost value of volunteer work. This represents the cost to replace volunteer effort if the same services were purchased on the paid labour market.

Extended measures were estimated for 1997 and 2000, the common years for which both the standard economic accounts and the value of volunteer work are available.

In 2000, the replacement cost value of volunteering was estimated at $14.0 billion in other "in-kind" revenue offered to the overall non-profit sector. This was more than double the $6.6 billion in donations received from households.

Core non-profit organizations mobilized $12.1 billion, or 86%, of this total, reflecting the importance of this resource to this group. This was twice the level of the $5.9 billion in household donations to core non-profit groups in 2000.

If the value of volunteering were included for 2000, the non-profit sector's economic activity would have increased by more than 21%. The value of GDP for the core segment alone would have increased by over 50%. Similarly, the core segment would have accounted for 3.6% of total economy activity in 2000, instead of 2.4%. Majority of volunteering in culture and recreation, social services, religion

The bulk of volunteering was concentrated in three main activities in 2000. Culture and recreation had $3.6 billion worth of volunteer effort, followed by social services ($2.9 billion) and religion ($2.3 billion).

These three combined accounted for 73% of the value of the volunteer work and nearly 48% of paid labour compensation in the core non-profit sector.

The large field of culture and recreation relied more heavily on volunteer labour than paid labour. Conversely, the health field, essentially dominated by hospitals both in terms of GDP and labour income, made use of substantially less volunteer effort relative to paid labour. Religion was almost evenly balanced between the two. Employees and volunteers are the building blocks of the sector's activity

In 2000, the value of volunteer work accounted for about one-fifth of the total value of labour resources used by the overall non-profit sector. In the core sector alone, however, volunteer work accounted for 39%, reflecting the greater involvement of volunteering in this segment.

The extended value of labour resources employed by the generally smaller core organizations represented 5.7% of the wage bill for the Canadian economy in 2000. This compares with 13.2% for the non-profit sector as a whole.

In 2003, compensation of employees in the overall non-profit sector hit $70 billion, up 45.0% from 1997. Between 1997 and 2003, compensation accounted for 87% on average of the overall sector's GDP.

In 2003, labour compensation was the biggest expense for hospitals, universities and colleges ($46.7 billion). In contrast, core non-profit organizations spent much more on goods and services ($25.8 billion) used in the production process than paid labour ($23.3 billion).

This article was published in The Daily, Statistics Canada's official release bulletin. You can access the full text and charts of this article