Economic factors can foretell the best directions for nonprofits to take: the locations where nonprofits should plan physical or service shifts as they gentrify or decline; the services that need expansion as industries change, affecting the livelihood of workers; the businesses worth building relationships with as nonprofits’ own needs evolve; and much more. Here, we look at the wider trends driving Georgia’s economy – and how nonprofits can take advantage of them.
Which Georgia economic trends would you like to find out about?
Nonprofit Contributions to the State and National Economy
Nonprofits’ main goal is achieving public benefit. But the sector has also developed into an increasingly important part of the overall economic picture. To get an understanding of nonprofits’ economic contributions toward the state, we look at jobs, job growth, and the state gross domestic product.
Nationally, the nonprofit sector provides roughly 10% of all private jobs in the US, employing close to 22 million people (per Cause IQ). To put this in context, data from the Bureau of Labor Statistics indicate that at the end of 2021 the nonprofit sector was tied with manufacturing (including mining and construction) for second-largest employer in the US.
As of 2022, Georgia nonprofits employed 458,871 people, or 9.4% of the 4.9 million people employed in the state (Cause IQ). You’ll see in the chart below, documenting 2022 employment in Georgia as tracked by IBISWorld, that nonprofits themselves aren’t singled out as a separate sector. However, it is interesting to note that the 2nd, 7th, and 13th largest job-producing sectors in the state are categories where nonprofits are highly concentrated: Hospitals and Social Assistance, Education Services, and Arts and Recreation, respectively.
Nonetheless, at nearly 459,000 total jobs, nonprofits would rank 4th overall in total job numbers for the state, making them a clear industry leader in employment.
However, raw numbers don’t tell the whole story: Job growth rates are also a significant measure of economic impact.
According to Johns Hopkins Center for Civil Society Studies, nonprofit employment grew 8.5% over the decade following the 2007-08 financial crisis, while for-profit sector employment decreased overall by 4.1%. In Georgia, some of the nonprofit sector’s most prolific employers – Healthcare and Social Assistance, Educational Services, and Arts and Recreation – grew a respective 2.5%, 1.7%, and 7.9% from 2021 to 2022.
In terms of payroll, Georgia’s nonprofit sector comes in XXXX again, providing more than $23.6 billion in total compensation and benefits. This compares to [stat XXXX]. No matter how you cut it, the sector provides a tremendous number of stable jobs that contribute significantly to the state’s overall economy.
Georgia’s gross state product (GDP), a measure of economic output, reached $579.7 billion in 2022, marking 2.1% growth over the previous five years. Interestingly, we can look to the sectors contributing the greatest “value-add” to the state’s economy to see both how the state’s economy is evolving and indications of significant risk. For instance, the leading industries in Georgia by share of GDP are Real Estate and Rental and Leasing, Information, and Manufacturing, which produce a combined 38.5% of state GDP. The chart below shows GDP by sector in 2022.
Again, it is worth noting that nonprofit-dominated industries (Healthcare and Social Assistance, Educational Services, and Arts and Recreation) appear 7th, 16th, and 18th respectively. Although it is not separated in formal GDP calculations nationally or in-state, we can assume that the nonprofit sector’s GDP, as a part of these leading subsectors, would rank among the top 20 industries in Georgia.
Economic Disruption in Georgia
The data above serves to position the sector’s role in the broader economic picture of our state. Underlying this data are currents of change that, if examined closely, allow us to understand how our sector might be impacted and how nonprofits might position themselves more proactively to respond to community needs. Here are a few top economic issues and trends that we think nonprofit organizations should be paying attention to.
Trend one: The industries now leading Georgia’s economic evolution
Because a few leading industries play such an outsized role in Georgia’s economic health, nonprofits should pay them close attention – for an array of strategic reasons.
For one, industry growth means a population influx – impacting a range of service needs in any community affected, from affordable housing development to community enhancements (like greenspace and cultural offerings) to affordable childcare (and the full range of health and human services). Similarly, industry decline will influence service needs in the communities that depend on them for employment. In addition, a community’s proximity to certain location-based resources – ports, technical talent production, and other logistical infrastructure – will play a role in the kinds of industries that it can attract and sustain.
These industry developments – growth, decline, and location – also inform the identity of nonprofit clients and nonprofit investors (those “paying” for nonprofit services). For example, a robust community economy with growing local businesses may make it easier for arts and culture entities to generate ticket sales, memberships, and individual donors. By contrast, a decline in local industry may lead arts entities to lean more significantly on government or philanthropic funds.
In addition, industries that drive the economy – statewide or locally – have outsized influence in policy matters. Nonprofits can ally with them to achieve mutually beneficial policy objectives. One example of this can be found in the current shortage of affordable housing across the state, particularly in Metro Atlanta. Local governments, developers, and nonprofit organizations are increasingly recognizing that restrictive, outdated zoning and land-use regulations have suppressed housing supply, driven up housing costs, and widened racial and economic disparities. Leveraging smart zoning reforms and easing building restrictions can unleash housing supply to meet the needs of current and future residents – serving the goals of all stakeholders.
The nonprofit opportunity
Understanding which industries drive the economy locally and statewide can help nonprofits plan more proactively and effectively in terms of risk management, relating to everything from demand spikes to donor and volunteer vulnerability to the potential for both new and declining customer bases. More specifically, that could mean plans for service location or expansion, new customer outreach (e.g. fee-for-service potential), potential impact on clients (e.g. gentrification or unemployment), legislative advocacy partnerships, and expanding donor prospects. Keeping tabs on industries important to the communities you serve, and developing insight into areas of growth and decline, is a strategic necessity.
And because Georgia’s economy is driven by a small number of industries – those that produce the most jobs and contribute most to the state GDP – it’s important to recognize who they are and the outsized influence they have on policy at the local and state level. Nonprofits must consider how industry leaders and their associations can play a role in collaborative advocacy strategies. If your objectives are aligned, the businesses involved in those leading industries (Real Estate, Information, and Manufacturing) can be your most powerful policy collaborators.
For example, potential exists for many nonprofit organizations to deepen partnerships with leaders in the Real Estate, Leasing, and Rental industry to co-formulate, and co-advocate for, policies that meet affordable housing objectives and mitigate negative development impacts, benefiting all three groups (nonprofits, developers, and municipalities). Policy-wise, this could take the form of density bonuses for affordable housing development and/or zoning for greater density in downtown areas. Nonprofits could also work with counties to tap their own land inventory by giving affordable housing providers a “first look” at county-owned land, or by giving first priority for surplus land to affordable housing providers.
Similarly, new entrants into the state’s economic growth portfolio (like the rising EV industry) present opportunities for new partnerships – to enhance acquisition competitiveness, find new customers, achieve impact goals through expansion strategies, target new donors and philanthropic partnerships, and more.
Trend two: Rising inflation and interest rates
Beyond specific industry influence, the state is not immune from macroeconomic forces that impact business and society at large – though a particular state’s economy can mute or amplify the effects on businesses and people. That goes for this trend and the next (hybrid workplaces).
The rate of inflation has consequences for the entire economy. Nonprofits are particularly vulnerable to inflation because they cannot react to rising prices the way businesses can. The twist is that inflationary periods cause three intertwined impacts: increased demand, declining contributions, and rising costs. These factors force nonprofits to make tough decisions: cut programs, cut staff, eat into reserves, or risk insolvency.
But financial juggling isn’t inflation’s only impact. Because inflation means that every dollar is worth less, one typical reaction across the nonprofit sector is to increase outreach to donors, which in turn influences their giving priorities. This may result in donors shifting their historic areas of focus, tightening grantee partnerships, or becoming more targeted geographically, among other changes. We saw this type of philanthropic shift during the height of the pandemic, when organized philanthropy focused more on general operating grants, loosened requirements, and broadened qualifications.
Interest rates also have a huge impact on nonprofits. Access to capital at reasonable rates is a big issue, and government funding is an important source of capital for many nonprofits. However, a major downside of government funds is that they are largely reimbursement-based, meaning that work is performed (and staff are paid) prior to disbursement. This means that nonprofits must “float” thousands of dollars – sometimes tens of thousands – for months at a time. Nonprofits close this gap with lines of credit that mostly offer variable rates. As interest rates rise, so does the cost of capital for nonprofits, impacting their financial health and the rationale for continuing those services.
In addition, inflation disrupts budgets for nonprofits that hold variable rate loans for buildings or other assets, raising sustainability issues. And as lending restrictions tighten at banks, and creditors impose more stringent qualifications, nonprofits that cannot routinely show typical “profits,” or those with few assets, find it hard to secure credit anywhere.
Simultaneously, the effects of rising inflation and interest rates on individuals and families – in the form of layoffs, cost-of-living spikes, housing affordability, and tighter credit – can cause both sudden and sustained community need increases.
The nonprofit opportunity
Nonprofits likely see both a yin and a yang impact as a result of rising inflation and interest rates. As demand for basic needs grows, donors may shift support from areas they consider “nice-to-haves,” like the arts, to those providing emergency assistance like rent or transportation. On the positive side, place-based funding strategies often engage and support grassroots nonprofits, which diversifies and strengthens the field as a whole.
When nonprofits understand the give-and-take of economic turbulence in their own sector and in terms of for-profit companies, they can seize singular or collaborative opportunities to achieve goals – a highly proactive (and largely untapped) strategy.
Understanding inflation’s impact on corporate players can uncover opportunities to become an integrated partner by supplying outplacement, retraining, or basic needs support for an industry’s workforce. Rising prices might affect the corporate giving and volunteerism that your organization relies on, but certain businesses may be more open to in-kind donations of services or goods (think vehicle or building maintenance, food, etc.). Another area to consider capitalizing on is the reuse and redevelopment potential of older office complexes as work styles and worker generations shift (see below).
In addition, nonprofits should explore deeper collaborative networks that focus on lowering costs. Health care collaboratives, collective buying, collaborative management, and outsourcing programmatic elements to narrowly focused or hyper-localized agencies are good ways to lower the overall cost of service as the expense of financing and operating continues to grow.
Trend three: Hybrid workplaces as the “next normal”
Although many workplaces are demanding workers return to the office (at least in part), it is safe to say that the workplace has forever changed. This change certainly has positives for workers and communities, including greater work-life balance control, less traffic, etc. However, there are local economic impacts that can largely be seen as negative. We consider two here.
First, depopulated work locations means a big drag on commerce related to work travel and workplace centers. Fewer people working at a downtown office means that businesses depending on those people – like restaurants, shops, and dry cleaners – earn less. Less business travel translates into fewer hotel rentals, less catering, and less “expensed” spending on entertainment. This hurts local economies and local tax revenues, which can translate into less revenue for nonprofits, especially in terms of individual giving and local government support. [expand this thought using local data]
Second, commercial real estate is being transformed as a result of hybrid workplace policies – alongside factors like rising interest rates, increased need for affordable housing, a shift in the common understanding of “livable communities,” and a new generation of employees. In Atlanta, like a number of other metro areas, older commercial buildings are emptying as employers seek new spaces featuring the amenities and flexible layouts conducive to a new style of work and a lower workplace headcount. The future promises an overabundance of older commercial space with the potential to be redeveloped into housing, centralized community service centers, and other imaginative reuse scenarios.
The nonprofit opportunity
Nonprofits would do well to collaborate in considering reuse and redevelopment potential for affordable housing, childcare, or even transitory housing solutions. In addition, certain buildings might be used to house the offices of multiple nonprofits, similar to the “coworking” concept of Roam or WeWork. However, the costs may outweigh the benefits of reuse efforts. In addition, many properties could be demolished, opening the way for redevelopment as parks, greenspace, or community gathering hubs, among other ideas.
Find out about all the latest sector developments in the rest of our 2023 Sector Trends Report