Non-profit institutions and volunteering: Economic contribution

Economic activity in the non-profit sector, as measured by gross domestic product (GDP), recorded solid growth during the late 1990s and early 2000s, according to data on the economic contribution of non-profit institutions and volunteering.

Between 1997 and 2001, GDP for the core non-profit sector increased at an annual average rate of 7.1%, slightly faster than the average of 6.1% for the economy as a whole. At the same time, economic activity generated by hospitals, universities and colleges grew at a slower pace of 5.4%.

The overall non-profit sector includes hospitals, universities and colleges, along with a widely diverse range of other generally smaller organizations. Hospitals, universities and colleges account for the lion's share of non-profit economic activity. The generally smaller organizations, known as the "core non-profit sector", function in a diverse array of fields and play an increasingly important role in society.

In 2001 alone, economic activity in the overall non-profit sector increased 8.4%, more than twice the 3.2% gain in the economy as a whole. Solid growth in the core non-profit sector of 10.2% boosted overall growth in the sector by a full percentage point.

The GDP of the core non-profit sector, estimated at $25.4 billion in 2001, accounted for 2.5% of the overall economy. When hospitals, universities and colleges are included, this share increased to 6.8%.

Volunteering a significant activity in non-profit sector, especially for the core segment

Because the non-profit sector relies heavily on volunteers to undertake its activities, the standard measure of GDP is extended to include a replacement cost value of volunteer work (i.e., the cost to replace it if the same services were purchased on the paid labour market). Extended measures of the sector's economic contribution were estimated for 1997 and 2000. In 2000, adding the value of volunteer work to GDP increases the overall sector's share of the economy from 6.4% to 7.8%.

In 2000, volunteer labour services contributed about $14 billion, or nearly 18% of the total extended value of the non-profit sector's GDP. Between 1997 and 2000, the total extended value of the non-profit sector's GDP grew at the slower pace of 12.9% than standard GDP, at 16.4%, due to a marginal decline in the overall value of volunteer work.

Notably, core non-profit organizations mobilized over 86% of the overall volunteer effort in 2000 ($12.1 billion). The economic contribution of the core non-profit sector increases from 2.3% to 3.5%, when this value is taken into account. The replacement cost value of volunteer work accounted for about one-third (34.3%) of its economic activity.

The size of both Canada's core and overall non-profit sector exceeds that of certain key industries

Although the non-profit sector is not a specific industry, its GDP can be compared against traditional industries to provide a point of reference.

In 2000, the overall non-profit sector's extended GDP was larger than the mining, oil and gas extraction industry, and the entire retail trade industry. The value of GDP exceeded that of these major industries regardless of whether the contribution of volunteers (the replacement cost value of volunteer work) was included in its valuation.

The extended value of GDP for the core non-profit sector in 2000 was larger than that of the motor vehicle manufacturing, agriculture and the accommodation and food services industries.

Core non-profit sector gained momentum from 1997 to 2001

Hospitals (including residential care facilities), universities and colleges accounted for the lion's share of non-profit economic activity in 2001, as their combined GDP reached $45.0 billion, or over 63% of the total. Hospitals generated twice as much value added, $30.3 billion, as universities and colleges, at $14.8 billion. These primarily large organizations fall mostly into the fields of health and education. As a result, these fields of activity dominate the overall sector's GDP.

However, with average GDP growth of 7.1% between 1997 and 2001, the core non-profit sector was the fastest growing segment. As a result, the share of hospitals (including residential care facilities) and universities and colleges in total non-profit sector GDP has progressively declined, from 65.3% in 1997 to 63.8% in 2001.

Social services on the rise, health in decline in the diverse core non-profit sector

The core non-profit sector, which amounted to $25.5 billion (36.2% of the overall non-profit sector's GDP) in 2001, typically comprises smaller organizations functioning in a diverse array of fields and playing an increasingly important role in Canadian society.

On the whole, the composition of the core non-profit sector by field of activity remained stable between 1997 and 2001. Throughout these five years, the field of social services always led the way, accounting for 23.5% of GDP in 2001. Other industries ranked as follows: culture and recreation (15.1%), development and housing (12.9%), business and professional associations and unions (11.6%), religion (11.4%), and health (7.6%). Together, these six fields of activity accounted for over 82% of the GDP generated by this group.

With an average growth of almost 10%, the social services group was not only at the head of the pack in terms of level of GDP, it was also the fastest growing field over the 1997 to 2001 period, after education and research. Social services organizations engage in the delivery of a multitude of services such as day care, shelters, services for the youth, the elderly, or persons with disabilities. The increase in social services organizations' share in core non-profit sector GDP (from 21.2% to 23.5%) was largely offset by a decrease in the field of (non-hospital) health services (from 10.2% to 7.6%).

Revenue growth of core segment takes the lead

Total revenue for the generally smaller organizations that make up the core non-profit sector grew by an average of 7.5% over the 1997 to 2001 period, exceeding income growth for the overall non-profit sector (+6.6%).

Sales of goods and services rank as the most important revenue source for core non-profit organizations, with significant income also derived from membership fees and donations from households. Over the period, the federal share of government transfers to the core non-profit sector rose, while the provincial share declined. Culture and recreation, business and professional associations, social services, and religion were pockets of strength, with these four groups accounting for over two-thirds of the cumulative income growth in the core non-profit sector between 1997 and 2001.

In 2001, revenue received by core non-profit organizations was up 4.8%, while that of hospitals, universities and colleges, which are primarily funded by provincial government, increased by 4.5%. The environment group (+25.4%) was the star performer in terms of income growth in 2001, followed by business and professional association (+21.2%). Organizations in the education and research field also saw their revenues increase strongly (+18.5%), as did the social services group (+13.5%).

Hospital, universities and colleges get bigger slice of the donations pie

The composition of revenue sources was notably stable over the 1997 to 2001 period. However, hospitals, universities and colleges received increased income in the form of donations from households and businesses over the period, their share in total donations climbing from 13.4% in 1997 to 16.2% in 2001.

Compensation of employees top expense of the non-profit sector

In 2001, outlays of the non-profit sector increased 8.9% to $109.6 billion. As much as 98% of these outlays consisted of operating expenditures incurred to produce goods and services. The remainder was transfers to other sectors of the economy.

Two expenditure categories accounted for nearly 95% of total operating expenditures in 2001. Compensation of employees was the largest and accounted for 56.8% of the total. Intermediate purchases, that is, current spending on goods and services used in the production process represented 37%. The composition of outlays remained relatively stable over the 1997 to 2001 period.

Increased reliance on volunteer work for core non-profit organizations

In 2000, non-profit organizations paid $56.4 billion in compensation of employees and received the equivalent of $14.0 billion in estimated volunteer work — nearly one-fifth of the total value of labour resources employed. The core non-profit sector mobilized over 86% of the total value of volunteer work in 2000, reflecting the key importance of this resource to smaller organizations. It is therefore not surprising that this group's share of the value of volunteer work in total labour services (40%) is twice as large as for the non-profit sector as a whole.

The overall value of labour resources employed by these generally smaller organizations represented 5.5% of the wage bill for the Canadian economy in 2000, compared with 12.9% for the non-profit sector as a whole.

Household donations pale compared with value of volunteer services

Despite a small decline in the value between 1997 and 2000, volunteering continues to represent a considerably larger resource to the non-profit sector than monetary and in-kind donations from households. In 2000, households donated $6.5 billion to non-profit organizations, less than half the estimated value of volunteer contributions of time.

Combining the value of volunteer work with donations from households triples the importance of household transfers in overall sector revenue, from 5.3% to almost 17% of the total. For the core non-profit sector, adding the value of volunteer work increases the importance of transfers from households from 10% to almost 30% of the total.

Culture and recreation attracts the most volunteers; health and education the fewest

As in 1997, four fields of activity accounted for the lion's share of the value of volunteer work in 2000. Culture and recreation led the way ($3.6 billion worth of volunteer effort), followed by social services ($2.9 billion), religion ($2.3 billion), and education and research ($1.5 billion). Together, these four groups accounted for nearly three-quarters of the value of volunteer work but less than 40% of paid labour compensation in 2000.

The field of health, which is essentially dominated by hospitals both in terms of GDP and income, relies heavily on paid labour services as opposed to volunteer effort. Health ranked ahead of all other areas in terms of paid remuneration, followed by education and research.

While these two fields account for the bulk (71.7%) of paid labour services in the non-profit sector, they only benefited from about one-fifth of the value of volunteer work. The dominance of paid labour services in health and education reflects the reliance on skilled labour in these two sectors.

The value of volunteer work fell between 1997 and 2000

The value of volunteer work fell marginally between 1997 and 2000, from an estimated $14.1 billion to about $14.0 billion. The decline in the value was because of a drop in hours volunteered over this period.

Philanthropic intermediaries and education and research organizations experienced the largest decline in the value of volunteer work, down 20% and 17% respectively. The few fields that registered an increase all have small volunteer complements, such as environment, business and professional associations, international, and law advocacy and politics.

In 2000, the value of volunteer work amounted to 1.4% of Canada's GDP, down from 1.7% in 1997.

Available on CANSIM: tables 388-0001 to 388-0004.

Definitions, data sources and methods: survey number 1901.

The full report for the Satellite Account of Non-profit Institutions and Volunteering, 1997 to 2001 (13-015-XIE, free) is now available online. From the Our products and services page, under Browse our Internet publications, choose Free, then National accounts.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the information officer (613-951-3640, iead-info-dcrd@statcan.gc.ca) Income and Expenditure Accounts Division.