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As income inequality grows, are charities making the problem better or worse?

ASK THIS | February 16, 2012

Most major charities are surprisingly unresponsive to economic suffering and increased inequality, writes an advocate for more socially responsive philanthropy. In fact, fueled by massive tax write-offs and paying big salaries to top executives, some look more like the problem than the solution.

By Mark Rosenman

In a time of growing economic inequality, Americans could reasonably expect the charitable sector to rise to the challenge and respond to increased needs, especially when the government is too strapped to do enough. But the reality is that too few charities are organized to address the needs of people and communities suffering from economic decline. And those that do want to help are usually the most under-resourced.

Disturbingly, most of the larger and wealthier charities aren't really helping -- and may well be hurting.

The top 2.5 percent of charities that report data to the Internal Revenue Service have over 50 percent of the sector's wealth and bring in over 60 percent of charities' annual revenues. Colleges, hospitals, and primary health-care facilities dominate that top tier. In contrast, human-service groups, which account for more than a third of all charitable organizations, have only about 13 percent of annual revenues and 11 percent of assets.

Meanwhile, the top-tier institutions are doing surprisingly little to address issues of inequality, a falling middle class, and worsening poverty. A quality higher education, for example, is essential to a decent job -- and colleges are supposed to provide fair access as a route to meritocratic success -- but the data shows they are failing to equalize opportunities. Students with high test scores from low-income families are less likely to complete college than those with low scores from affluent families, according to a College Board study. And only five institutions (that's a total number, not a percentage) out of 1,200 examined by the Education Trust were found to be doing a good job serving those low-income students who managed to cobble together tuition.

Health-related crises are among the powerful factors that propel people down the economic ladder and increase economic inequality. But two-thirds of nonprofit hospitals dedicated less than 2 percent of their total expenses to charitable medical care; just 7 percent dedicated more than 5 percent.

Indeed, some top-tier charitable institutions further exacerbate inequality through their own internal practices. Far too many of them pay salaries that put senior executives in the top 1 percent of earners, often while having a large base of staff at or near minimum wage.

In nonprofits generally, the wealthier ones recover charitable donations after bad economic times much faster than smaller ones. Coming out of the recession, higher education enjoyed one of the larger increases in charitable donations, at about 3.5 percent. Compare this with human services, which declined 1.5 percent in spite of contributions in response to disasters abroad.

Adding to the irony, the tax deduction for charitable gifts benefits only those who itemize their returns -- the wealthiest Americans -- while it costs government revenue that might otherwise go to serve people and communities in economic distress. In other words, the deduction itself can be seen as exacerbating economic inequality.

Almost any charity can go beyond its narrow mission and find ways to benefit the broader common good. Creative programming can extend most missions in ways that better serve people in financial distress and help shore up the American dream.

Journalists can probe some of these areas with questions aimed at charitable organizations. Among them:

Q. In this time of spreading economic hardship and growing inequality, do you see financially distressed people as an important part of your charity's constituency/client base/target population/users?

Q. If not, how would you argue that support for your organization ought to receive priority over groups providing assistance to those in dire or rapidly growing need?

Q. Has your organization experienced more of a demand for its services from people facing growing economic hardship?

Q. If not, why do you think that's so?

Q. Given cuts in government funding and the general decline in charitable contributions, what, if anything, are you doing to secure additional financial support allowing you to reach out to provide services to the people who newly need them?

Q. Even if economic inequity and financial decline aren't addressed by your organization's mission, do you see ways you can extend your regular programs to make them more relevant to the falling middle class and those in poverty?

Q. If so, how -- and are you doing it?

Q. Since most charitable organizations of any real size depend more on government dollars than charitable contributions, do you think it appropriate for charities to advocate for themselves and their constituents?

Q. Since so many government budget cuts are driven by concerns about the deficit, do you think it appropriate for charities to push for additional government revenues to be raised through such means as increased taxes on the top 1 percent?

Q. Do you think it appropriate that some charities pay such large salaries that top staffers are in the top 1 percent of individual income earners -- especially when there's usually such a gap between them and the lowest paid employees?

Q. Do you think it wise for government to reduce or eliminate tax deductions for charitable contributions, in order to raise more money for pressing public needs?

Q. Do you think the deduction should be limited to charitable contributions that address particular pressing needs?

Q. Do you think it's appropriate for charitable organizations to encourage their constituency, client base, target population and/or users become more engaged as citizens and voters?

Q. Do you think your organization should have a role in registering, encouraging and educating voters within your constituency?

Q. Some people think that there will never be enough charitable resources to provide the amount and kind of services that our society needs. For them it's important that organizations also work on the causes of problems instead of just trying to take care of their bad effects on people and communities. Does your organization work on both sides of that question, by challenging causes and reducing the generation of need in addition to remediating problems? Should it?

retired engineer
Posted by Ed_B
02/22/2012, 10:36 AM

I notice a reference to a carbon reeducing benefit, ie.. the belief that somehow reducing CO2 emissions is beneficial.

The science is overwhelming.. CO2 is NOT having even a measurable effect upon global temperatures. In fact, CO2 is beneficial in that it increases crop yields which feeds millions more people.

It is time for this blog to face the music, the CO2 scare is not based on current science, but a tired poltical green agenda. It discredits this otherwisde good blog to not be aware of that fact.

BTW, the earth is now cooling, as predicted by NON CO2 driven science!(Check out Dr. Scaafetta))

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