Philanthropy and a Changing World Part II: Tracking the American Economy
By: Susan Raymond, Ph.D., 10/15/04

This is the second in a six-part series examining how changes in the economic and social environment of America in the coming two decades will impact philanthropy and the non-profit sector.

It is difficult to say anything with precision about a $10 trillion economy, apart from the fact that it will be $11 trillion at some point in time.  But, although precision eludes us, general directions are clear.  Let us look at three dimensions to chart those directions.

Between now and 2012, the Bureau of Labor Statistics (BLS) predicts that the top 7 fastest growing industries will cluster in only three areas: computing, health care, and management services.  Employment in software, computing systems, and internet services is projected to grow by more than 50%.  The losing occupations?  Some are expected (agriculture and textiles).  Some are not.  BLS predicts that the next decade will see a 40% decrease in jobs for word processors, since we are all word processors now!  But, a decade ago, word processing was a “technology” skill.  As the pace of technological change quickens, standing still will not be an economic strategy.  It is dangerous business to think about employment in terms of skills when the definition of “skills” changes rapidly.

A recent study at the Federal Reserve Bank of New York (FRBNY) offers a second, more sobering way to look at change in the U.S. economy.  The FRBNY analyzed U.S. employment in terms of the changing composition of industries.  But they categorized industries not in terms of goods and services, but in terms of whether they were subject to “cyclic” or “structural” employment change.  All healthy economies operate in cycles, with periods of growth and periods of quiescence.  “Cyclic” means that an industry loses and gains jobs through business cycles.  “Structural” means that an industry loses jobs and does not gain them back through business cycles because the nature or structure of the economy (or industry) changes permanently.

In the mid-1970s, 50% of U.S. employment was in industries subject to structural change.  Today, the FRBNY estimates that 80% of employment is in structural change industries.  Four out of 5 jobs are in industries where job loss will not be replaced with job gain as business cycles change.  Jobs lost in those industries are not coming back in those industries.  Employment is in flux.  Further evidence can be found in the emergence of the temporary job market.  In January 1972, the temporary personnel supply industry posted 214,000 jobs.  In September 2000, that number was 3,965,000, a 1753% increase!  Of course, those jobs come without benefits, pensions, training, or income stability.

The third changing dimension of the U.S. economy is globalization.  U.S. exports rose 34% between 1996 and 2000.  Using 1996-2000 data from the U.S. Department of Commerce as a base, and the median annual change as the projection method, the value of U.S. manufactured products exports may exceed $1 trillion in 2015, more than double its inflation-adjusted value in 1996.  The value of services trade may add another 2/3 of a trillion dollars in 2015, and perhaps more if current global negotiations to ease non-tariff barriers to services trade succeed.   These are issues to track in the future.  Globalization is important today, and not just in Silicon Valley.  One in 14 workers, and one in 5 manufacturing jobs depends on exports.

What happens in foreign markets matters to the U.S.  The ability of the U.S. economy to change and adapt to foreign markets matters to the U.S.  The focus of U.S. business is no longer only the streets just outside the plant gate.  The focus is on the streets thousands of miles away.

What are the implications of such economic change for philanthropy?  Let me suggest four.

First, what will “community” mean in the future?  In a global knowledge economy, what matters is not where you live or what you have done in the past. What matters is what is between your two ears.  When everyone must be ready and able to change rapidly, when employment is insecure, when the link between employer and employee (and his/her family) is tentative and even temporary, when the focus is the globe not the locale, what will it mean for philanthropy to look for “community” partners?

Second, what will be the wages of personal economic insecurity?    How will structural change and the “temping” of the economy affect families?  What new pressures will emerge on families and on children?  Combined with a loss of well defined “community” how will such stresses be manifest and managed?  (Part 4 of this series will return to these issues in more detail.)

Third, the impact of economic change may have differential impact that does not track philanthropic interest.  Rural areas will be most deeply affected by economic change.  Yet, most philanthropies are not located in rural areas, and indeed do not care at all about rural areas.  The problems of rural America, even those of small-town America, are not prominent on the philanthropic map.  California and New York are home to many of the nation’s largest foundations.  The Foundation Center lists 10,352 New York foundations and 7,508 foundations in California.  Rural development is an expressed interest of 9 foundations in New York and 4 in California.  There are 209 foundations listed in Montana, to pick a rural example.  Only 17% of them have annual giving in excess of $100,000.

Finally, competence in math and science will be the key to future individual economic success.  By “competence” I do not mean “skill” because skills will change.  I mean the ability, even the propensity, to engage in jobs or functions with a significant degree of math or science content.  Math and science will not simply be important to chemists, engineers, and biotech whizzes.  They will be central to even understanding the world in which we will live.  For all of our concern about educational and societal flaws and errors of young people about attitudes and behaviors that exist there should be matching concern about capabilities and attitudes that may not exist, including competence in math and science.

There are, of course, more problems to worry about than there are neurons with which to do the worrying.  The argument is not that U.S. philanthropy and its nonprofit recipients should begin throwing their current portfolios over the side of the ship.  The argument is that economic changes facing the nation have profound implications, and it is time to start understanding and embedding those changes within philanthropic priorities.

Sources

Raw data: U.S. Department of Labor, Bureau of Labor Statistics; U.S. Department of Commerce, International Trade Administration

EL Groshen and S Potter, “Has Structural Change Contributed to a Jobless Recovery?” Current Issues in Economics and Finance, 9:8, 1-8.  Federal Reserve Bank of New York.