What to Make of New Insights into Pre-Pandemic Giving
In 2020, the American people unleashed a record-topping $471.44 billion in response to the pandemic. The recent Giving USA report, which you can read about here and here, provides an in depth look at giving trends last year. However, a new analysis from the Indiana University Lilly Family School of Philanthropy paints a troubling picture of long-term declining pre-pandemic household giving due in part to declining incomes and shifting societal norms around religion.
While concerning, there are reasons to believe that individual giving could be higher and will rise in the future. Other forms of (informal) giving are not captured by current industry research, but are gaining in popularity. Post pandemic, Americans say they plan to give and volunteer more. If true, this gives us some hope.
The report, THE GIVING ENVIRONMENT: Understanding Pre-Pandemic Trends in Charitable Giving, found that the share of American households which donate to charity has been steadily declining over the past two decades. The share of charitable households fell from two thirds (66.2%) in 2000 to just half (49.6%) in 2018.
The negative financial impact of the Great Recession slowed giving participation rates. Logically, households with lost income, reduced home values and portfolios wiped out by the stock market may have decreased their giving. Just over one third (36%) of the decline in giving participation can be attributed to changes in income and wealth according to this analysis.
The report also points to declines in religious giving, which underpins much of individual giving, as another key driver. As fewer individuals attend religious services each week, fewer dollars are going into offering plates. This is a trend that pre-dates the Great Recession.
How does this compare with Giving USA’s research? The 2019 Giving USA report, which reported charitable donations during the 2018 year and captured different sets of data, does confirm declining trends in individual giving just before the pandemic.
Overall, individual giving was down both as a percentage of total giving (68% down from 70% in 2017) and the percentage of individuals who gave (falling 3.4% when adjusted for inflation). This was largely the result of tax changes that doubled the standard deduction for likely reducing the number of households which itemize and reducing an incentive for charitable giving.
Also, religious gifts fell by an inflation-adjusted 3.9%. Researchers pointed to the growing number of Americans who are not affiliated with a religious group as one of the factors driving the decline in giving.
In 2019, according to the 2020 Giving USA report, as a share of all giving, individual giving fell below 70% for the second time in the reports long-standing history. Religious giving was essentially flat (increasing 0.5%).
Another factor impacting giving participation appears to be age. Indiana University researchers pointed to greater declining interpersonal trust among young people compared to older Americans. That is not to say that young people are uncharitable, but they have less money to give.
The youngest generations also appear to be supporting individuals directly or tackling problems through emerging giving vehicles that may not be employed by established organizations or counted by the industry. Impact investment, cause marketing and crowdfunding, for example, “have captivated younger and more diverse audiences, who may not necessarily trust or respond to traditional solicitation methods from institutions,” according to the Indiana report. According to one estimate, $17.2 billion each year is raised in North America by crowdfunding. The projects that donors come together to fund to completion are as varied as medical bills, scholarships and inventions.
As pertains to the giving participation rates, the question is whether donors to crowdfunding and other new vehicles are truly new donors to philanthropy or whether they give across multiple formal and informal channels. Indiana University researchers explained elsewhere that a significant number of crowdfunding donors give to charity through traditional means as well; only a small portion of them only use crowdfunding. It’s worth noting that it may take more time for these new vehicles to attract new donors. Nonetheless, we should not ignore any type of giving, especially if it could draw into the charitable world demographics that eschew traditional giving destinations.
Americans gave a record-breaking level in 2020 to alleviate the economic hardship that befell millions of Americans. The pandemic also spurred in-kind gifts and mutual aid that we are only starting to process now. It remains to be seen whether last year’s giving participation rates broke through the downward trend. Also, will any uptick in giving be sustained in 2021 and beyond?
We hope that the pandemic may spur a new dawn of charitable giving despite the headwinds of distrust in institutions and falling religious participation. If we look broadly at civic participation, there are reasons for optimism.
Civic participation or giving one’s time, talent and treasure may see a marked increase in support post pandemic. According to a fall 2020 Points of Light survey, the percentage of those who say they volunteered in the past year was 36% before the pandemic, which is about in line with previous Census data. Post pandemic, 60% of people say it will be more important than ever to volunteer. Over half (54%) say they donated to a nonprofit, but 75% say it will be more important than ever to give. These are responses about future actions. Only time will tell whether we see sustained increases in giving and volunteering.
Volunteerism is important to monitor because of its correlation to giving. If younger generations can turn volunteerism and activism into gifts, they could make significant charitable contributions in the future. That remains to be seen.
If nothing else, we must continue to find ways to encourage the spirit of giving and recognize the ways Americans are choosing to give.