"A Guide to Giving"-Charity's Role in the Economy
Monday, February 25, 2008SUSIE GHARIB: Tomorrow is national corporate philanthropy day. The idea is to inspire businesses to take on more philanthropic endeavors. Wal-Mart and its foundation were the largest cash contributor in the U.S. last year, giving away $296 million. Tonight, we kick off our series "A Guide to Giving." Erika Miller looks at who is giving to charity and why those donations are so important to the economy.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: This honors violin class could be taking place in an exclusive private school. But it's actually at Mount Carmel Holy Rosary in East Harlem, one of the poorest neighborhoods in New York City. Thanks to the organization Education Through Music, children here have music class once or twice a week, where there was none before. Many students say the program has helped them improve their grades overall.
SYDNEY DORNER, STUDENT, MOUNT CARMEL HOLY ROSARY: In math you learn beats (ph) and fractions and music is all about that.
AAREN LOVE, STUDENT, MOUNT CARMEL HOLY ROSARY: My experience was better and my schoolwork got better.
MILLER: Philanthropy is not just important to these kids. It's a vital part of the U.S. economy. The latest data shows that charitable giving totals nearly $300 billion a year and represents over 2 percent of gross domestic product. Studies show that about seven out of 10 households contribute to at least one nonprofit each year. High-income families are responsible for about two-thirds of all household giving. Married couples give the most and single men the least. Among households which give, the average total amount is roughly $2,000 a year. Patrick Rooney of the Center on Philanthropy at Indiana University says about 60 percent of that amount goes to religious organizations.
PATRICK ROONEY, DIRECTOR OF RESEARCH, CENTER ON PHILANTHROPY AT INDIANA UNIVERSITY: Interestingly, the one area that is recession proof for the most part, is religious giving, so that people tend to give to their church or their mosque or their synagogue, regardless of where we are in the business cycle.
MILLER: On the corporate side, donations are typically linked to profits. Nationally, that giving has averaged 1 percent of pre-tax income a year, a level that has held steady over the past four decades. Among the most generous corporations is the 5 Percent Club, 3M, Target and other Minneapolis/St. Paul-based firms have been giving that percentage since the 1960s. The biggest beneficiaries of U.S. corporate giving are health organizations, followed by education. Carolyn Cavicchio of the Conference Board, an organization that researches business trends, says firms often want to support their communities and boost their image.
CAROLYN CAVICCHIO, SR. RESEARCH ASSOC. GLOBAL CORPORATE CITIZENSHIP, THE CONFERENCE BOARD: It definitely raises an awareness of their brand with potential consumers as well as existing consumers. If they support a cause or an issue, if they engage in cause-related marketing, companies have seen pretty much across the board, an uptick in sales or an uptick in awareness of the company.
MILLER: She also says charitable giving helps companies attract and retain workers.
CAVICCHIO: I am hearing very uniformly from companies that employee pressure and interest in giving has increased. And that is one of the most important factors recruiters are hearing when they are interviewing top candidates.
MILLER: Another trend is an increase in U.S. corporate donations going to overseas charities, often used as a way to boost sales in global markets. A big concern for many non-profits is the current health of the U.S. economy. But Education Through Music's Executive Director Katherine Damkohler say none of her donors have pulled funding yet.
KATHERINE DAMKOHLER, EXECUTIVE DIRECTOR, EDUCATION THROUGH MUSIC: When they see that we are fiscally responsible, when they see that 81 percent of our money goes to our children, when they see the results that at the end of the day, music education supports learning, they really are very happy about investing.
MILLER: However, experts warn if there is a recession, many nonprofits will get likely take a hit.
ROONEY: What we've seen historically, is that during recessions giving -- total giving -- tends to decline at least on inflation-adjusted basis dollars. It tends to fall between one and five percentage points each year of a recession.
MILLER: There is also increasing competition for fundraising dollars. That is leading many organizations like Education Through Music to do their best to strike a chord with potential donors. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
KANGAS: Tomorrow, our series continues with a look at how to determine if a charity is serving its purpose and deserves your contribution.
