By Professor John Mohan, Director of the Third Sector Research Centre, School of Social Policy, University of Birmingham.
“At a time when there are great expectations of what voluntary organisations can deliver, the prospect is one of a significant reduction in resources with highly differentiated effects that, in turn, will affect the capacity of those organisations to support those in greatest need.”
One of the heartwarming stories of the COVID-19 pandemic was the outpouring of charitable giving in support of health-related causes – particularly those charities associated with support for workers on the front line. Right now, Captain Sir Tom Moore is once again in the news, with the socially-distanced conferment of his knighthood. In the short term, some health charities have benefited enormously. But what will be the long-term effects of COVID-19 on giving?
Will people still give during a recession?
Everything points to a substantial economic recession. So what effects do economic recessions have on giving? One source for this is data from the USA about charitable giving that covers the Great Depression of the inter-war years as well as various recessionary years in recent decades. The effects of the Great Depression (1929–31) on giving were investigated through a range of sources (e.g. reports of major gifts in the print media; Inland Revenue Service (IRS) returns) but there are broadly consistent conclusions. Charitable giving declined from 1928 – 1933 on a scale proportionate to the substantial drop in the stock market, which clearly had a major impact on the discretionary wealth of the upper strata of society, and on the asset base of foundations. The expenditures of large foundations and community trusts therefore fell by around two fifths over the depression period; there was a similar reduction for major gifts by individuals.
On the other hand, while charitable contributions set against income tax dropped substantially from 1928 – 33, they had more than returned to their pre-depression levels by 1940, suggesting that individual donations were resilient. In fact, tax returns indicate that there was actually little variation in the proportion of disposable income given to charity over time. Americans gave as much as they could to charity, but as unemployment levels rose during the depression years, fewer people were in a position to give anything, contributing to a substantial reduction in giving.
Trends in giving
Research into giving trends in the USA since the late 1960s has also indicated relative stability: the proportion of GDP given to charity has fluctuated between around 1.8 – 2.3% over that time, settling at c. 2% since the recession. A more recent study suggests that the proportion of US households that give to charity has fallen since the Great Recession of 2008-9, and that the amounts each household gave had not risen enough to compensate for the loss of several million donor households.
In short, there is a degree of consistency in the level of charitable giving from the American people, though this must be tempered with the realisation that in recent years there is evidence that fewer households are donating. Evidence from household surveys in Britain for the period 1978-2008 pointed to similar conclusions: the share of total household income given to charities had remained largely stable, and in recessionary periods in the 1980s and 1990s, giving had not dropped in line with the shrinkage of the economy. However, the data used did not cover the end of the 2008-9 recession. The authors pointed to the results as evidence of resilience, while also acknowledging that three decades of stability highlighted the challenges of achieving a step-change in charitable giving.
The future of charitable giving
Thus, these studies give reasons to believe that giving will recover in due course. However, the key here will be the numbers of individuals and households who are in a position to donate. This will depend on the depth and longevity of the impending recession, its effects on the numbers and quality of jobs, and, looking further ahead, on what sort of economy emerges in the future.
We may also see a shift in the causes that people wish to support – for example, COVID-19 has led to an outpouring of support for health-related causes. Is this at the expense of giving to other charitable causes, or is it in addition to it? Will that growth continue or tail off as the pandemic subsides? Early work on donations to food banks suggests an initial surge in giving has not been sustained. And the funding mix of individual charities varies significantly, so their experiences in future will vary by type and size of organisation. At a time when there are great expectations of what voluntary organisations can deliver, the prospect is one of a significant reduction in resources with highly differentiated effects that, in turn, will affect the capacity of those organisations to support those in greatest need.