The Social and Economic Impacts of Nonprofits Are Undeniable in the Upper Valley — But Is That a Good Thing?
What drives the economy? Usually, when we think of a thriving economy, we picture private, for-profit companies and a burgeoning bottom line. A mental picture of the Upper Valley economy, however, would be seriously incomplete if the nonprofit sector wasn’t given a prominent place.
“It’s straight-up huge,” said Rob Schultz, the director of development at Vital Communities, a White River Junction organization focused on fostering growth in the region. “(The nonprofit sector is) a major driver for employment in every way.”
There are two major nonprofits in the Upper Valley that employ thousands of people and attract talent not just from around the country, but also from around the globe: Dartmouth-Hitchcock Medical Center and Dartmouth College. While the massive impact of these institutions is undeniable, a host of smaller nonprofits also contribute significantly to the Upper Valley economy and help make the region a desirable area to live and work.
Nonprofits’ Economic Impact
While many people associate nonprofits with charity and minimize their economic importance, they comprise an important component of the U.S. economy. Nationally, 10.2 percent of private employment is in nonprofits. In 2012 — the most recent data available — nonprofits contributed $878 billion to the American economy, accounting for 5.4 percent of gross domestic product, or GDP, according to the Council of Nonprofits, a national organization.
“It’s really important to understand just how huge the nonprofit sector is in every economy throughout the country,” Schultz said. “It’s fundamentally misunderstood by most people what a large part of the economy nonprofits are.”
Both New Hampshire and Vermont have larger-than-average nonprofit sectors. In Vermont, 17.9 percent of the workforce is employed by a nonprofit in 2017, according to Morgan Webster, the director of Common Good Vermont, an organization that serves nonprofits. About 20 percent of the state’s gross product comes from the nonprofit sector, Webster said.
“Vermont’s nonprofit sector is essential to the well-being of our state with over 4,500 nonprofits helping build and sustain healthy communities throughout Vermont and support a thriving economy by generating nearly $6.5 billion in revenue,” she said.
In New Hampshire, 16.7 percent of workers are employed in the nonprofit sector, which contributes $11.8 billion to the state’s gross product, according to a 2016 report by the Independent Sector, a coalition of nonprofits, foundations and corporate giving programs.
“Nonprofits across the state are central to economic development,” said Kathleen Reardon, CEO of the New Hampshire Center for Nonprofits.
The Dartmouth Effect
In the Upper Valley, the economic impact of nonprofits is likely even larger due to two massive nonprofits that call the region home: Dartmouth-Hitchcock Medical Center and Dartmouth College. The medical center, which is the largest private employer in New Hampshire, has 9,000 permanent employees in Vermont and New Hampshire, while the college employs just over 3,000 people.
“The Upper Valley is unique in the dominance of those two nonprofit institutions,” Reardon said. “I can’t think of another community that has such strong dominance of one or two nonprofits.”
Other communities — like Manchester or Burlington — have large hospitals and colleges (which tend to be nonprofits). However, they also have more for-profit businesses.
“There are other strong nonprofit institutions throughout the state, but it’s the proportion (of nonprofits) in the Upper Valley that is different,” Reardon said.
Health care and education are the largest nonprofit employers in general, and that holds true in the Upper Valley, according to Joan Goldstein, commissioner of Vermont’s Department of Economic Development.
“Education and health care are extremely important in terms of the employment that they generate,” Goldstein said. “In the (Upper Valley) region, Dartmouth-Hitchcock Medical Center and Dartmouth College are drivers of the area on so many different levels.”
Although is it hard to find data on the Upper Valley region specifically because the region spans two states and four counties, a 2012 study by New Hampshire Employment Security gives a glimpse into how the college and medical center affect the Upper Valley economy.
The report found that in Lebanon, 27.4 percent of working residents are employed in health care and social services and 19.2 percent work in educational services, both sectors that are largely nonprofit. In Hanover, 38.5 percent of workers are employed in educational services, with 19.4 percent working in health care and social services. In Hartford, 26 percent of workers are in health care and social assistance, while 17.9 percent are in educational services.
Secondary Economic Impact
In addition to the sheer number of jobs they provide, Dartmouth-Hitchcock Medical Center and Dartmouth College both attract skilled workers who in turn bring purchasing power and other economic advantages to the area.
Anne Duncan Cooley, the CEO of Grafton Regional Development Corp., said that both nonprofits provide highly skilled jobs that attract well-paid workers with a high education level.
“The demand for services that highly skilled workers brings includes good schools, good food and a lot of other dimensions to the economy,” Duncan Cooley said.
Reardon agreed, noting that a heavy presence of nonprofits can make an area more desirable to live in, even affecting the real estate market.
“When you think about what drives an economy, it’s attracting companies and people to live, work and play,” she said. “How do people think about communities they want to settle in? They think about assets, many of which are tied to nonprofits.”
The concentration of highly skilled human capital in the Upper Valley leads to innovation in the for-profit sector as well, Duncan Cooley said.
“Having all that knowledge and cutting-edge expertise in the Upper Valley does drive a lot of innovation. A lot of energy in the for-profit sector comes out of nonprofit institutions,” Duncan Cooley said. Many for-profit businesses are established in the area because of the proximity of the college and hospital, and many alumni from the college stay in the area and start businesses, bringing more for-profit businesses to the region.
“There is a real transition of ideas from the nonprofit sector into the for-profit economy,” Duncan Cooley said.
In addition, jobs are generated in the for-profit sector to support those working at the nonprofits. In fact, a 2012 report on the economic impact of hospital systems in New Hampshire found that in Grafton County, alone the total income impact from hospital systems was about $1.3 billion.
Impact of Smaller Nonprofits
It’s easy to see how major institutions such as Dartmouth College and Dartmouth-Hitchcock can boost a local economy. However, smaller nonprofits also factor in the economic well-being of the Upper Valley, not least of all by making the area a more desirable place to live.
“Small nonprofits make a big difference in the quality of life in our rural communities,” Duncan Cooley said.
Nonprofits that support the arts or provide community services, for example, make the region more appealing to skilled workers and thereby support the economic strength of the region, she added.
Schultz, of Vital Communities, points out that even looking beyond the college and medical center, many people in the Upper Valley are employed by small, area nonprofits.
“These are all examples of nonprofits that have a significant employee base with skilled people, and are a very vibrant part of the economy, in a way that isn’t about making widgets,” he said.
Value of Diversity
The medical center and the college both have a huge impact on the local economy, but Bob Flint, executive director of the Springfield Regional Development Corp., cautions against seeing these institutions as typical examples of the economic impact of the nonprofit sector.
“The Upper Valley wouldn’t be Upper Valley without Dartmouth and DHMC,” he said. “But that has less to do with the fact that they’re nonprofits as it does to do with the fact that they’re an Ivy League school and a teaching hospital. Both of those things attract money and cachet, which then fuels other economic activities.”
Flint pointed out that it is more helpful to look at what nonprofits are providing to understand their regional economic role.
“I don’t look at it as a distinction between nonprofit and for-profit, but as sectors,” he said. Health care and education are both sectors that have a big impact on the local economy, and just happen to be nonprofit.
Overall, the health of the economy has little to do with the balance of nonprofit versus for profit businesses, he said.
“You want a vibrant and diverse, positive economy that hits a lot of sectors,” he said.
Schultz agreed, noting that it’s a bit arbitrary to understand an economy in terms of how many nonprofits it has, rather than looking at its overall stability and growth.
“Every nonprofit is really just a business,” he said.
However, some small nonprofits that rely largely on state or federal funding can be left vulnerable to political swings, he added.
“Which is why, if you want to be really secure, you want to be making widgets that you can ship,” he said.
Although the tax burdens are different for nonprofits, it’s difficult to say whether having a larger-than-average number of nonprofits undermines a region’s tax base. The tax situation of each nonprofit varies, said those interviewed for this article.
While some question whether the size of a region’s nonprofit sector has much impact on its overall economic health, Reardon is confident that having an array of nonprofits across sectors strengthens economies.
“There’s no profits without nonprofits,” she said. “We need nonprofits to have strong communities, and strong communities are essential to economic growth. People don’t think of it that way. You couldn’t have any of that without foundation that nonprofits provide.”
Kelly Burch, of Claremont, is a freelance journalist and editor. Her work has appeared in THE WASHINGTON POST, the CHICAGO TRIBUNE, BOSTON magazine, COSMOPOLITAN and elsewhere. Follow her on Twitter @writingburch.