Six things you may not know about the U.S. social sector

The social sector can feel like a black box—even for those of us who work in it. People want to know: Just how big is the sector? What role does it play in the economy? What kinds of organizations make it up?  We created our U.S. Social Sector Dashboard to provide these valuable, big-picture insights. The dashboard answers many of these questions, including more specific ones. It is a resource to support the 12.5 million people working at nonprofits, funders, and other social sector entities, as well as a general education tool to help people understand how this $3.7 trillion industry operates.  

Here are six takeaways about the U.S. social sector from the dashboard: 

1. The U.S. social sector is not synonymous with nonprofits.

The social sector is the domain of private action for public good. While nonprofits are perhaps most associated with the social sector, organizations within it can overlap with the spheres of business and government. For instance, social businesses sell products, make profits, and are usually not tax exempt, but they also operate for the public good. Political organizations such as political action committees (PACs) straddle the line between public and private, accepting private donations in order to influence elections. Over the years, we’ve seen the lines between business, government, and the social sector blur. Corporations are expected to take a stance on social issues, and the government contracts out some social services to nonprofits. The dashboard’s visualization of the sector reflects these overlapping functions.

2. Not all nonprofits are 501(c)(3)s.

People often use the terms “nonprofit” and “501(c)(3)” interchangeably. However, there is also a huge constellation of other types of nonprofit organizations, including labor unions (501(c)(5)s); social welfare organizations (501(c)(4)s, which unlike 501(c)(3)s are allowed to participate in politics); business associations (501(c)(6)s like Chambers of Commerce); and fraternal societies (501(c)(8)s/501(c)(10)s), among others. Still, 501(c)(3)s are by far the most common type of nonprofit, making up 80% of U.S. nonprofits (or 1.4 million out of 1.8 million).   

3. Religious and human services organizations are the most common types of 501(c)(3) public charities.

According to Candid’s Philanthropy Classification System, there are over 318K religion-focused 501(c)(3)s and over 302K human services 501(c)(3)s (making up 18% and 17% of public charities, respectively). [1] Additionally, many religious organizations are not required to register with the IRS, so there are likely far more religious organizations in the social sector at large.  

4. In aggregate, nonprofits rely more on earned income than donations.

When most people think of charities, they think of organizations run on charitable donations. To be sure, charitable donations are critical to the success of most nonprofits. However, in total, earned income (including money earned on programs and services) is the most common way that nonprofits bring in revenue. Specifically, earned income makes up $1.6 trillion dollars in revenue for nonprofits, compared to $428 billion in donations and contributions from individuals, foundations, bequests, and corporations. (Universities and hospitals likely skew this figure, as they are massive organizations that get most of their revenue from earned income). However, earned income—as defined for organizations filing the 990—is an expansive category that includes not only revenue from the sale of goods or services rendered but also government contracts, and other forms of revenue that are not grants and donations.  

5. The majority of nonprofits are small.

About 69% of nonprofits have an annual revenue of less than $50,000. A slight majority of nonprofits (52%) have two or fewer employees, and 43% of nonprofits have no paid employees at all. In contrast, only 8% of nonprofits have annual revenue greater than $1 million, and only 22% of nonprofits have more than 20 employees.  

6. One in five foundation grant dollars goes toward general operating support.[2]

About 22% of foundations’ grant dollars go to funding general operating support, totaling $12.8 billion in funding. Overall, general support is the second-most-funded support strategy. Program development comes in at number one, with $19.4 billion dollars of foundation funding (34% of total funding). In terms of subject area, education receives the most funding at $15.1 billion (26% of total foundation funding), followed by health, which receives $12.6 billion in grants (22% of total foundation dollars). 

What questions do you have about the U.S. social sector? Check out the U.S. Social Sector Dashboard to see if it has the answers you’re looking for. Have a question it doesn’t answer? Feel free to direct suggestions for data and analyses to include in future versions of the dashboard to [email protected].  

[1] Includes all 501(c)(3) public charities registered with the IRS and present on a calendar year 2020 Business Master File. Subject categories are based on Candid’s Philanthropy Classification System. Organizations may receive multiple subject codes, where relevant.

[2] Analysis of foundation funding is based on all grants awarded by U.S. private and community foundations in 2018 and captured in Candid’s databases. Support strategy and subject categories are based on Candid’s Philanthropy Classification System. Grants may receive multiple codes, in which case the full amount of the grant is counted under each category.