Visiting Scholar Arthur C. Brooks

You have to be living in a cave to miss the news that America's economy is increasingly rocky. Crises in housing, credit, and financial markets are now threatening to increase unemployment. Indeed, the Labor Department reported last week that jobless claims are now at their highest point since September 2005.

In New York State, unemployment in February ticked up by 0.1% over the same time last year, and threatens to move higher. Consumer confidence is at its lowest point in five years, which is particularly distressing for the producers of so-called "pro-cyclical" luxury goods such as vacation travel, which many people eliminate first when times are tough.

Nonprofit leaders tend to view these figures with a mix of alarm and dread, logically figuring that charitable giving--which constitutes between 20% and 80% of the revenues for various parts of the charitable sector--might be lowered or eliminated by many donors as an expendable "luxury" expense. For New York's nonprofits, this is especially worrisome.

The good news is that evidence shows that many millions of Americans do not treat charitable giving as an expendable luxury. These are religious folks, the third of Americans who attend their house of worship every week or more. According to the 2000 Social Capital Community Benchmark Survey of 30,000 American families, a 10% decrease in income leads to almost exactly a 10% decrease in giving. In other words, a recession hurts, but it doesn't do disproportionate harm to the charity of the average religious American.

This is good news not just for houses of worship, but for nonreligious charities as well, because religious people are America's big givers. In 2000, by 25 percentage points, the religious people were more likely to give than secularists, the 27% of Americans who attend less than a few times per year, or have no religion. Religious people gave nearly four times more dollars per year, on average, than secularists.

These enormous differences are not a simple artifact of religious people giving to their churches. Religious people are more charitable in every measurable non-religious way than secularists. For example, in 2000, religious people were 10 points more likely than secularists to give money to explicitly nonreligious charities, and 21 points more likely to volunteer for secular causes.

The bad news for New York's charities is that we are a relatively godless state, and our nonprofits must rely on the giving by secularists. One way to demonstrate our secularism is in the number of houses of worship per capita. Nationwide, this number is 1.15 per thousand citizens. In some places it is much higher, such as North Dakota, 2.23, or Arkansas, 1.99. Out of the 50 states, however, New York comes in 42nd, at 0.60. Most unchurched of all is California, at 0.41.

A low level of religious observance is one of the reasons why New York is not an excellent performer in charitable giving even in the best of times. Internal Revenue Service data show, for example, that New York State sits in the bottom half of the nation with respect to the percentage of income donated to charity.

None of this is to say that New Yorkers are stingy by any international standard. In point of fact, no country comes even close to Americans, even secular New Yorkers, in terms of private giving. In some parts of New York, giving is actually at or above the national average because of high wealth and a culture of elite philanthropy.

For example, IRS records show that tax-deducted charitable giving among those living in Manhattan comes to 4.5% of income, while in Westchester County it is 2.8%, which is very close to the average level across all American states for middle class families.

Most of the rest of New York State, however, falls below national averages. In general, New Yorkers give only a fraction as much of their incomes as do the citizens of highly-churched states such as Utah, Alabama, and Texas.

In tough economic times, the giving problem for New York nonprofits worsens. Unlike religious folks, secular people do tend to treat giving like a luxury, giving more when times are good--but a lot less when times are bad. Indeed, a 10% income decrease for the average secularist leads to a 14% decrease in charitable giving. This might pose an especially troubling prospect for the New York nonprofits that rely on gifts from folks in the financial industries, which promise to be especially hard hit by the looming crisis.

Most charities will survive the financial downturn if history is any indication. However, some will experience more pain than others, especially here in New York. As we head into the trough of the business cycle, we can forgive our nonprofit leaders for wishing they lived in Texas.

Arthur C. Brooks is a visting scholar at AEI.