July 26, 2007

31% of Donations by Individuals Benefit the Poor, Study Finds

Less than one-third of the money that individuals give to charity goes to causes that serve the needs of poor people, and wealthy people give a smaller share for this purpose than do other Americans, according to a study released this week.

The study, conducted by the Indiana University Center on Philanthropy and financed by Google, found that contributions to charities meeting basic human needs, such as food and shelter, totaled $19-billion, or just under 8 percent of all donations from individuals.

An additional $58-billion, or 23 percent of all donations from individuals, went to the poor by way of universities, churches, and other nonprofit organizations that serve all segments of society.

Among the wealthiest households, those earning $1-million or more per year, 22 percent of contributions went toward the needs of the poor, compared with roughly 35-38 percent of giving by households earning below $200,000 per year.

The study was based on two surveys: the Center on Philanthropy Panel Study, used to estimate giving for households with less than $200,000 in annual income, and the Bank of America Study of High Net Worth Philanthropy, for households with incomes of more than $200,000.

The panel study included a representative sample of 8,000 households in 2003. The Bank of America study, conducted in 2006, is based on responses from 1,400 households in a random sample of wealthy neighborhoods.

All told, households making at least $1-million per year, which constitute just 0.2 percent of all American households, contributed nearly 15 percent of all donations to causes that help poor people. Households making less than $100,000 — 90 percent of all households — gave roughly 40 percent of all donations focused on the needs of the poor.

To arrive at the estimates of giving to benefit the needy, the study first estimated giving by individuals to all causes, regardless of beneficiary. That total, based on the responses to the household surveys, was slightly less than $253-billion.

The study found that different income groups had different giving priorities:

Households earning less than $200,000 gave a much larger share of their donations to religious causes (whether benefiting the poor or not) and to charities meeting basic human needs than did wealthier households. For example, households making under $100,000 gave 67 percent of their contributions to religious groups, while the comparable figure for $1-million-plus households was 17 percent. Likewise, the less-wealthy group gave 10 percent of all donations to groups meeting basic needs, while the wealthiest group gave less than 4 percent. Wealthier households — those making at least $200,000 — dedicated a far greater proportion of their donations to education and the arts than did less well-off households. Those making $1-million or more gave 25 percent of their donations to education, compared with just 3 percent for households in the under $100,000 category. The comparable figures for the arts were 15 percent for the wealthiest households and just 1 percent for the least well-off category. The very wealthy placed a far higher priority on health-related giving than did people in other income groups. For households making at least $1-million, health causes constituted 25 percent of all donations, compared with 6 percent or less for other income groups.

The study also found that different types of nonprofit organizations were responsible for funneling different amounts to the poor.

Of the $253-billion in giving by individuals to all causes, the study found that, in addition to the $19-billion going to charities meeting basic needs, as much as $20-billion (8 percent of all giving by individuals) to aid the poor was funneled through religious organizations; $17-billion (7 percent) went through United Ways and other general-purpose fund; just under $12-billion (5 percent) went through other organizations, such as international aid charities; $7-billion (3 percent) went through educational institutions; and $2-billion (less than 1 percent) went through health organizations.

The researchers used a complex set of methods and assumptions to derive the estimates of giving that went to the poor through nonprofit groups serving the general population.

Those methods included examining the beneficiaries of a sample of United Ways, Jewish federations, and donor-advised funds at financial institutions; reviewing the founding purpose of health organizations (such as clinics and children’s disease charities); assessing the fraction of educational organizations’ spending on financial aid, literacy, and other programs for the disadvantaged; and estimating the fraction of churches that channel money to community and international organizations.

The study’s authors note that some estimates, particularly for health organizations, should be viewed with caution because it was difficult to determine the income levels of organizations’ beneficiaries. What is more, the authors noted that they may have underestimated by as much as $8.9-billion all giving by Americans to benefit poor people in other countries.

Estimates of giving by individuals did not include donations to foundations.

The report, “Patterns of Household Charitable Giving by Income Group, 2005,” is available free at the Center on Philanthropy’s Web site.