Conditions That May Affect the Outlook for Giving

Each year, a variety of complex conditions influence charitable giving.

This year, we address the research findings on giving patterns following natural disasters, a particularly relevant issue following the wave of natural disasters in 2017. In addition, the “Conditions That May Affect the Outlook for Giving” identifies the stability of each variable used in the forecasting model. The effect of the passage of the Tax Cuts and Jobs Act, a development that will significantly impact the giving environment in 2018 and 2019, is detailed in the special “Potential Impacts of Tax Reform on Charitable Giving” section.

Disaster Giving

Major natural disasters usually receive an outpouring of charitable donations from individuals and corporations.

The series of disasters that occurred in the U.S. and around the world in 2017 raise questions about whether donations for disaster relief will crowd out giving to other charitable causes, and how the events of 2017 will impact giving for any future disasters in 2018 and 2019 due to donor fatigue.

Prior research examining individual/household charitable giving to natural disasters has found no evidence of such a crowding-out effect. In one study, researchers found a positive relationship between giving by U.S. households to support tsunami relief in 2004 and giving to non-disaster causes in 2006 (the next year with available data), controlling for socio-demographics of households.78 A recent study of individual donors in the U.K. confirmed that disaster relief organizations saw an increase in donations during the 20-week period after a disaster, with no offsetting decline in donations to the organizations within five years.79 Non-disaster relief organizations did not experience a decrease in donations over the same period.

Additionally, several studies have found that major natural disasters can actually increase prosocial behavior such as charitable giving and volunteering in the long-term.80 These studies suggest that fundraisers should not expect a decrease in donations or charitable activity more broadly in 2017 or subsequent years due to the fact that numerous disasters took place in 2017.

However, giving to one disaster may crowd out giving to other disasters if they occur in a short time frame. One study examined online giving by U.S. donors in response to a cyclone in Myanmar and to an earthquake in China that occurred one week after the cyclone in May 2008.81 The study revealed that giving for Myanmar dropped faster than the predicted rate, even when the impact of donor fatigue was taken into account. Given the competition for disaster relief donations between closely occurring events that the study found, practitioners should stay abreast of disasters occurring in the immediate aftermath of other disasters and tailor messaging to potential donors accordingly.

Stability of the Variables Used in the Forecast

To estimate charitable giving in future years, we must generate estimates of the economic variables that affect giving.

We can expect the accuracy of these estimates to be higher or lower based on each variable’s historical variance. Deviations in the variables would affect our outlook for giving, and the next section “Conditions That May Impact the Giving Predictions,” explains the changes in the variables that would have to take place in order to change the baseline outlook for giving for each source and the three subsectors. Stakeholders can use these two sections to track any updates to the baseline projections throughout the year.

  • Consumer Sentiment

    Consumer sentiment affects giving by corporations. This variable is generally an unstable economic indicator, meaning the likelihood that the growth rate for this variable will be considerably different than predicted is high.82

  • Corporate Saving and Corporate Profits

    While these variables have significant influence on corporate giving, they are unstable economic indicators. The likelihood that the growth rates for these variables will be considerably different than predicted is high.83

  • Employment

    The employment rate is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this Outlook. Therefore, its predicted impact on giving by corporations is deemed highly reliable.84

  • GDP

    GDP is generally a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this Outlook. Therefore, its predicted impact on giving by foundations and corporations is deemed highly reliable.85 However, GDP may fall if the U.S. economic environment experiences an exogenous shock as a result of recession, disaster, war, or other severe situations.

  • Household and Nonprofit Net Worth

    Household and nonprofit net worth is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this Outlook. Therefore, its predicted impact on giving by individuals/households, foundations, and estates is deemed highly reliable.86

  • Individual/Household Itemizers and Non-Itemizers

    While this variable has influence on individual giving, it is an unstable indicator, particularly in the short-term given the changes in tax law. The likelihood that the growth rates for these variables will be considerably different than predicted is high.

  • Interest Rate for Governmental Securities

    The interest rate for governmental securities has significant influence on estate giving, in particular. This variable is a stable economic indicator. Therefore, its predicted impact on giving by estates is deemed highly reliable.87 This variable plays an overall small role in our predictions, otherwise.

  • Personal Consumption

    Personal consumption affects giving to education. This variable is generally a stable economic indicator, meaning the projected growth rate is not likely to differ significantly from what was predicted in this Outlook.88

  • Personal Consumer Expenditures

    Personal consumer expenditures affect giving to education, health, and public-society benefit. There are many different types of personal consumer expenditures, and the majority are stable economic indicators. This means that for most of these indicators, the projected growth rates are not likely to differ significantly from what was predicted in this Outlook.

  • Personal Income

    Personal income is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this Outlook. Therefore, its predicted impact on giving by individuals/households is deemed highly reliable.89

  • The S&P 500

    While the S&P 500 has significant influence on corporate, individual/household, and foundation giving, this variable is an unstable economic indicator. The likelihood that the growth rate for this variable will be considerably different than predicted is high.90