Leading experts weigh in on current policy issues and challenges

How to Think About Personal Giving Capacity

Scholars and practitioners are now casting fresh light on the question of how individuals’ sense of personal wealth, well-being, and resource capacity shape their giving decisions. Instead of simply considering how to increase the aggregate totals of individual giving – the persistent 2 percent of our national GDP – we must consider more critically how we might expand the base out of which giving could be taken at an individual level. How do objective and subjective measures of personal giving potential relate? What is the relationship between understandings of personal and communal charitable capacity? Are there policy or behavioral measures that could be taken to increase these measures?

The Urban Institute is talking with...
Gasby Brown Gasby Brown
Angela Eikenberry, PhD Angela Eikenberry, PhD
Jonathan Meer, PhD Jonathan Meer, PhD
Melinda Rolfs Melinda Rolfs
Piyush Tantia Piyush Tantia
Benjamin Soskis, PhD
Moderated by:
Benjamin Soskis, PhD
Research Associate, Center on Nonprofits and Philanthropy at the Urban Institute

Happy Giving Tuesday, everyone!

We’ll soon be hearing about how much money was raised today, and there will likely be some big numbers involved. We’ll need to think about how those figures fit into the larger totals of aggregate charitable giving.

And so today is not just a time to give, but to reflect on how we measure giving.

One way that we make sense of aggregate charitable giving totals is to favor proportions and ratios. The most prominent of these is the stubborn 2 percent figure: for at least the last four decades, total charitable giving as a proportion of GDP has hovered around 2 percent, as has total individual giving as a proportion of personal disposable income.

Discussion of these measures, and of the ways to increase them, tend to focus on the nominator: the part of a particular whole that was directed toward charity. This, after all, is where the ethical imperative seems to inhabit.

But with that focus, we have often overlooked the denominator: the whole out of which the charitable part is taken.

In this Policy Debate, we will focus on that whole, what we’ll call personal charitable resource capacity.

That capacity can be understood in both objective and subjective terms, as a function of quantifiable financial or economic measures, such as household wealth, and as a reflection of more qualitative dimensions, shaped by feelings of security and well-being. A sense of personal resource capacity can inform Individual giving decisions, as can an estimation of communal charitable resources.

We’ve invited a distinguished group of scholars and practitioners to reflect on the nature of charitable resource capacity. We’ll consider how it can be measured and how it can be shaped toward the end of increasing giving. And we’ll grapple with how conceptions of resource capacity intersect with concerns about equity and democracy within the charitable sector.

In other words, and using a metaphor that should feel somewhat familiar if you gorged yourselves like I did over the Thanksgiving holiday, we’ll be thinking about the makeup of the charitable pie, as opposed to the size of the slice we actually consume.

It should be a terrific, spirited conversation.

Melinda, why don’t you get the conversation rolling? Can you tell us how you might define and measure individual giving capacity in the U.S.? Are there historical trends that you can identify with respect to that capacity over the last few decades? What do those trends suggest to you?

I think about individual giving capacity as inclusive - the ability for all Americans to give based on their personal income less what they’ve paid in taxes and spend on personal consumption. Using this simplistic calculation, Americans have over a trillion dollars annually that could potentially go to nonprofit organizations in the form of donations, according to publicly available data. However, since the future is hard to predict, savings, which act as a safety net, are an important aspect of financial security and need to be factored into the equation. Using a savings rate of 6 percent (the average rate from 2009 – 2016), there is over $400 billion of annual individual giving capacity.

The growth in individual giving capacity (personal income less taxes, personal consumption expenditures and savings) fluctuates with economic trends and has a 67% correlation to GDP growth. While income growth is important, so are people’s attitudes towards spending and saving.  Since the 70s and 80s, Americans are spending more as a percentage of disposable personal income (DPI) and saving less, based on data reported by U.S. Department of Commerce.

Historically, the savings rate (savings/DPI) has fluctuated significantly from double-digits in the 70s and early 80s down to a low of 2.6 percent in 2005. When the great recession hit in late 2007, it served as a reminder to Americans about the importance of savings, which rose to 7.6 percent of DPI in 2012, with an average of 6 percent from 2009-2016.

There is an enormous opportunity to increase individual charitable giving in the U.S. Small percentage changes to income, consumption and savings can have a significant impact on funds available to give. Due to the law of large numbers, a 1 percent change in the savings rate or spending would result in approximately a $120 billion impact on giving capacity.

I agree with Melinda that inclusion is so important. Unfortunately, African Americans and other diverse people are viewed as "recipients" and not "donors" in our wonderful philanthropic world. One of the most overlooked segments in philanthropy is the African American population. Past studies have shown that:

  • Approximately two-thirds of giving is conducted via the Black church.
  • African Americans who give to churches are twice as likely to give to outside causes.
  • Giving is more closely attributable to need rather than race.
  • Virtually all African American fraternities and sororities are devoted – in large measure – to service.
  • Except for donations to the church, giving tends to be more responsive rather than pro-active.
  • African-American congregations are more likely to assist individuals and organizations outside their own church.
  • African-American philanthropy tends to focus on community-building, personal financial assistance, and aid to congregations.

The latest 2016 U.S. Trust Study of High Net Worth Philanthropy, done in collaboration with the Indiana University Lilly Family School of Philanthropy, proves that one size does not fit all when it comes to high net worth philanthropy. It has practical applications to which we must pay attention.

For example, the study found that African American high net worth philanthropists are significantly more likely to monitor or evaluate the impact of their giving – 39 percent compared to 29 percent Latino and 21 percent White. The practical application here is that communication is key.

Forty-two percent of African American high net worth individuals are significantly more likely to plan to increase their contributions in the next three years, as compared to 24 percent for White high net worth individuals. The practical application here is that cultivation of potential donors is critical within the philanthropic space.  

Additionally, 67 percent of African Americans and 42 percent of Latinos report being significantly more fulfilled by their charitable giving. This trend may be attributable to the emphasis on giving in African American and Latino churches

Building on Melinda’s response, much has been done in recent years to encourage people to, on the one hand, consume less and shift funds over to charitable giving—an example is the Effective Altruism (EA) movement; and on the other hand, merge consumption with giving such as through cause-related marketing (CRM). The tenets of EA, inspired by Peter Singer’s work, are to “do more good” and do so by applying evidence and reason to determine the most effective ways to do the most good. An example of CRM is the pink products campaign organized by the Susan G. Komen Breast Cancer Foundation, where for each product sold, a corporation or business contributes a small share of proceeds to the cause. EA and CRM have grown exponentially in recent years and clearly have helped causes raise money.

I wonder about the long-term impact of EA and CRM on individual giving capacity. In both cases, individual donors or consumers seem to have little incentive to confront how larger structures might create the social problems supposedly addressed with giving or consumption or why the beneficiaries of a cause are in need in the first place. Might this hinder inspiration and motivation to give? Further, especially with CRM, “helping” is equated with individual choices about consumption for one’s own benefit rather than giving something up to help another, perhaps devaluing the moral core of generosity and ultimately limiting a person’s charitable giving potential.

So, we might be able to shift consumption towards giving, or blur these categories to increase giving capacity, but it’s unclear if it will ultimately lead to making the giving pie bigger.

These are great responses, Melinda, Gasby and Angie. Each of you conceptualized personal giving capacity in slightly different ways. Melinda focused on individual income (less taxes, personal consumption and savings). Gasby emphasized the need to include underrepresented communities within the givers whose "charitable capacities" we seek to tap. Angie grappled with the relationship between personal consumption and giving capacity. 

Before we dig deeper into these conceptualizations, I wonder if there are other variables and measures we might consider in thinking about the size and composition of the “charitable pie." Are there other objective financial measures? And are there subjective measures of well-being that we should include as well?

 Melinda also mentioned the correlation between personal giving capacity and GDP growth. Based on how we define personal giving capacity, are other correlations evident?


This has been a really interesting conversation so far!

From an economist’s perspective, charitable giving is a part of consumption like any other, though somewhat strange given that one isn’t (generally) “purchasing” something. I don’t want to get sidetracked into motivations for giving, at least not yet, so I’ll try to focus on the notion of giving capacity.

There’s a pretty strong positive correlation between income and giving – both the likelihood of giving and the number of dollars given. Things are a bit trickier when looking at the proportion of income donated. Many of those in the data with very low incomes but high giving are not truly low income; that is, they may be high-net-worth elderly whose income flow is low but whose resources are high, or business owners in a down year whose current income is not reflective of their longer-run capacity.

In recent work with my undergraduate students, David Miller and Elisa Wulfsberg, we examined the impact of the Great Recession on charitable giving. Specifically, we looked at whether individual circumstances, like changes in income or wealth, explained the significant and sustained drop in donative behavior during that time. We found that those person- (or family-) specific attributes didn’t come close to accounting for the whole drop in a household’s giving. We speculated that broader trends, like increased uncertainty, led people to cut back on their most discretionary expenditure – namely, charitable giving.

Interesting discussion so far. Here's a behavioral perspective and some data from a small poll we ran last year:

Melinda makes an important point about the capacity for Americans to give. Her $400bn estimate stands in contrast to the $258bn in actual gifts made in 2014. Meanwhile, as Angie noted, we’re presented with more opportunities to increase or stretch our giving each year. Research suggests that many people may fully intend to give more than they actually do. Last year, ideas42 polled 500 people and asked how much their neighbors should donate in a given year. Interestingly, respondents' average giving target was 6% of income - double the current donation rate.  This figure implies a collective intention to give as much as $500bn.

We can draw insights from behavioral science to understand – and close – this gap in giving. Like all decisions, choices around whether and how much to donate are heavily influenced by the unique features of each situation. For example, we may receive a request to give in the mail and want to respond, but if our checkbook isn’t handy or we’re out of stamps, it’s likely we’ll put off this task to later and never get to it. Simple fixes like a reminder can help donors follow through, boosting campaign participation by as much as 50%. Similarly, offering easy-to-use payment options can dramatically change behavior.

Many organizations are already applying such insights to help donors be more generous in one-off giving situations. We believe we can push behavioral insights even further to help donors make more informed and deliberative decisions across the board. For example, most people don’t know offhand how much they’ve given this year or how that compares to how much they’d like to give. Just as concerning, donors can end up supporting some organizations without much thought and miss donating to the causes that matter most to them. Behaviorally designed solutions like goal-setting and plan-making could help address these issues and support not just more giving, but a capacity for better giving. 

Thank you, Gasby, for bringing up overlooked segments in philanthropy and highlighting African Americans’ contributions to philanthropy. Another often overlooked segment is women. More research has and is being done through the Women’s Philanthropy Institute to shed light on women’s philanthropy and challenging some assumptions we have about women’s giving. They’ve found, for example, that women are more likely to give, and to give more, than men in similar situations. Women also tend to prefer to be more engaged in their giving rather than just writing a check.

This explains why giving circles or collaboratives (GCs) have been an attractive giving vehicle for women. GCs involve groups of individuals collectively donating money and sometimes time to support organizations or projects of mutual interest. Importantly, members have a say in how funding is given and which organizations or projects are supported. GCs also provide a structure through which members may conduct collective research on potential funding beneficiaries and learn about grant making and community issues. Our recent research on the landscape of GCs shows that the number of GCs are increasing and women continue to be the majority of participants. There are also a growing number of GCs formed around gender, race/ethnic, and religious identities.

Giving circles integrate some of the behavioral science strategies noted by Piyush—they can make giving a more regular part of someone’s life, and make giving more deliberative, easy, and even fun. Previous research found that participating in GCs seems to influence members to give more overall, give more strategically, and give in different issue areas than is typical for donors who are not giving as part of a GC. They also increase members’ knowledge about philanthropy, nonprofits, and the community, resulting in GC members being more highly engaged in the community.

Thanks everyone for the terrific discussion yesterday (and for the fine addition this morning). I want to pick up on something that Jonathan mentioned about the relationship between a sense of “uncertainty” and giving capacity. This suggests to me the importance of allaying feelings of (financial?) insecurity in trying to boost charitable capacity. I’m curious what the behaviorist implications might be for that aim. After all, by many measures, Americans really are financially insecure, due to stagnant wages, rising costs of education and health care, etc. We can obviously try to address those causes and in doing so, will likely indirectly expand giving capacity. But are there other sorts of resources that we can also turn to, communal resources, and those of social capital more generally, that could help grow the size of the charitable pie?

And this leads me to a point raised in Angie’s recent post this morning. Does giving capacity change when individuals give as members of a larger group? How might conceiving of givers as members of a community or collective shape our understanding of giving capacity or of the charitable resources that might be at their disposal?

I want to focus on the question of giving as a group, because there’s a lot to unpack there. Several well-documented mechanisms underlying giving affect giving when a group is involved. Social pressure, social norms, and the desire to signal group identity can increase giving. There are also reductions in search and transactions costs when giving as a group – if a prospective donor trusts the judgment of the group, he or she doesn't have to do their own research on the quality of the charity and will likely give more.

On the other hand, free-riding can be an issue. If I see that “people like me” are giving a lot to a particular cause, then I can rest easy knowing that a problem that I care about is being dealt with and pull back my own giving. Further, social distance (the perceived degree of closeness between individuals or groups) can be a double-edged sword. While I’m more likely to have similar preferences to others in my group, donations may be less likely to be directed to causes that have impacts outside of the group.

It is great how this discussion is touching on many different aspects of giving. I would like to elaborate on what Piyush said about offering easy-to-use payment options and how it can dramatically change behavior. We have seen a change in how people are giving in our Donation Insights report and dataset. Annual growth in online giving outpaced total giving since we started this analysis in 2010. Online giving grew 9.3% in 2010 compared to total giving of 3% - a 6.3% spread, while in 2016, the spread was just 2.7%- so the gap has narrowed over the years. However, when we compared the growth of online giving to the growth in online retail sales growth reported by the U.S. Department of Commerce, charitable giving has underperformed from 2010 through 2016. Therefore, it appears there is a lot of room for charities to grow their donations received online.

Melinda’s discussion of online giving prompts another question on my end. What can we say about the form giving takes and its relationship to giving capacity? Does our sense of the charitable resources at our disposal change when we are giving online, doing person-to-person giving, engaging in checkbook giving, etc? I know, for instance, that my own thinking about the discretionary “funds” I have access to is shaped by whether I’m using a credit card or digging into my wallet or paying by check. How might this apply more specifically to charitable giving? Does the charity pie seem bigger or larger when we give online or offline?

While everyone is mulling over my last question, I want to throw one more out there. If we follow the economists and take charitable giving to be just another form of personal consumption, what can we say about its relationship to other forms of consumption? If we are trying to expand the charitable pie, do we need to explicitly address how much Americans are spending on other goods and/or services in order to shift some of that spending into the charitable realm?

This is a really fascinating question. Understanding how, where and why people spend and donate can benefit charities. For example, in recent years the U.S. consumer has shifted away from buying products to consuming services. This is evident by the outperformance in spending on experiences versus items starting in 2013, which can be discerned by analyzing personal consumption expenditures reported by the U.S. Department of Commerce. Additionally, younger generations are influenced by social good. According to recent research from DEFY Media and TMI Strategy, 34% of youth stopped following a brand on social media because of their lack of social responsibility. 76% said they stopped using a brand after unfollowing it. Nonprofits could benefit from understanding this consumer psyche when looking at their own branding, marketing and offerings to donors.

I want to respond to Ben’s earlier questions about giving as part of a group and Jonathan’s follow up response. Patterns of giving often reflect that people give to causes with which they can identify and are physically or emotionally attached. Schervish and Havens found in their research, for example, that the more closely donors are associated with a charitable cause and the more intensely they feel the beneficiaries of their giving share a fate with them, the greater the amount of giving. Jonathan also makes the point that people are more likely to have similar preferences to others in their group and so may be less likely to direct donations to causes that have impacts outside of their group.

We found in our past research on giving circles that they may create empathetic connections between donors and beneficiaries through participation in the group that leads donor/ members to give to issues and areas they may not have given to otherwise, or that are typically not supported to a large degree by most donors. For example, our survey data showed that giving circle members were more likely than a control group of non-GC members to support women and girls, ethnic and minority groups, and organizations that support or promote arts, culture, or ethnic awareness. This is in part explained by the fact that giving circle member respondents were also more likely to be women or persons of color than control group respondents; however, findings also showed that as length of time in a giving circle increased, all giving circle respondents were more likely to report giving to non-white ethnic or minority groups. We need to tease out further what exactly it is about the GC that leads to this shift, but it seems a lot of it has to do with folks learning about and from issues and people they may not have interacted with otherwise.

In 2016, Sara Konrath, PhD released some interesting research on psychological motives for giving and volunteering. Her work details the psychographics of individual groups by age and economic status. Her research has impressed me a great deal because this is the kind of data used by marketing departments of consumer goods corporations around the globe. There is plenty of data on demographics in philanthropy but not enough on psychographics.

Konrath’s research found that younger adults are more motivated than older adults by egotistical concerns, such as looking good. They are also more likely to say that they do not give because of financial constraints. So, if these populations are your prospective donors, it would make sense to speak to these motives.

Older adults are more motivated than younger adults to donate for altruistic and social reasons. They give because they want to help, and because giving is important to the people dearest to them. But before you assume that they are saints, older adults also give to get tax benefits. Trust in the charitable organizations to which they give is a universal value for donors, regardless of age.

Konrath, along with Lilly Family School of Philanthropy colleagues Sasha Zarins and Meng-Han Ho, also looked at an example of how narcissistic people give through responses to the 2014 ALS Ice Bucket Challenge. The challenge, wherein participants would challenge one another to either dump a bucket of ice over their own head or donate to The ALS Association, became a viral sensation. According to Konrath, The ALS Association received almost 34 times the amount of donations in August 2014 ($94.3 million) as they did in August 2013 ($2.7 million).  This represented 2.1 million new donors. 

Konrath and her colleagues examined whether narcissism was related to the type of commitment made by those who accepted the challenge. Those who posted just the video without a donation scored the highest on narcissism. Those who donated without posting a video scored lowest on narcissism. These psychographic observations are very helpful to non-profit organizations in crafting annual appeals and crafting fundraising strategies, and can also be useful for corporations in determining buying patterns and consumer priorities. 

First, I wanted to go back to Ben's point about uncertainty being a major barrier when making a decision to donate (or any decision, for that matter).

In addition to uncertainty about future expenses and needs, people may have uncertainty around how much in savings is “enough”. There are calculators that can help with planning retirement savings and rules of thumb about how many months of expenses to keep in shorter-term savings. But guidelines can vary quite a lot, especially when it comes to short term savings. How does one know how much of one's income or wealth is "extra"?

A deliberative approach to giving can address this uncertainty by encouraging people to set a giving target upfront -- perhaps based on a percent of income. This would essentially create a separate mental account for charitable giving so that donations aren’t competing with savings or discretionary consumption in the day-to-day. People might also be more careful about how they disburse funds that have been earmarked for charity, seeking out higher-impact causes to support.

I'd also like to follow up on Ben’s earlier question about the form of payment. There is indeed research that shows we are willing to spend more when we use a credit card versus the use of cash. The convenience of plastic might make people more likely to give, and the delayed pain might make them give more. However, it’s important to note that this research looks at one-off, potentially impulsive, purchases. If people are planning their giving in advance, or they habitually give to a cause frequently, the form may not matter as much.

Another effect of the form of payment is connection. ideas42 affiliate Avni Shah and her colleagues have found that when we use more “painful” or effortful forms of payment, such as cash or check instead of simply swiping a credit card, we end up feeling a deeper connection to the product we purchased. They also look at some data that suggests the same holds true for charitable giving, though these are not experimental results.

What a great question, Ben. My thoughts are humming...

Affirming existing structural inequities and challenging them represent positive disruption in a wonderful way. The fact of the matter is that the existing structural inequities are the challenge.  I would like to see an exponential increase in the “stickiness” of the messages and research regarding the importance and viability of inclusion in the philanthropic sector.

The value of different voices and points of view strengthen boards; however, we are not seeing enough men and women of color represented on non-profit boards, in addition to  leadership staff, volunteers, and donors. I have seen a little progress in this regard, but not nearly enough.

The data about African American, Latino, LBGT, and Asian American high net worth individuals' giving and motivations that appeared in the 2016 U.S. Trust Study on High Net Worth Philanthropy I referenced in my earlier post was collected for the first time in the history of the study. This study was the sixth in a series of biennial studies.  It started in 2006. While we are very pleased that the over sample was conducted, the study leaders will agree that it has taken a long time to get to this point of racial and gender inclusion. We have a lot of catching up to do!

It will start with forging relationships with people who don’t look like each other and valuing those differences. I am visibly shaken when a non-profit leader tells me they are “color blind”. What a ludicrous notion when it comes to inclusion! The idea is to recognize and respect our differences while appreciating our commonalities. The non-profit sector will be enriched by this age of enlightenment. Let’s embrace it.

Thanks again to all those who participated in this Urban Policy Debate. Our focus was on personal giving capacity and it was striking to see the various approaches and perspectives that we took in our posts to engage that theme. We addressed both the objective measures that could define personal giving capacity (personal income less taxes, personal consumption and savings, as Melinda suggested) as well as subjective ones, such as economic insecurity or uncertainty. And we discussed an approach to boosting giving capacity that was rooted in a commitment to inclusivity—to making sure that everyone felt respected as a giver.

In all these emails, one sub-theme that emerged was the sense that there was in fact a much larger pool of charitable resources, subject to discretionary spending, than what was being tapped. Or perhaps another way of saying this is that giving capacity seems less like a static figure than a fluid one, expanding and contracting based on a range of variables—not just financial confidence but logistical convenience; not just individual generosity but social pressures and ties of kinship and community. Ultimately, it doesn’t seem that we yet have a clear idea of how large the charitable pie really is. Our exchange suggests a range of new research avenues and really highlighted the challenge of grappling with the charitable denominator. To borrow the phrase with which Gasby concluded her last email, “Let’s embrace it!”