Imagine Canada Releases Paper on Charities as an Economic Sector

On June 23, 2015, Imagine Canada released a discussion paper entitled Charities in Canada as an
Economic Sector (the “Paper”) by Brian Emmett, Imagine Canada’s Chief Economist for Canada’s
Charitable and Nonprofit Sector, and Geoffrey Emmett, Research Assistant. It was written to “take a
balanced look at the Canadian charitable sector from an economic point of view.” In doing so, the Paper
emphasizes the important role and scope of the charitable sector in Canada’s economy, discusses
revenue sources for charities, and briefly highlights policy implications stemming from the sector’s role
in the economy. Overall, the authors stress that while charities are not analogous to for-profit businesses,
the impact that they have on the economy is equally strong and is a necessary part of the broader
economic picture.
The Paper begins by highlighting the significant role and scope of the Canadian charitable sector. The
authors define the charitable sector as part of the service sector and emphasize that its growth “reflects
growth in the service sector in general.” For example, the charitable sector’s contribution to Canada’s
GDP and employment is growing faster than many “traditional” sectors, such as construction, and the
charitable sector employs nearly as many people as the manufacturing sector. This section of the Paper
concludes by highlighting the commonalities between charities and small businesses, such as their
relatively small size and the “significant risks to success and continuity” that exist for both sectors.
The Paper then discusses revenue sources for charities. It draws a key distinction between the private
sector, in which customers determine financial success, and the charitable sector, in which “clients are
somewhat passive beneficiaries of funding decisions by governments and donors.” The charitable sector
relies on government transfers, member and donor funds, and the sale of goods and services. It is
interesting to note that the Paper highlights some of the same challenges regarding donations that were
also included in this year’s edition of Statistic Canada’s Spotlight on Canadians: Results from the
General Survey, such as the fact that donors are aging. For more information on the Statistics Canada
report see Charity Law Bulletin No. 362.
The final section of the Paper is a relatively brief overview of associated policy implications. These
include the fact that policy makers should consider the needs of the charitable sector in the same way that they currently consider sectors more traditionally thought of as “economic”. Also, the authors state
that “the full suite of support programs available to small private businesses” should be made available
to the charitable sector. They also emphasize that regulatory and income tax barriers to expanding
earned income and investment opportunities should be addressed and social finance should be expanded.
Finally, the authors argue that the importance of the charitable sector should warrant better data
collection and analysis such as that which supports the small business sector.
Overall, this Paper provides an interesting and needed discussion, which situates the charitable sector as
a key part of the wider Canadian economy. As the Paper highlights, given the fact that the charitable
sector is facing increasing financial challenges, understanding its economic role is an important part of
understanding how the sector can respond and move forward with innovative solutions.