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Emerging “Social Deficit” May Force Charities to Cut Essential Services

Thursday, July 5, 2018
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Two hands, one holding a red leaf and the other holding an acorn. There is a forest in the background.

Canada faces a slowly intensifying crisis. Demand for the essential services provided by charities and nonprofits will rise dramatically over the next decade, but the sector’s revenue streams are not likely to keep up with demand.

By 2026, Imagine Canada, a national organization working on behalf of charities, projects the sector will need an additional $25 billion to meet spiking demand for services. This calculation is based on projected increases being driven by current demographic trends and average annual GDP growth of 1.8 per cent between now and 2026 (based on Parliamentary Budget Office and Conference Board estimates). 

This means charities and nonprofits will need roughly double what they raise today to meet spiralling demand for their services. 

We call this the emerging “social deficit” and, if systemic action is not taken, it will manifest itself in an ever-increasing litany of unmet needs. The cost of inaction to taxpayers will be high when you factor in the enormous financial pressure governments will face within a decade to maintain social services Canadians want and have come to rely upon.

What should be done? The answers lie in understanding the demographic, cultural and economic trends driving demand; the social and economic value of giving charities a voice in macroeconomic policy and the need to reform regulations governing charities. 

Demand side drivers include: our rapidly aging population which is necessitating a major increase in support services; rising transitional needs among a more diverse population of immigrants and refugees; the impacts of climate change on the environment and communities and increasing demand for poverty-related services as the benefits of economic growth is concentrated in fewer hands.

Solving the social deficit largely depends on the deployment of inclusive, equitable and environmentally friendly economic policies. Canada needs income growth that benefits more people, particularly those in marginalized groups who are more likely to rely on services currently provided by charities.

From the perspective of addressing the social deficit, economic policies aimed at raising income levels more broadly would simultaneously slow demand for charitable services and increase the capacity of Canadians to give.

There are serious discussions going on today about the future of our economy. Canadians want the higher standard of living that inclusive economic growth brings. Charities are uniquely qualified to work with policymakers to create economic policies that do more than just trickle down to most Canadians.

Canada’s 170,000 charities and nonprofits excel at inclusiveness and creating social value across areas ranging from healthcare to social services, education, international development and the environment. With a seat at the policy table, charities and nonprofits could make a creative contribution to the government’s development of smart policies that would maximize the synergistic relationship between the sector and the broader economy.

Our sector is also relevant to policy makers because it’s an important engine of jobs and growth, accounting for 8.1 per cent of GDP and a workforce topping two million. The sector also represents 13 million volunteers who give their time and talent to help others. 

Charities offer government a deep reservoir of ideas and capabilities to advance social good. As things stand, however, charities and nonprofits have virtually no voice in economic policy. This must change if we are going to address the social deficit and protect our quality of life, which is the envy of much of the world and a mainstay of Canada’s competitiveness in the global economy.

Fighting the social deficit also requires reforming the regulatory framework governing charities and nonprofits. Regulatory change to modernize the relationship between government and charities is long overdue and is needed to spur the innovation and agility the sector needs to continuously advance efficiencies and service quality. 

Of importance is providing charities and nonprofits with new ways to finance their activities. Priority should be given to creating new social investment or social equity instruments that would ease restrictions on earned income to enhance service capacity.

How we support each other and our communities all contributes to our country’s wealth. Actions to fight the social deficit will benefit millions of Canadians. Inclusive economic growth coupled with regulatory reform is essential to maintaining Canada’s position as one of the best countries in the world in which to live and raise a family.

 

See the #SocialDeficit infographic for more information. 

 

About the Author

As the Chief Economist for Canada’s Charitable and Nonprofit Sector, Brian Emmett is tasked with measuring the impact of the sector and bringing economic issues facing charities and nonprofits to the forefront of public policy decision makers. Mr. Emmett is an economics graduate of the University of Western Ontario and the University of Essex in England, and has enjoyed a long and distinguished public service career. He was Canada’s first Commissioner of the Environment and Sustainable Development in the late 1990s and worked extensively on Canada’s Green Plan. He also served as Vice-President of the Canadian International Development Agency (CIDA) in the early 2000s and has been an Assistant Deputy Minister in a number of federal government departments.

The position of the Chief Economist for Canada’s Charitable and Nonprofit Sector is made possible through funding received by Bank of Montreal, The Counselling Foundation of Canada, The Muttart Foundation, and an anonymous donor.

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