Giving gap reported among high and low income households

The Great Recession is still impacting charitable giving, even as the economy continues to improve. According to The Chronicle of Philanthropy, wealthy Americans earned more but gave a smaller percentage of their income to charity.

The Chronicle used tax information from the Internal Revenue Service to track charitable gifts at state, county, metropolitan area, and ZIP code levels. The study looked at more than $180 billion in donations to charity in 2012 and found that out of Americans earning $200,000 or more, total giving decreased 4.6 percent since 2006. On the other hand, those who earned less than $100,000 gave 4.5 percent more of their income to charity, the report found.

There were some other interesting findings in the report. While giving in the largest U.S. cities declined, it increased sharply in certain areas. Residents in Las Vegas increased giving by almost 15 percent from 2006 to 2012, which was the highest such spike in the country. The report also noted that Las Vegas was hit particularly hard by the recession. Overall, Nevada, Idaho, Georgia, Connecticut, and Florida had the most growth in charitable giving.

Why are the poor more charitable?

The fact that those with less wealth are more likely to give than those with greater resources may seem puzzling at first, but it’s an ongoing trend. A 2010 article from The New York Times reported data from Independent Sector, which found that households earning less than $25,000 annually gave 4.2 percent of their incomes, while those earning more than $75,000 gave just 2.7 percent.

The newspaper cited a study from the Institute of Personality and Social Research, which had similar findings. The less well-off were more likely to give. But the study also determined the psychological factors that went into giving. The result was what the newspaper called a “compassion deficit” that is derived from the groups’ differences inexperience. In other words, because the less wealthy have generally experienced hardship, they understand the need to contribute to charitable organizations more than well-off households.

In an interview with the magazine, Paul Pill, then a Ph.D. candidate at the University of California, Berkley, said the giving patterns could potentially be changed.

Empathy plays a significant role in charitable giving. As such, if nonprofits want to increase donations from the wealthy, they may have to tap into donor emotions in giving campaigns. One key way to do this is by telling stories that demonstrate the impact their dollars can make in the community and sharing these. It’s all about communicating the value of nonprofit programming.

It may require a lot of work across the nonprofit sector to close this charity gap or compassion deficit, but with collaboration and strategic work, it can be done. All nonprofits need to keep these findings in mind when putting together the end-of-the-year giving campaigns. Using donation management software and business intelligence, it may be possible to better segment between different groups and send targeted messages that could increase donations in the long run.