Philanthropy’s Missing Middle – Characteristics of MidLevel Donors (part 2)

Since the birth of our nation, charitable giving has been a defining characteristic of Americans at all socio-economic levels.  But a worrisome trend has appeared over the past two decades: total charitable donations are increasing in absolute terms, yet the share of American households who give has fallen significantly from a high of 68% in 2002 to less than 53% of households today.  This “donors down, dollars up” phenomenon means that donations are coming from a much smaller pool: the very wealthy.

Research by institutions such as the Indiana University Lilly Family School of Philanthropy shows households with lower levels of education, income, and/or wealth stopped giving during the Great Recession (when Giving USA reported an 11.7% drop in inflation-adjusted giving by individuals) and simply have not returned to philanthropy.  The Lilly Family School also cites decreasing congregational affiliation and attendance as an explanation.  Religious donors tend to give more regularly and generously than the American average of 2% of disposable income, but due to the drop in affiliation and attendance, giving to religion has fallen from 47% of all donations in 2000 to 29% today.

The Lilly Family School’s research looks in detail at donors earning less than $100,000 annually who generally give less than $2,000 a year, but lumps all other donors (who provide possibly 80% of total philanthropic dollars) into a single “$100,000+” category.  I posit that this category should be divided further between “High Net Worth” donors who earn at least $200,000 annually, who are the subject of frequent surveys, and “MidLevel” donors who earn between $100,000 and $200,000 annually, because each of these groups displays particular giving behaviors.  To this end, I partnered with Dr Cal Halvorsen of the Boston College School of Social Work to commission a survey of 1,260 individuals who gave between $2,000 and $20,000 in 2019 (generally considered by fundraisers to be in the mid-size range of giving), with the intention of focusing specifically on those earning between $100,000 and $200,000 annually.  Each week, I am publishing an article about this often overlooked and underserved demographic.

This week let’s further examine the 44% of the Boston College Survey respondents who earn between $100,000 and $200,000.  In my previous article, we saw that:

32% gave between $2,000 and $5,000
29% gave between $5,000 and $10,000
25% gave between $10,000 and $15,000
13% gave between $15,000 and $20,000

We also learned that the $10,000 to $15,000 giving level – seen as pivotal by many fundraisers – became most popular when donors began earning $150,000.  This substantial annual income is only achieved by 15.5% of Americans yet is still well below the minimum annual income of $200,000 to be considered High Net Worth by the IRS.

MidLevel donors maintained or increased their giving – particularly at higher giving levels

The good news is that 94% of respondents earning between $100,000 and $200,000 gave the same (32%) or more (62%) to charity in 2019 than in the previous year, and 96% have given the same or more in the past five years.  A key reason cited by 70% of this group was a “major change” in their personal financial situation.  And even more encouraging, 79% of respondents in this earning category who experienced a significant improvement in their financial situation in 2019 then chose to increase their giving.

Not surprisingly, it was at the higher giving levels that the most donors increased their giving year-on-year.  At the critical $10,000 donation level, half of respondents moved from “I gave about the same,” the dominant answer at lower giving levels, to “I gave more.” And at the highest $15,000 to $20,000 donation level, an impressive 77% of donors gave more.  Conversely, among the small number of donors (6%) who were less generous in 2019 than in 2018, the majority (64%) gave at the lowest $2,000 to $5,000 level.

These findings uphold the well-publicized notion that a donor’s personal financial situation is the single greatest determinant of giving.  Indeed, 97% of all respondents – who had donated at least $2,000 in 2019 to qualify for the survey – claimed to be in good, very good or excellent financial health.

 Younger mid-level donors gave more than older generations, especially retirees

When giving trends were correlated with age, the Boston College Survey results directly contradicted another well-publicized belief, as described in the Lilly Family School’s Changes to the Giving Landscape 2019 which states, “When evaluating overall giving by generational cohorts, it is clear that older generations give larger percentages of their income to support philanthropy in America.”

We divided our respondents into three age groups:

37% ranged in age from 35 years (the minimum age to participate in the survey) to 49 years
26% ranged in age from 50 years to 64 years
37% were over 65 years old

By far the greatest number of donors who gave over $10,000 in 2019 were in the “under 50” generational cohort.  An impressive 58% of annual donations at the highest $15,000 to $20,000 level came from donors under age 50 – despite their representing just over a third of the sample.  75% of donors in the under 50 age group had increased their giving over the past five years.  Some of this generosity can be explained by the greater wealth of survey respondents under age 50 – there were almost exactly the same number of respondents under age 50 as there were over age 65, but 56% of the under 50s earned $100,000 to $2000,000 and 21% were High Net Worth, as opposed to only a third of those over 65 earning $100,000 to $200,000 and 13% identified as High Net Worth.

However, our findings were reinforced when we focused on retirees.  Contrary to research done on High Net Worth donors, retirement does not appear to lead to more generosity from Midlevel donors.  Though representing 32% of our survey sample, retirees provided only a fifth of donations over $10,000.  And among retired respondents, half gave at the lowest level of $2,000 to $5,000 (just over a third of donors in the workforce gave at the lowest level).  These lower levels of generosity can be explained partly by the lower annual income of the survey’s retiree respondents – 36% earned between $100,000 and $200,000 as opposed to 52% of the working respondents; only 8% were High Net Worth.  One may therefore conclude from the Boston College Survey that middle-aged MidLevel Donors are giving generously , which bodes well for the future and appeases the fear that the Millennial generation will not catch up with the giving levels of its older counterparts.

Changes to the tax law seem not to affect MidLevel Donors

Much has been written about the potential negative effect of the 2017 Tax Cuts and Jobs Act on charitable donations.  But when asked “How did changes in the tax law influence how much you gave in 2019?”, 63% of respondents said it had no effect and only 10% noted they gave less.  Since we know that most taxpayers who earn over $100,000 itemize, and since 60% of the Boston College Survey respondents earned over $100,000, we can safely conclude that the 94% of respondents who gave the same or more in 2019 were motivated by something other than a tax deduction.

In a pre-COVID world, this week’s analysis of results from the Boston College Survey of MidLevel Donors would give great hope for the future.  Despite being overlooked by researchers, underserved by philanthropy advisors, and increasingly ignored by fundraisers, MidLevel donors, particularly those under 50, were showing signs of growing generosity in April 2020 when the survey was conducted.  The question now is whether this generosity will continue as they experience the painful effects of potential job loss and a post-COVID recession on their personal finances.

My next article will examine how MidLevel donors give.

 

 

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