Nonprofit organizations: state and regional employment trends

Using publicly available data from the Internal Revenue Service (IRS), BLS was able to identify private-sector nonprofit companies on its business register. BLS linked the IRS’s Exempt Organization Business Master File to the BLS Business Register, by using a variable common to both datasets. Although the IRS lists 29 different classifications of tax-exempt entities, BLS restricted its publication tables to the most common category: 501(c)(3) nonprofit organizations.² Establishments designated as 501(c)(3) organizations through this process are referred to as nonprofit organizations in this article. Establishments not identified by this approach are referred to as for-profit establishments.³

This article focuses on employment estimates for nonprofit organizations at the regional and state level. It begins by examining the state distribution of 501(c)(3) employment relative to overall private-sector employment. Although 501(c)(3) organizations accounted for 1 in 10 U.S. private-sector jobs in 2022, their representation in state labor markets differed considerably. Despite this state-level variation, however, these data exhibit a noticeable regional pattern.

The article then examines the degree of private- and public-sector involvement in the healthcare and education industries. These two industries accounted for 83 percent of all nonprofit jobs in 2022.⁴ The extent to which the private sector participates in these industries may have a significant impact on the distribution of 501(c)(3) employment.

Finally, the article examines the data on nonprofit organizations for the District of Columbia and compares them with those of the 50 U.S. states. The District of Columbia differs considerably from the states in that its nonprofit employment is spread more broadly across different industry sectors. It also has the highest percentage employment in nonprofit organizations.

Unless otherwise noted, the data presented in this article are for 2022, the most recent year available for BLS nonprofit estimates.

Geographic distribution of employment

Nationally, 501(c)(3) organizations accounted for 9.9 percent of all employment in the private sector in 2022. At the state level, the nonprofit share of employment ranged from a high of 25.2 percent (District of Columbia) to a low of 2.8 percent (Nevada). These variations in state-level employment shares exhibit a regional pattern, with nonprofits being more prevalent in certain parts of the country.

To better understand this regional distribution of employment at 501(c)(3) organizations, state-level data are divided among the nation’s four regions, as determined by the U.S. Census Bureau: Northeast, Midwest, West, and South. (See the box that follows for the states included in each region.) Employment at nonprofit organizations tends to be more concentrated in the Northeast and, to a lesser extent, the Midwest, than in either the West or South regions of the country. (See chart 1.)

Among the four regions, the Northeast had the highest percentage of nonprofit jobs, accounting for 15.5 percent of total private-sector employment. Eight of the nine states in this region had nonprofit employment shares that were greater than the national average of 9.9 percent. The only exception was New Jersey, where 9.5 percent of private-sector jobs were in 501(c)(3) organizations. The Northeast states with the largest proportion of nonprofit employment were Vermont (19.8 percent), Massachusetts (17.6 percent) and Maine (17.2 percent). (See chart 2.)

In contrast, the South region had the smallest proportion of private-sector employment in nonprofit organizations: 7.6 percent of private-sector jobs in the South were in 501(c)(3) establishments, less than half the share in the Northeast. Twelve states in the South had shares below the national average. The only exceptions were the District of Columbia (25.2 percent), West Virginia (15.2 percent), Maryland (13.4 percent), and Delaware (11.5 percent), all of which are located close to the Northeast region. The states in the South with the lowest shares of nonprofit employment were Alabama (4.8 percent), Texas (5.1 percent), and South Carolina (5.7 percent). (See chart 2, table 1, and table A-1).

At the regional level, nonprofit employment shares were fairly stable over time. The relatively high proportion of 501(c)(3) employment in the Northeast and Midwest compared with the South and the West was maintained throughout the entire 16-year period for which data are available. From 2007 to 2022, the Northeast had the highest proportion of nonprofit jobs, ranging from a high of 16.6 percent in 2020 to a low of 14.9 percent in 2007. Similarly, the South maintained the lowest share of nonprofit jobs throughout the period, reaching its largest proportion in 2020, at 7.9 percent, and its lowest proportion in 2007, at 6.8 percent.⁵ The other two regions showed similar trends, with the nonprofit employment share for the Midwest consistently higher than the share for the West over the 2007–22 period.

These stable trends in 501(c)(3) employment shares are also generally observable at the state level. For example, the District of Columbia had the highest proportion of nonprofit employment compared with that of any U.S. state over the entire 2007–22 period. The nonprofit-employment share in the District of Columbia reached its highest point in 2013, when it was 27.0 percent. Similarly, Nevada had the lowest share among the states throughout the period, reaching its lowest point in 2007, when the share of nonprofit employment was 2.1 percent. (See table A-2.)

In a 2012 report, researchers from Johns Hopkins University provided a possible explanation for the regional differences in nonprofit employment, arguing that they are partly the result of historical trends in which “the Northeast developed a robust tradition of private, nonprofit colleges and hospitals during the colonial era, whereas the West and Midwest, thanks in part to the network of public land-grant colleges fostered by the federal government after the Civil War, evolved a more robust public college system, and, in the post-World War II period, a significant for-profit health industry.”⁶ The two industries referenced by these researchers—healthcare and social assistance and educational services—accounted for 83 percent of all jobs at nonprofit establishments in 2022. Thus, examining the breakdown between the private sector and public sector for these industries provides insight into the geographical distribution of 501(c)(3) employment. The next two sections look at these two industry sectors in detail.

Healthcare and social assistance

Nationally, the healthcare and social assistance sector accounted for two-thirds of all nonprofit jobs in 2022. For all 50 states, this sector accounted for the largest share of nonprofit employment.⁷ The share of 501(c)(3) organizations in healthcare and social assistance varies by state but generally follows regional patterns similar to those of total private employment in this sector.

Employment in healthcare and social assistance can be partitioned into public- and private-sector jobs. Private-sector employment can then be further broken down into those working at 501(c)(3) establishments and those employed by for-profit businesses.⁸

At the national level, the healthcare and social assistance industry accounted for a total of 22.3 million jobs in 2022. As shown in table 2, 91.2 percent of those jobs were at privately owned establishments. Within the private sector, 501(c)(3) establishments represented 41.6 percent of employment in healthcare and social assistance. As with the data for all industries, the share of nonprofit employment in healthcare and social assistance varied by region and state. (See table A-3.)

The data in table 2 indicate that the private sector plays a larger role in healthcare and social assistance in the Northeast and the Midwest than in the West and the South. In the Northeast, privately owned establishments accounted for 95.0 percent of all jobs. In all seven states with published estimates in the Northeast region, the share of private-sector employment was above the national average of 91.2 percent. The highest share was in Massachusetts (97.2 percent), while New York had the lowest share (93.6 percent).

Similarly, in the Midwest, more than 9 in 10 jobs in health care and social assistance are found in the private sector (91.9 percent). The states with the highest share of jobs in private-sector establishments were Illinois and Minnesota (95.8 percent each). The state with the lowest proportion of jobs at privately owned establishments was Iowa (84.5 percent).

The high private-sector shares in the Northeast and Midwest contrast with those in the South and the West. Although all states in the Northeast with published estimates had private-sector employment shares that were above the national average, only 2 states in the South had shares that exceeded that level: Maryland (96.5 percent), which borders the Northeast region, and Florida (93.4 percent). The remaining 13 states in the South with published estimates had private-sector employment shares that were below the national average, with 3 states having shares of less than 80 percent: Alabama (78.2 percent), South Carolina (75.9 percent), and Mississippi (74.5 percent).⁹ For the South region as a whole, the private-sector share was 88.4 percent, the lowest among the four regions.

In the West, 91.2 percent of healthcare and social assistance jobs were in the private sector, the same as the national average. The percentages for 5 of the 11 states with published estimates in this region were above the national average.¹⁰ Montana had the highest share, at 95.3 percent, while Colorado and New Mexico had the lowest shares, at 84.9 percent each. (See table A-3.)

In the Northeast and Midwest regions, 501(c)(3) organizations accounted for more than half of the private-sector jobs in the healthcare and social assistance industry. In the South and West, where privately owned establishments have a more limited role, the share was significantly lower, at a little more than one-third.

All nine of the states in the Northeast region had a nonprofit share of private-sector employment greater than the national average of 41.6 percent. The highest share was in Vermont, where 66.3 percent of all private-sector jobs in healthcare and social assistance were in 501(c)(3) organizations. New Jersey had the lowest share, with nonprofits constituting 41.8 percent of private-sector employment.

In the South region, only four of the states with published estimates for both public- and private-sector jobs had a share of employment in nonprofit organizations that was greater than the national average.¹¹ Eleven states were below the national average, and the nonprofit share of employment in two of those states was less than 30 percent: Texas (23.1 percent) and Alabama (24.5 percent). For the region as a whole, the 501(c)(3) share of private-sector employment was 34.4 percent.

In the West region, 501(c)(3) organizations contributed the least to private-sector employment in the healthcare and social assistance industry, with a nonprofit share of 32.5 percent. Among the 13 states in the West, Montana had the highest share of nonprofit employment (60.3 percent), while Nevada had the lowest share (16.6 percent). Nevada’s nonprofit share of employment in healthcare and social assistance was the lowest of any state in the nation.

The state-level data show that, in general, as the private-sector share of healthcare employment increases, there is a corresponding increase in the nonprofit share of private-sector employment. (See table A-3.) Chart 3 illustrates the relationship between the degree of private-sector involvement in healthcare and social assistance and the nonprofit share of private-sector employment. The Pearson correlation coefficient for these two variables equals 0.489, which suggests a moderate positive relationship.¹²

The size of the private sector relative to the public sector in the health care and social assistance industry is an important contributing factor that explains the geographic distribution of 501(c)(3) organizations. In the Northeast and to a lesser extent in the Midwest, the larger relative size of the private sector leads to a higher concentration of nonprofits in this industry compared to either the West or the South. There are two likely reasons for these differences. First, the larger relative size of the private sector in the Northeast and Midwest creates an environment more conducive to 501(c)(3) establishments. Second, nonprofit employment increases as the relative size of the private sector increases. These factors lead to a higher share of employment in 501(c)(3) organizations in the Northeast and Midwest.

The correlation between a higher level of private-sector involvement in an industry and the share of employment in nonprofit organizations is not unique to the healthcare and social assistance industry. A similar relationship can be found in the educational services industry, which is examined in the next section.

Educational services

The educational services sector was the second largest industry contributing to employment in 501(c)(3) establishments, accounting for 16.4 percent of all nonprofit jobs at the national level. This industry was also the second largest contributor to nonprofit employment in 47 of the 50 states.¹³ The extent to which nonprofits contribute to this industry at the state level follows similar regional patterns to those cited by the Johns Hopkins researchers for total-private employment data: Nonprofits constituted a larger share of employment in the Northeast and Midwest than in either the West or the South.¹⁴

At the national level, the percentage of government-owned establishments in the educational services sector (76.1 percent) was much larger than the comparable percentage for the healthcare and social assistance sector (8.8 percent). Federally owned establishments play only a minor role in educational services, accounting for less than 0.1 percent of all employment in this sector.¹⁵ In educational services, the vast majority of public sector employment is in state and local government; thus, the estimates on public ownership discussed in this section are limited to the state- and local-government levels.¹⁶

As shown in table 3, within the educational services industry, the Northeast had the largest proportion of employment in privately owned establishments among the four regions: 35.6 percent of jobs were in the private sector in 2022, nearly twice the share in the South (19.8 percent), the region with the smallest proportion of private-sector employment in educational services. The shares in the Midwest (20.6 percent) and the West (22.0 percent) were only slightly larger than that of the South.

Not surprisingly, in addition to having the highest proportion of private-sector employment in the educational services industry, the Northeast also had the highest proportion of private-sector employment in 501(c)(3) establishments. In 2022, nonprofit organizations accounted for 692,969 jobs, or 80.8 percent of private-sector jobs in educational services. The lowest nonprofit share was in the West, where 346,884 jobs were at 501(c)(3) establishments, representing 57.3 percent of private-sector employment in the sector. In the Midwest, 72.7 percent of jobs were at nonprofits, while in the South, the comparable figure was 64.4 percent.

A review of state-level estimates for these regions provides more detail on these findings. Five of the seven states with publishable estimates in the Northeast had a private-sector share of employment that was greater than the national average of 23.9 percent. Massachusetts had the highest share, with 41.8 percent of educational services employment in privately owned establishments. The next highest shares were in Pennsylvania, at 38.0 percent, and in New York, at 37.4 percent. Two states in this region had a share that was below the national average: Maine, at 22.9 percent, and New Jersey, at 23.2 percent.

In terms of the proportion of private-sector jobs in educational services that were in 501(c)(3) organizations, 8 of the 9 states in the Northeast region were above the national average of 69.8 percent.¹⁷ Rhode Island had the highest share, with 88.8 percent of all private-sector jobs in 501(c)(3) establishments. The employment share for Rhode Island was also higher than that of any state in the nation.¹⁸ The only state in the Northeast with a proportion below the national average was New Jersey, where 58.4 percent of private-sector jobs were at nonprofit organizations. (See table A-3.)

By contrast, the South had the lowest proportion of private-sector employment in the educational services sector. Of the 16 published state estimates in this region, only 3 states had estimates above the national average: Florida, at 30.0 percent; Maryland, at 27.3 percent; and North Carolina, at 25.3 percent. Seven states in the South region had private-sector employment shares that were less than 15 percent. West Virginia had the lowest share, with 10.6 percent of all educational services jobs located at privately owned establishments.

In addition to having a private-sector share of employment in educational services that was significantly below that of the Northeast, the South also had a smaller nonprofit share of private-sector employment than did the Northeast. Ten states in the South had nonprofit employment shares that were lower than the national average of 69.8 percent. Florida had the lowest share, with 50.5 percent of its educational services jobs in privately owned establishments

The four U.S. states with the lowest shares of 501(c)(3) employment were all in the West region: Nevada (31.7 percent), Colorado (38.5 percent), New Mexico (38.9 percent) and Arizona (48.3 percent).

A review of these regional and state data indicates that a higher share of private-sector employment relative to public-sector employment corresponds to a greater share of nonprofit employment. The scatter plot shown in chart 4 illustrates this point.

The data in chart 4 show that, for educational services, there is a positive correlation between the share of jobs at privately owned establishments and the share of these establishments that are nonprofit organizations. The Pearson correlation coefficient of 0.449 suggests a moderate positive relationship between these two variables.¹⁹

The findings in this section illustrate how the educational services industry contributes to the observed regional employment differences in the total private-sector share of employment. A larger private sector relative to the public sector increases the scope by which 501(c)(3) organizations can participate. Also, a higher ratio of private-sector jobs corresponds to a higher proportion of nonprofit jobs at privately owned establishments.

The findings for the educational services industry are similar to those for the healthcare and social assistance industry. In both cases, a larger private sector relative to the public sector correlates with an increased role for 501(c)(3) organizations. This observation, combined with the large proportion of 501(c)(3) jobs attributed to these two industries, helps explain the regional patterns in the BLS data on nonprofit organizations.

The District of Columbia compared with the states

The District of Columbia is unique in the distribution of nonprofit employment by industry sector. Whereas the healthcare and social assistance industry accounted for at least half of all nonprofit jobs in every state, this sector is second in terms of nonprofit employment in the District of Columbia, accounting for just 28.4 percent of all 501(c)(3) jobs. (See table A-3.)

The smaller share of nonprofit employment in the District of Columbia is not the result of 501(c)(3) organizations playing a smaller role in this sector—nonprofit establishments accounted for 55.6 percent of private-sector healthcare jobs in the nation’s capital, well above the national average of 41.6 percent. Instead, the greater prevalence of nonprofits in other industry sectors led to the reduced relative weight of healthcare. Specifically, the educational services sector; the religious, grantmaking, civic, professional, and similar organizations subsector; and the professional, scientific, and technical services sector all played larger roles in the District of Columbia compared with those of any state.

The District of Columbia is distinct in that the privately owned educational services sector employs more workers at 501(c)(3) organizations than any other industry. In 2022, this sector accounted for 40,766 nonprofit jobs in the District of Columbia, or 31.5 percent of all employment at 501(c)(3) organizations. The large share of nonprofit employment in educational services in the District of Columbia is nearly twice the national average of 16.4 percent. Among the states, Rhode Island had the largest share of nonprofit employment in educational services, at 25.5 percent.

The large share of overall nonprofit employment in educational services in the District of Columbia can be attributed to the substantial role 501(c)(3) organizations play in this sector.  In the District of Columbia, 92.0 percent of all private-sector educational services jobs were in nonprofit organizations, considerably higher than the national average of 69.8 percent. This degree of nonprofit involvement also exceeds the share of any state. Among the 50 states, Rhode Island had the largest share, at 88.8 percent, followed by Pennsylvania and Massachusetts, at 85.4 percent each.

This high degree of nonprofit involvement in the District of Columbia can be observed in all five of the published industry subgroups within the educational services sector. In each of these industries, the nonprofit share of employment for the District of Columbia exceeded the national average and, in most instances, exceeded the share for any of the states. (See chart 5 and table A-6).

In the District of Columbia, the industry group within educational services with the greatest share of nonprofit employment was colleges, universities, and professional schools. In this group, 501(c)(3) organizations accounted for 99.0 percent of private-sector employment. This figure compares to the national average of 93.9 percent. Four states had a share of nonprofits that exceeded the share of the District of Columbia: Rhode Island (99.5 percent), Massachusetts (99.4 percent), New Hampshire (99.3 percent), and Vermont (99.1 percent).

The industry within educational services with the next highest share of nonprofit jobs was elementary and secondary schools. Nonprofits in this industry, which includes kindergartens, military academies, and parochial schools, accounted for 11,061 jobs in the District of Columbia and 95.1 percent of all private-sector employment in this industry. This share of private-sector employment was higher than that of all but two states and compares to the national average of 83.4 percent. Hawaii (97.5 percent) and Iowa (97.0 percent) were the only two states for which the proportion of nonprofit employment in elementary and secondary schools exceeded the proportion for the District of Columbia.

The District of Columbia is also unusual in the large share of nonprofit jobs found in the religious, grantmaking, civic, professional, and similar organizations subsector. Specifically, this industry constitutes 25.9 percent of all nonprofit employment in the District of Columbia and accounts for 33,495 nonprofit jobs. This sizable share of overall employment at 501(c)(3) establishments is more than 4 times the national average of 6.1 percent. Among the states, Montana had the highest proportion of 501(c)(3) employment in the religious, grantmaking, civic, professional, and similar organizations subsector, at 12.0 percent.²⁰

Within the religious, grantmaking, civic, professional, and similar organizations subsector, the largest industry group in terms of 501(c)(3) employment was social advocacy organizations. This industry encompasses a diverse field of advocacy groups, ranging from drug prevention organizations to hunting and fishing clubs to veterans’ rights groups. In 2022, 83.0 percent of this industry’s employment was in 501(c)(3) organizations, a total of 15,749 jobs. (See chart 6.)

All of the states had similarly high ratios of nonprofit jobs in social advocacy organizations: All published 2022 estimates for this industry group (47 states and the District of Columbia) showed a higher percentage of jobs in 501(c)(3) organizations than they did in for-profit businesses. The share of employment in nonprofits was higher in most states than it was in the District of Columbia. In fact, only six states had a nonprofit employment share that was lower than that of the District of Columbia, with Hawaii having the lowest share, at 60.9 percent. On the other end of the spectrum, Mississippi had the highest proportion of nonprofit employment among the states, at 96.0 percent.

Two other industry groups within the religious, grantmaking, civic, professional, and similar organizations subsector had nonprofit shares of private-sector employment that exceeded the for-profit share for every state and the District of Columbia. One of these groups is the religious organizations industry. For the District of Columbia, 94.4 percent of employment in religious organizations was in 501(c)(3) establishments. Organizations in this industry include churches, mosques, shrines, and synagogues. Among the states, Michigan had the largest nonprofit share of employment in religious organizations (97.4 percent), while Louisiana had the lowest share (60.9 percent).

Similarly, in the second industry group, grantmaking and giving services, there were more jobs at nonprofit organizations than at for-profit businesses in all 39 states that had publishable estimates and in the District of Columbia. In the District of Columbia, 501(c)(3) establishments accounted for 83.0 percent of all employment in this group, or 5,249 jobs in total. This compares to the national average of 88.7 percent. Hawaii and Kansas had the greatest proportion of nonprofit employment in grantmaking and giving services (97.8 percent each), while Texas had the smallest share (74.5 percent).

Within the religious, grantmaking, civic, professional, and similar organizations subsector, the only industry group for which the nonprofit share of employment was consistently below 50 percent throughout the 2007–22 period was business, professional, labor, political, and similar organizations. In the District of Columbia, 28.7 percent of jobs in this industry were in nonprofit entities, more than double the national average of 14.2 percent. Among the states, Kansas had the highest share (30.4 percent), while 13 states had nonprofit employment shares that were below 10 percent. Nevada had the lowest share, at 1.7 percent.

Another industry that contributed to the diffuse nature of nonprofit employment in the District of Columbia over the 2007–22 period was the professional, scientific, and technical services sector. Establishments in this sector offer their clients services that require high levels of training, skill, and expertise, including management and scientific consulting, legal advice and representation, financial services, research and development, and computer and software-design services, among others.

The professional, scientific, and technical services sector represented 8.8 percent of all nonprofit employment in the District of Columbia (11,357 jobs), compared with a national average of 2.3 percent. The District of Columbia share of nonprofit employment in this sector exceeded that of all 50 states, and the two states with the highest shares border the District of Columbia: Virginia (6.1 percent) and Maryland (5.6 percent). In most states, however, this industry’s contribution to nonprofit employment was considerably smaller, and in 13 states, the nonprofit employment share for professional, scientific, and technical services was less than 1 percent.

In the District of Columbia, nearly two-thirds of the nonprofit employment within the professional, scientific, and technical services sector was in scientific research and development services, for a total of 7,439 nonprofit jobs. Nonprofits within this industry include establishments engaged in pioneering research to advance the understanding and development of new processes and products. The next two largest industry groups in the District of Columbia were management, scientific, and technical consulting services (1,391 jobs) and legal services (1,007 jobs).

Conclusion

Although nonprofit organizations can be found in all states and are spread across many different industries, employment in these organizations tends to be more highly concentrated in the Northeast and Midwest than in the South and West. A common factor associated with this greater concentration is a higher degree of private-sector involvement in the healthcare and social assistance industry and the educational services industry. A larger role for the private sector in each of these industries is correlated with a higher nonprofit share of private-sector employment. On a regional basis, states in both the Northeast and the Midwest tend to have higher ratios of private-to-public employment than states located in the West or the South. In general, the Northeast and Midwest have higher shares of total private employment in 501(c)(3) establishments.

The District of Columbia’s nonprofit share of total private employment was greater than that of any state. In addition, the healthcare and social assistance industry accounted for a much smaller proportion of the District of Columbia’s nonprofit employment than it did in any of the 50 states. Instead, 501(c)(3) employment in the nation’s capital is more broadly dispersed among industries. Most notably, the educational services sector and the religious, grantmaking, civic, professional, and similar organizations subsector play a much larger role in the District of Columbia than they do in any state.

This article and the data analysis presented in it demonstrate some of the insights that can be gained from the BLS data on nonprofit organizations. BLS plans to release additional nonprofit tabulations every 5 years. The next release of estimates is tentatively scheduled for 2029 and will cover the 2023–27 period. These estimates will provide further opportunities for analysis of this important segment of the U.S. economy.

Appendix: supplemental data tables