The Scarring Effect of the 2008 Economic Crisis: Growth and Growth Decline in Austria’s Nonprofit Social Services Sector

Abstract

Since the 2008 economic crisis, social service providers worldwide have reported funding cuts, while the need for some social services has been increasing. This paper examines the combined and longer-term effects of such divergent developments on the nonprofit social services sector. The empirical analysis uses Austrian administrative data on six subfields of the sector covering the years 2003–2017. We investigate significant changes in the trends of four growth indicators applying interrupted time series analysis. We find that the 2008 economic crisis is associated with persistently lower growth rates in Austria’s nonprofit social services sector. The magnitude of this dampening effect differs across subsectors. Additionally, our findings suggest an increase in market concentration. Hence, the study discloses a long-term scarring effect of the economic crisis on Austria’s social services sector, raising doubts on the sector’s future resilience.

The Organisational Resilience (OR) of Rural Non-Profits (RNPOs) under Conditions of the COVID-19 Pandemic Global Uncertainty

“…Studies show that NPOs have proven resilient in many countries, especially in countries with traditionally strong ties between the state and the non-profit sector [55,56], particularly RNPOs that build their organisational resilience daily under harsh conditions of remoteness and low civilisation. However, environmental conditions have changed significantly over the last two decades due to, e.g., global economic crises or public reforms (see, e.g., [55,56]) and, most recently, the COVID-19 pandemic health crisis. According to Pape et al, (2020) [55], there are three types of responses presented by non- [10,34,39,47,53]).…”

The size–growth relationship in the social services sector in Austria

“…In fact, the social services sector generated on average 6000 (net) jobs per year during 2003 and 2008 and on average about 3000 (net) jobs per year from 2009 to 2017. Lately, i.e., since 2014, the total number of non-profit social service organizations has started to decrease (Pennerstorfer et al 2020). This development could be indicative of market selection within Austria's social services sector.…”

“…In the EU, the social services sector has been among the fastest-growing industries with regard to employment during the last two decades (Eurostat 2020a). Employment growth in the sector has persisted even in times of economic crisis (Hora and Sirovátka 2014;Costa and Carini 2016;Pennerstorfer et al 2020). Yet, so far, this sector has attracted little attention in debates concerned with job creation, firm growth and the relationship of this to firm size.…”

Measuring Growth of the Nonprofit Sector: The Choice of Indicator Matters

“…All Austrian employers have to report gross wages paid to employees in a given calendar year. Wages, on average, account for around 70% of total expenses in the Austrian nonprofit sector with paid employment (Pennerstorfer, Schneider, & Reitzinger, 2015). A pay slip is a sort of employment head count.…”

“…Although not all organizations have sales revenues, it is the most important income category for Austrian nonprofit organizations. On average, sales revenues account for around 72% of total income for an Austrian nonprofit organization that has paid employees (Pennerstorfer et al, 2015). Almost 70% of all sales income comes from public contractors, although there is a great variability between activity fields (Pennerstorfer et al, 2015).…”