Volunteering in a downturn
| March 12th, 2012If you want to make the case for the value of volunteering, there are broadly two lines you can take.
Arguments for the value of volunteering
The first is to argue that volunteering has a social utility, and the second is to argue that volunteering has an economic utility. Traditionally, people have tended to use the first line: that the merits of volunteering lie in its value to society. However, over the last quarter of a century or so the second line, pointing to the economic value of volunteering has gained credence.
As the 2008 economic downturn bit, a curious thing happened. These arguments became enmeshed. Many people in the voluntary sector began to argue the economic value line when it came to inputs (what’s needed), but continued to argue the social value line when it came to outputs (what results). Conversely, many policy makers began to argue the social value line when it came to inputs, but went on to argue for the economic value of volunteering when it came to outputs.
This is how it worked:
Volunteering advocates
As investment in volunteering came under pressure with the downturn, so advocates for volunteering highlighted even more vigorously the need for financial investment in volunteer management and infrastructure. The reason they cited for this financial investment was the social value of volunteering, not the economic value of volunteering.
In fact, when it comes to economic value, many in volunteering were resistant or even sceptical about the merits of expressing volunteering’s outputs in economic terms, pointing out it exposed volunteering programmes to all kinds of unwelcome comparisons involving job substitution and exploitative work practices, devoid of social value.
Policy makers
On the other hand, policy makers seized on the need for volunteering to become much more socially acceptable and valued as an input. This new embrace of volunteering across society they argued was vital at a time of economic fragility. In fact, the economic situation meant we didn’t have any other choice. If policy could remove the social barriers to volunteering, it made economic sense as a value for money solution. In fact, volunteering could actually produce a return on investment.
So how did we get to this point?
The search for clues as to how volunteering advocates and policy wonks got their economic and social value arguments intertwined, takes us back to the 1960s. In the 1960s, economists started to become concerned with the decline in the UK’s manufacturing base and the relative growth of the services sector.
This concern grew and grew into the 1970s and 1980s. Economists at this time had become used to dividing economies into three parts:
- the extraction and production of raw materials
- the transformation of raw materials into products
- the provision of services to consumers and businesses
With the growth in the relative importance of the services sector of the UK economy, attention was turning to the cost of labour in delivering services. While increasing labour costs could be covered by productivity gains in manufacturing, in services where productivity was often flat, it was not so clear how an increase in wages could be paid for out of productivity growth.
An artist’s labour
In 1966, a couple of American economists called William Baumol and William Bowen published a study called: Performing arts, the economic dilemma: a study of problems common to theater, opera, music and dance. In it they argued that the arts faced a problem in how in it covered the costs of input (wages), through earned income from the output of the arts. Baumol and Bowen argued that this was because an artist’s labour could not be rendered more productive, as was the case with manufacturing industries.
To illustrate this, Baumol and Bowen used an example that has become seminal in modern economics. The example, they chose was a string quartet performing Mozart. This string quartet, they said, requires the same amount of labour today as it did 200 years ago. It requires the same amount of people and same amount of time to perform.
From this standpoint, the classical musician is as productive today as they were 25 years ago, while a technician in a car production plant is many, many times more productive today than they were a quarter of a century ago. Baumol and Bowen concluded, in what was later termed Baumol’s cost diesease that the arts, which is intrinsically labour intensive, is destined to have a flat productivity rate, now and going into the future.
Baumol and Bowen were fascinated with how despite having a flat rate of productivity, the performing arts managed to survive as its costs increased. Conventional economic wisdom explained that manufacturing industries could afford to pay higher wage costs to those providing the labour through increases in productivity.
This productivity growth was often based on at least five factors:
- Technology improves over time
- Capital investment
- Skills of labourer develop
- Management of production process is refined
- Economies of scale can be made
Industries with productivity growth can afford to pay higher wages without always charging higher prices. However, more labour intensive services such as education, health and social care face an income gap as they increase wages to keep up with other sectors of the economy. The result is that industries where productivity is flat, costs and prices just keep going up. This affects everything from football tickets to repairing worn out products through to nursing.
Baumol’s cost disease
Baumol’s cost disease helps explain this sense that there are two economies, rather than one. There’s one where we’ve got used to paying less for more for manufactured goods (such as from supermarkets or clothes shops), while we pay more for the same for services (such as the theatre, child care or train fares). Labour intensive services can become more efficient.
They can improve their use of technology, invest in new equipment, skill up, improve management and merge. However, in labour intensive services where productivity is flat, these measures tend to only have a marginal or short term impact. Instead, sooner or later, and particularly in an economic downturn when money’s tight, attention turns to measures that reduce the cost of labour (typically services biggest single expense). Other than increasing productivity, this can be down in a number of ways, including:
- Decreasing the quality of the service
- Decreasing the quantity of the service (supply)
- Increasing price charged for the service
- Increasing amount of unearned income (e.g. grants, donations, etc)
There was also a fourth way to combat higher service costs without huge increases in productivity. In the economic jargon of the time this was to increase the non-monetary compensation of those offering their labour to provide the service. This meant offsetting wage costs with non-monetary compensation such as training or perks, but it also meant involving volunteers and interns.
Volunteering and the services sector
As the services sector grew in the UK, so volunteering and interning began to become sucked into economic strategy. The idea that you could attach an economic value to volunteering, suddenly took it out of the gift economy and placed it squarely within the services sector. As the services sector of the UK has expanded, so did many voluntary and non-governmental organisations who began familiarising themselves with the growing sector they found themselves in.
As volunteering expanded through the 1980s and 1990s, it had begun to catch the eye of policy makers and think tank wonks. Increasingly policy makers became interested in the economic value of volunteering to the UK economy. The focus on the economic value of volunteering also suited the interests of those in the up and coming volunteering sector who wished volunteering to better recognised and appreciated.
Having a better way of understanding the economic value of the output of volunteering, provided the evidence base they required for arguing for greater financial investment in volunteer management and infrastructure. As Susan Ellis, a key volunteer management advocate put it: “Many resent the hold that the dollar has on our thinking and would prefer to live in a world in which human activities would be assessed and esteemed on the basis of their contributions to others. But we don’t live in such a world yet. Only things we value in dollars and cents get the attention of decision-makers.”
Economic value of volunteering
Many recognised that it’s the economic value argument that holds greater sway with policy makers, than the social value of volunteering argument as many in the volunteer management profession prefer.
Gradually, since 2000, more and more work has been done to establish the economic value of volunteering in the UK. The UK Civil Society Almanac in 2007/08 put the economic value of formal volunteers at an estimated £22.7 billion to the UK economy.
Kakoli Roy and Suzanne Ziemek in ˜On the economics of volunteering explained the idea: develop a conceptual framework to measure the economic contribution made by volunteer labor, thereby hoping to raise its societal appreciation. At the same time, governmental organisations were keen to highlight the economic value of volunteering. In 2001 the United Nations General Assembly passed a resolution calling on governments to establish the economic value of volunteering.
Then, in its 2005 resolution on the follow-up to the Implementation of the International Year of Volunteers, the UN General Assembly further encouraged Governments, with the support of civil society, to build up a knowledge base on the subject, to disseminate data and to expand research on other volunteer-related issues, including in developing countries (UN General Assembly, 2005b).
In a 2008 resolution the European Parliament encouraged Member States and regional and local authorities to recognize the value of volunteering in promoting social and economic cohesion. In 2011, the International Labour Organisation (ILO) published its ˜Manual on the Measurement of Volunteer Work that aimed to make it easier to include volunteering cross-national comparative analysis in economic statistics.
The economic crisis
As volunteering embraced the economic value argument, the economic climate changed. In 2008, the banking crisis in the UK led to the first signs of pressure on an unprecedented period of growth in voluntary sector services in the UK. As a result of the economic crisis, the old underlying tension surfaced, first identified by Baumol in the 1960s.
Sooner or later, the pressure of labour costs catches up with labour intensive services. As with the 1960s, the policy makers faced six possible responses. The wonks scratched their heads and went through the options. While critics pointed to signs of decreasing quality and quantity of services and increasing costs (charges), policy makers attempted to offset these through recourse to finding alternative sources of unearned and earned income, productivity gains (so-called efficiencies was a buzzword for all political parties) and the increased use of labour that’s compensated through non-monetary means, including volunteering.
In 2011, the UK Government published its Giving White Paper. It highlighted alternative sources of income, pinpointed new technology and productivity gains for giving to charities, and went on to promote volunteering. It was exactly as the theory had predicted. What was novel was that it used a social value argument for volunteering.
The White Paper announced that the government would lead by example and volunteer in the hope that it would inspire people to do what they can to support their communities and will demonstrate that social action can fit around people’s busy lives in ways that benefit both the volunteer and the chosen organisations. Volunteering, in other words, was something socially valuable that all (even Ministers) should input into.
Included in the White Paper was a commitment to developing impact reporting and a mention of the work of New Philanthropy Capital (NPC). NPC, according to its website, was set up by Goldman Sachs staff who were trying to find the best way to give away money to charity. NPC is part of growing movement of philanthrocapitalists who believe economic and financial knowledge can be applied to help resolve social problems. In short, they apply economic value to entrenched social problems.
Based on this philanthrocapitalist approach, policy makers began to reverse engineer the economic value argument, starting with the output they wanted (hardheaded, independent, high-quality information to be able to decide where to invest their capital). They had ended up with a social value of volunteering argument for the input where everyone, even the Prime Minister, should take the time to volunteer.
Reducing labour costs
At the same time, since 2008 and the banking crisis, volunteer management and infrastructure has come under increasing financial pressure as with the rest of the service sector. This pressure has manifested itself in different ways. In particular, these growing comparisons between the volunteering and rest of the service sector have led to tensions.
For instance, many services across the service sector are relying increasingly on internships and work experience (e.g. the government’s work programme) to reduce labour costs, often drawing comparisons to volunteer programmes. As cuts are made to services, comparisons are being made by trade unions, statutory bodies and others, between the roles of volunteers and the roles of paid staff made redundant to reduce labour costs.
Many advocates for volunteer management and infrastructure, have rebutted these comparisons by employing the social value of volunteering argument. Essentially, this rebuttal rests on the point that it’s not valid to compare paid roles to volunteer roles, because paid roles are justified on an economic value basis, while volunteer roles are justified on a social value basis.
Likewise, it’s not valid to compare internships or work experience with volunteering, because one follows an economic rationale, while the other has a social value one. It’s as if the social value argument puts a firewall around volunteering during these pressures resulting from the economic downturn, while an over reliance on the economic value argument for volunteering exposes volunteering to complex dilemmas such job substitution.
Curiously, it’s the reverse of the policy makers position. Volunteering advocates seek to argue for the economic value of volunteer management when it comes to input, by campaigning on the message that volunteer management merits an appropriate financial investment. Yet volunteering advocates frequently turn to the more traditional social value arguments when it comes to outputs, even though they tend to emphasis the need for economic recognition when it comes to funding volunteer management.
Conclusion
This current economic downturn has revealed how closely enmeshed the arguments for both the economic value and social value of volunteering have become. It’s demonstrated that those policy makers calling economic-style outputs for volunteering, should logically also be much more open to social value type outputs. It’s also demonstrated that those calling for increased financial investment in volunteer management, should be more prepared to explore the dilemmas that the use of economic value inputs logically implies for outputs, alongside the more traditional social value arguments for volunteering.
