New Works in the Field

Past Transactions: The History of Fee-Charging in the American Nonprofit Human Services Sector

Editors’ Note: Maoz Brown previews his article, “The Moralization of Commercialization: Uncovering the History of Fee-Charging in the U.S. Nonprofit Human Services Sector,” which was recently published in Nonprofit and Voluntary Sector Quarterly

Finances are often viewed as vital signs in the nonprofit sector, as in the much-discussed (and much-lamented) case of using administrative expense ratios to gauge organizational efficiency. Yet nonprofit finances are treated as health indicators not only for individual organizations but also for the sector as a whole. Above all, income streams have attracted outsized attention from scholars, resulting in a growing body of research on what Steven Smith and Michael Lipsky dubbed “the political economy of nonprofit revenues.” The principal assumption in this area of study is that nonprofits are tangible manifestations of communal fellowship and generosity; as such, changes in how they procure resources can shed light on important trends in civil society more broadly.

One financial measure that has proven especially intriguing is the proportion of revenue derived from earned income, which seems to defy the redistributionist function of charity’s traditional donative framework. Numerous authors have argued that nonprofits have grown increasingly reliant on fee revenue and that this “commercialization” signifies potential large-scale mission drift from charitable to pecuniary goals. I scrutinize this claim from a historical perspective in an article titled “The Moralization of Commercialization: Uncovering the History of Fee-Charging in the U.S. Nonprofit Human Services Sector,” recently published in the journal Nonprofit and Voluntary Sector Quarterly (in advance online form for now).

As apparent in the title, the paper focuses on the human services field, which encompasses homeless shelters, youth-mentoring agencies, and other classically charitable organizations that are particularly evocative of altruism and communitarianism. As I demonstrate in the paper, research has shown that the human services have become more commercialized since the 1980s. This trend is frequently attributed to neoliberal political and cultural developments such as welfare budget cuts, funder expectations of revenue diversification, and the introduction of conventional business-oriented thinking in nonprofit management education. From this perspective, the “commercial turn” is a consequence of the neoliberal restructuring of the nonprofit sector, a process said to transform the sector from an arena of fellowship and benevolence to a market built on crude utilitarianism and self-interest. This pessimistic depiction of commercialism in the nonprofit sector conforms to what economic sociologist Viviana Zelizer calls a “hostile worlds” perspective, which assumes “a sharp division between economy and society, with the one embodying impersonal rationality and the other intimate sentimentality.” This is a major motif in literature on the evolution of the American nonprofit sector, one that I argue is seriously oversimplified.

The standard account of commercialization tends to assume novelty in significant fee-reliance, a belief that persists largely because of a supposed lack of historical data; aggregate statistics cited in previous studies (as reported by Curtis Child) do not reach farther back than the late 1970s. Of course, no one has argued that earned income arrived on the scene only in the neoliberal era, yet we have lacked data on the extent of fee-charging practices before the late 1970s. This absence of data has made it difficult to check bold claims of organizational and sectoral transformation. Authors have simply assumed that the scale of commercialization in the human services field during the 1980s represents a dramatic departure from the past.

My paper’s first empirical contribution is to expand our analytical purview by sharing a forgotten source of quantitative data on human service revenues over past decades: a series of multicity surveys on social welfare financing that grew out of the Registration of Social Statistics, a joint project of the University of Chicago and the Association of Community Chests and Councils (predecessor of the United Way). Widely cited during their time, these reports provide aggregate data on nonprofit human service cash flows from 1938 to 1965 and show that fee income as a proportion of total revenue grew significantly over this period. To be sure, fee-reliance also grew in the 1980s, but it is likely that the relatively low level of commercialization immediately prior to the 1980s was the residual effect of Great Society grantmaking, which boosted the proportional share of contributed money in nonprofit revenues. Thus, as I argue in the paper, “rather than describe the proportional growth in fee income during the neoliberal period as a ‘transformation’ of the nonprofit human services sector, we should view this increase as the resumption of a trend going back decades and interrupted only briefly by the War on Poverty.”

Although the quantitative revision of the commercialization narrative is important, most of the paper’s historical analysis comprises a qualitative investigation of how social work professionals made sense of this rise in fee-charging (I justify my focus on social work in the paper’s methods section). Notably, my findings contrast markedly with current notions of commercialism’s negative influence on the sector. Past conference presentations, practitioner manuals, and journal articles evince a more optimistic appraisal of fee policies, associating fee-charging with an egalitarian and inclusive configuration of nonprofit service provision.

Engaged in a strenuous professionalization effort, social workers were eager to distance themselves from the paternalism and amateurism of the profession’s charitable origins. Accordingly, they sought to advertise family counseling, rehabilitation programs, and other human services as common amenities available to all in need rather than as handouts for a bottom segment of society. Fee-charging was integral to this rebranding. A fee-paying client was viewed as an active consumer rather than as a passive beneficiary of upper-class philanthropy. In short, the historical evidence (which I review at greater length in the article) shows that fee-charging was infused with a professional service ethic that espoused communal inclusiveness in service provision. As social work leader H.L. Lurie summarized in a 1955 article on financial trends in the sector, “When family service agencies no longer can be advertised as relief organizations, and health and welfare agencies become increasingly fee-charging and fee-supported, the slogan of ‘charity’ must be replaced by the slogan of ‘community service.’”

It is important to recognize that the inclusive aspiration of fee-charging presumed a broadly affluent society that was, as Michael Harrington revealed in his pathbreaking scholarship, largely a fantasy. American communities did not offer the egalitarian distribution of spending power on which a progressive fee policy was premised. For this reason, as I elaborate in the article, fee-charging failed as a means of fostering communal fellowship and fell away from social work discourse as priorities shifted in the 1960s to targeted services for poor and disenfranchised communities. With this change in focus, social work’s celebration of communal fellowship gave way to a more politically confrontational model of community organization.

Still, it is worth reflecting on the past understanding of a modern fee-charging system as a progressive foil to the noblesse oblige of the Gilded Age. The present era of mega-philanthropy invites us to engage thoroughly with concerns about charity’s role in reinforcing class-based dependency relations. Moreover, we ought to consider the potential function of market models in fostering greater equality and agency if paired with more generous wealth-redistribution policies. Too often, however, scholars of the nonprofit sector and philanthropy have viewed market models as inherently alien and corrupting influences. In the case of nonprofit commercialization (at least as measured by changes in revenue profiles), I contend that the reality is too complex and culturally contingent to reduce to an ahistorical narrative of corrosive market intrusion.

-Maoz Brown

Maoz Brown is a PhD candidate in sociology at the University of Chicago. His research concerns past and present trends in the social organization and political economy of altruism, philanthropy, and social welfare services.

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