Association for Public Policy Analysis & Management

The term ‘entrepreneurship’ in the nonprofit sector is often conflated with organizational cost-saving or efficiency measures (e.g., Leroux, 2005, Frumkin & Kim, 2001). While entrepreneurship in the private sector tends to be associated with business innovation, studies of nonprofit entrepreneurial activity are associated with efforts of commercialization. Relatedly, nonprofit workers’ relationship with entrepreneurship is often misunderstood. In the arts nonprofit sector, entrepreneurs are often personified as flexible, autonomous workers who derive satisfaction from non-traditional work arrangements (Menger, 1999; 2006). This characterization of artists has become even more emphasized in the new ‘gig-economy’, which is often defined by the prevalence of work-on-demand and short-term contracts (Torpey & Hogan, 2016). Nevertheless, these workers also suffer from low pay, no benefits, and a lack of worker protections afforded to wage employees in the same organizations (Dokko, Mumford & Schanzenbach, 2015). In this paper, we conduct an examination of organizations’ motivations for and use of contract labor in order to understand the dynamics of nonprofit entrepreneurial activity.

The use of contract labor by organizations in both the private and public sector has been growing. While there is no good source on ‘contingent employment’ – a term used to describe “people who do not expect their jobs to last or who reported their jobs are temporary” (U.S. Department of Labor, 2018) – we can use proxy data to understand general trends. For example, U.S. Census Bureau data on nonemployer firms, which are firms that earn at least $1000 per year in gross revenues but employ no workers, suggest that the gig-economy is “significant and growing fast” (Hathaway & Muro, 2016). Soon, the U.S. Census Bureau will release its second data collection effort on contingent employment, which will identify workers in the nonprofit sector (the first was conducted in 2005).

In this paper, we use data on nonprofit arts organizations, which detail level of 1099 (i.e., independent contractor) expenses for approximately 4000 nonprofit arts organizations in California, Maryland, and Pennsylvania between 2011 and 2016. The data are collected by DataArts, an initiative which collects financial, programmatic, and operational information on arts nonprofits. In addition to illustrating trends in contract labor among nonprofit arts organizations, the paper analyzes substitution between wages and contract labor among nonprofit arts organizations in these states.

This study is the first in the nonprofit studies field to quantify contract labor spending at nonprofit firms among a large set of organizations. Furthermore, it is the first study that begins to hypothesize the motivations of what is often called entrepreneurship among nonprofit organizations, but might instead be measures taken by organizations to reduce costs or improve organizational efficiency. The latter has serious implications for the quality of jobs in the nonprofit sector.