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How has Covid-19 affected charitable giving?

Despite an initial increase in donations at the outset of the pandemic, the number of people giving to charities fell in early 2021 compared with previous years. Long-term trends are also worrying for the sector, which will be hoping that December brings its traditional festive boost.

This month, the UK’s charity sector will be hoping for a return to the usual pattern of increased giving that happens around the holiday season. The pandemic was initially associated with an increase in donations, but the number of givers during the first half of 2021 was down on previous years.

In addition, charitable donations have almost certainly shifted within the sector – for example, towards charities related to healthcare and those that have adapted best to the changed fundraising landscape as charity shops closed and events were cancelled. A full analysis of the ‘winners’ and ‘losers’ will only be possible when the data on charity incomes become available.

Looking forward, there is a worrying decline in the number of givers and an increased reliance on older and richer donors. In the next 12 months, there is likely to be increased debate about the role of the super-wealthy – through tax and/or philanthropy – in tackling the huge inequalities exposed by the pandemic.

Can charities expect some festive cheer?

Historically, the season of goodwill has meant a boost for charitable donations. In 2018 and 2019, for example, December was the month with the highest total donations of the year, linked to above average numbers of givers and amounts donated (see Figures 1 and 2).

But the typical seasonal pattern of giving was disrupted during the first year of the pandemic and levels of giving were higher in April 2020 and July 2020 than in December 2020. Covid-19 was associated initially with a boost to donations in the UK – visible both in a higher numbers of givers and the amounts donated – during the first months after the pandemic hit in March 2020.

Yet the initial positive effect appears to have diminished by the end of 2020 and the number of givers during the first half of 2021 has remained below the previous three-year average.

Figure 1: Percentage of people who make a donation

Figure 2: Average (mean) monthly donations

Source: UK Giving, 2021 and UK Giving, 2019

How has Covid-19 affected donations?

The pandemic is likely to have affected charitable donations in several different ways (as discussed in an earlier Economics Observatory article).

Covid-19 was associated with an increase in need that was highly salient. In the early stages, there were many prominent examples of pro-social behaviour in response to the increased need. For example, in March 2020, 400,000 people signed up to volunteer for the NHS on one day and in April 2020, Captain Tom’s fundraising appeal raised £38 million for NHS charities.

One innovative experimental study on a UK sample shows that mention of Covid-19 in a fundraising campaign resulted in a significant increase in donations: by around 8% (Adena and Harke, 2021). It also finds that the increase in giving was stronger in areas that were concurrently experiencing higher incidences of Covid-19 cases and deaths. This stronger positive effect could have been because the disease had higher relevance in these areas and/or been attributable to a response from people who were personally affected by Covid-19.

Another study sheds light on the phenomenon of ‘altruism born of suffering’ – the idea that personal experience of suffering triggers greater pro-social behaviour (De Gruyter et al, 2021). Using data from the US Panel Survey of Income Dynamics, the research finds that the unexpected onset of a personal illness (cancer, heart attack or stroke) did not lead anyone to start giving or to increase their overall donations. But it did lead people to change the causes that they gave to – increasing the amount given to health-related charities at the expense of other, non-religious giving (religious giving was unaffected).

Charity winners and losers

Almost certainly, the pandemic will have affected which charities people give to in the UK, although there is little sign of a major shift from looking at broad causes. Animal welfare remained the most popular cause in 2020 (given to by 27% of donors), followed by children (24%) and medical research (22%). Religious organisations received the highest share of donations (19%), followed by overseas aid (11%) and children and young people (9%) (UK Giving, 2021).

Nevertheless, some individual charities are likely to have been winners and losers with indications of early increased support for NHS-related and health charities, for example. Support for individual charities will have been affected not only by changes in their salience as a direct result of the pandemic, but also by knock-on changes in fundraising efforts – Captain Tom’s campaign for NHS charities and Marcus Rashford’s support for Fare Share, a network of charitable food redistributors, being high-profile examples.

The pandemic has also disrupted many traditional fundraising methods. For example, charity shops closed during lockdowns, which both took away a source of income and reduced brand visibility. There was a similar story with the cancellation of major fundraising events such as Race for Life and the London Marathon.

Cash donations virtually dried up and there was also a significant reduction in face-to-face fundraising. Charities that were best placed to embrace alternative, online fundraising strategies are likely to have done much better during the pandemic. Unlike private companies, where the share price gives an early indication of winners and losers, the full picture of the effects on different charities will only emerge once they report their annual incomes.

Local or global?

Survey evidence indicates that donors were thinking about changing their giving in response to the pandemic by targeting it towards local charities and UK causes, rather than international causes.

But an experimental study finds no difference in donors’ willingness to support Save the Children UK versus Save the Children International (Adena and Harke, 2021). In part, donors’ continued support for international causes may be because of the global nature of the pandemic and its devastating consequences in many developing countries.

Yet there is also evidence that exposure to local adverse events makes people more sensitive to adverse events occurring overseas. A study of the effect of a severe storm that hit a famous music festival in Belgium shows that people in the immediately affected area were more likely to increase their donations to a continuing nationwide campaign to collect money for famine relief in Africa, compared with people in areas that were not affected by the storm (Meon and Verwimp, 2016). These findings suggest that a positive effect on donations to local charities dealing with the immediate effects of the pandemic could spill over to a broader set of charities.

There is also evidence of positive spillover effects to other charities from the impact of fundraising appeals launched by the Disasters Emergency Committee (DEC) in response to overseas disasters (Scharf et al, 2021). DEC appeals result in a large and immediate increase in donations to overseas disaster relief, but this does not come at the expense of donations to other charities. Rather, donations to other charities increase at the time of the DEC appeal, an effect that is predominantly driven by time-shifting – in other words, bringing forward donations to other charities that would have been made later.

This time-shifting could be the result of transactions costs (‘if I make one donation, I might as well make my other donations at the same time’) and/or due to a temporary increase in salience, not just of disaster relief but also of charity in general.

A key practical takeaway from this study is that DEC appeals – which, unlike personal adverse health shocks, are linked a widespread increase in need – do not replace donations to other charities, but instead lead to an increase in total donations.

Another study documents a similar result in response to natural disasters in the UK (Deruygina and Marx, 2021). This appears to have been exactly what happened to total donations during the first year of the pandemic in the UK: 2020 saw an increase in household donations to charity to an estimated £11.3 billion, up from £10.6 billion in 2019 (UK Giving, 2021).

What happens next?

The first year of the pandemic was characterised by a positive response in terms of overall donations. Any increase in donations to individual (health and other) charities was not completely offset by reductions in donations elsewhere. Analysis of charity income data, when they become available, is likely to reveal both individual winners and losers, but the sector as a whole saw donations increase.

The first half of 2021 has looked less positive for the sector, with the numbers of donors and the donation amounts both down on the same time in previous years. Charities will be hoping for a return of seasonal giving this Christmas, but the economic damage caused by the pandemic – and the current uncertainty around Omicron – may dampen households’ generosity. In the 1980s and 1990s, donations proved resilient to economic downturns, but evidence from the United States suggests that this changed during the global financial crisis of 2007-09.

Moreover, charities face challenging long-term trends in donations, in particular a decline in the number of givers (see Cowley et al, 2011 and UK Giving, 2021) and an ageing of the donor population as giving by older households holds up better than that by younger households (see CAF 2012 and UK Giving, 2021).

In 2020, 62% of households reported that they gave, down from 65% in 2019, and the over-65 age group was the most likely to report that they had given. There is also an increasing concentration of giving among richer households. For the United States, for example, research shows that half of all donations now come from just 2% of donors, down from 10% in 1960 (Duquette, 2020).

Big donors

According to the latest Sunday Times Giving List, the total amount given by the top 200 givers in the UK increased to £4.30 billion in 2021, up from £3.16 billion in 2020, although the 2020 figure was down from £3.75 billion in 2019.

Prominent individual donors such as Jack Dorsey and Bill Gates made sizeable pledges in response to Covid-19 in the United States, while MacKenzie Scott shook up the billionaire donor world with upfront donations of around $5 billion that were unrestricted and came with no strings attached.

Overall though, it was estimated that barely one in ten of the world’s billionaires gave in response to the pandemic during its first few months. Those who did were younger, wealthier, more likely to be in the technology industry and more likely to be self-made – a pattern that is broadly in line with earlier studies on which billionaires signed the Giving Pledge.

As the pandemic has highlighted (and intensified) global inequalities and increased the wealth in the hands of the world’s billionaires, debates about tax and donations paid by the super-wealthy to contribute to tackling the problems that lie ahead are likely to feature prominently in the coming months.

Where can I find out more?

Who are experts on this question?

  • Susan Pinkney, Head of Research at the Charities Aid Foundation, is a highly experienced market and social researcher, with particular expertise and interest in the charity sector.
  • Kimberley Scharf is Professor of Economics and Public Policy and Head of the Economics Department at the University of Birmingham, works on the economics of charitable giving and social interactions, tax incentives for giving, and the effect of fundraising on giving behaviour.
  • David Reinstein, Senior Lecturer in Economics, University of Exeter. Research on charitable giving and other-regarding behaviour, social influences on giving, and anonymous contributions to public goods.
  • Sarah Smith, Professor of Economics, University of Bristol, works on the economics of not-for-profit organisations.
  • Johannes Lohse, Lecturer in Economics, University of Birmingham, uses experiments to study voluntary cooperation, pro-environmental behaviour, and climate change mitigation.
Author: Sarah Smith
Photo by Mina Waters on Flickr
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