The Impact of Inflation on Non-Profits

The sting of inflation is felt by everyone – but more so for nonprofits

While businesses can usually offset the impact of inflation by raising the price of goods and services, nonprofits by their nature are in a poor position to adapt to rising costs. Unable to raise prices, nonprofits usually find themselves cutting back on services or hoping that donors come to the rescue.

The Strain to Retain

Due to inflation, more and more nonprofits are trying to keep up with requests for higher salaries and wages. Despite the passion most caseworkers have for the mission, the rising cost of living coupled with the stress and stagnant wages will ultimately lead them to seek out higher wages elsewhere – especially if they can’t meet basic living expenses. Nonprofits that provide annual cost-of-living increases are seeing higher payroll costs of approximately 6%. That’s without any increases based on merit or seniority.

Inflations Ripple Effect

The high price of just about everything is having a ripple effect on every aspect of nonprofits. Consumer prices rose 8.5% in March, the highest annual gain since 1981. That jump is making it harder, if not impossible, to get anything done. This strain can be felt across different models of care – from food banks and food delivery services affected by soaring high gas prices to shelter and housing programs impacted by record-breaking material costs. Typically, even a small price hike in material costs could stall a project or, in the worst case, shut it down entirely. Nonprofits can sometimes renegotiate the terms of a loan or find additional financing sources, but it doesn’t always work out in their favor. As Chief Executive of the Nonprofit Alliance Shannon McCracken puts it, “It’s not a very pretty equation.”

With donations down across the board since the height of the COVID-19 pandemic, it’s more important than ever to put a strong emphasis on fundraising. Now is the time to look at your organization’s grants and fundraising initiatives to reevaluate and ramp up efforts.