BLOOMINGTON, Ind. – The nonprofit arts, entertainment, and recreation (AER) industry is relatively small in Indiana, employing fewer than 7,000 workers in 2019, but it plays an important role in producing arts, culture and recreation services that enrich people’s lives. Whether serving niche markets or larger groups, these organizations make it possible for Hoosiers to attend the performing arts, engage in recreation, and visit museums, zoos, and historical sites.
As detailed in a new Indiana University report, Indiana’s nonprofit AER establishments have faced a number of challenges since 1995. However, they remain an important part of the overall AER industry, which otherwise is dominated by for-profit businesses, especially amusement parks, gambling establishments, and spectator sports.
The report, “Nonprofit Paid Employment in Arts, Entertainment, and Recreation for Indiana, 1995-2019 was prepared by Kirsten Grønbjerg, Distinguished Professor of Public Affairs at the O’Neill School at Indiana University and the Efroymson Chair in Philanthropy (2001-2020) at the IU Lilly Family School of Philanthropy at IUPUI together with Anjali Bhatt, a recent graduate of Indiana University Bloomington.
According to the report’s findings, total employment in Indiana’s AER industry grew 81 percent between 1995 to 2019, when it reached almost 45,000 employees. That is much faster than nonprofit employment in the industry, up only 14 percent in the same time frame, and much faster than total employment across all industries (up 13 percent). For-profit employment in AER increased 66 percent, more than four times faster than nonprofit employment.
Nonprofit payroll for AER grew at nearly twice the rate of employment, at 26 percent (adjusted for inflation), to $188 million in 2019. But that was also much lower than for-profit payroll, up 173 percent over the period.
The three major AER subindustries show distinct patterns of nonprofit contributions.
- The amusement subindustry accounts for the most nonprofit jobs in the AER industry, but the jobs are almost entirely concentrated in “other amusement” such as fitness and recreational sports centers, golf courses, recreational day camps.
- The museums and similar institutions subindustry employs fewer nonprofit workers, but they dominate the industry, accounting for about 84 percent of all jobs. Most of the rest are employed by government, primarily nature parks and some museums and historical sites.
- The performing arts and related industries subindustry has relatively few nonprofit employees, primarily concentrated in performing arts companies and some arts promotion. For profits dominate spectator sports and promoters and agents in the subindustry.
Although nonprofit AER employment and payroll (adjusted for inflation) have increased since 1995, almost all of the growth occurred before 2000. Moreover, average annual nonprofit wages have remained low (for some sub-industries averaging less than $20,000 per year),reflecting the challenge of rising costs in the industry, the so-called “cost disease,” where production costs rise faster than the volume of services. Also, access to digital media is likely to have reduced the demand for live experiences. In Indiana, one study found that almost 68 percent of adults consumed art through electronic media in 2017.
“These developments suggest that rising costs across the industry have made it harder for nonprofits to adapt in the same ways that for-profits can – they lack easy access to technology or capital resources,” said Grønbjerg.
Though these data do not extend past 2019, other research suggests that nonprofit challenges in the AER industry were further aggravated by the COVID-19 pandemic. All AER establishments were hit hard as venues were forced to close (reducing income) and technological innovations became more important (but required investments).
“The COVID-19 pandemic could devastate smaller AER nonprofits,” Grønbjerg said. “Right now, many are struggling just to stay open. And we expect this trend, unfortunately, will continue.”
On the positive side, Indiana allotted $10 million of CARES Act funding for AER businesses in response to the pandemic. However, smaller local nonprofits may see disproportionate impacts of the pandemic for years to come.
The report, “Nonprofit Paid Employment in Arts, Entertainment, and Recreation for Indiana,” uses data from the Quarterly Census of Employment and Wages (QCEW) prepared by the Indiana Business Research Center (IBRC) and analyzed by the Indiana Nonprofits Project.
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