Saturday, May 25, 2013

Do the rich give to charity?

A couple of months ago, Ken Stern had an article in the Atlantic called "Why the rich don't give to charity."  He said   "In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income. "  He didn't give any details about the source of these figures, but in a letter to this month's Atlantic, Jonathan Meer (a professor of economics at Texas A&M) made a convincing case that they couldn't be believed:  basically, the pattern followed from the way the sample was selected. 

In 1996, the General Social Survey asked a representative sample of Americans about how much they gave to various charitable causes.   I combined those causes into two groups, religious and non-religious (which included health, education, human services, the arts, and others), and divided the totals by reported income.  On the average, people reported giving about 9% of their income to religious causes and 5% to non-religious.  These figures seem likely to be overestimates.  However, reported giving was very skewed:  the median contribution to both was 0%, while a few people claimed to give over 100% of their income.   I suspect that most of the very high figures were people who did donate generously but inadvertently exaggerated or counted one donation in several categories.  

I then divided people into groups of approximately the lowest 20%, middle 60%, and highest 20% of household income.  The results:

                 Non-Religious Donations            Religious Donations
               Mean    Median  75 percentile   Mean     Median    75 percentile
Lowest 20%     5.4%     0%         1.8%        11.9%      0%      0%
Middle 60%     4.6%     0.6%       4.4%         7.2%      0%      3.6%
Top 20%        9.8%     1.5%       6.2%        15.8%    1.3%      8.9%

The means don't show a clear pattern, but they are strongly affected by the few people who claimed extremely large donations relative to their income.  The medians and 75th percentiles both show a clear tendency for more affluent people to give a larger share of their income.  I also did an analysis using a more sophisticated technique that essentially involves predicting ranks (proportional hazards regression).  According to that, more affluent people definitely gave a larger share of their income to non-religious causes (a t-ratio of 3.7); there was some evidence, but not definitive evidence, that they gave a larger share to religious causes (t-ratio of 1.9).  

The measurement of income in the GSS isn't precise enough to distinguish the truly rich (the top category was $75,000 and up, which would be about $111,000 in today's dollars).  But it's pretty clear that "affluent" people give more of their incomes to charity than poor people do.  Of course, this doesn't necessarily mean that they are more generous:  you could certainly argue that a person who gives 1% of $10,000 is making a bigger sacrifice than someone who gives 5% of $100,000 (and gets a tax deduction).  But more affluent people have more money to spare after paying the bills.  


  1. The IRS publishes aggregated statistical data for income tax returns.

    Couldn't you get some rough idea of the figures from Table 2.1 there?

    1. Those figures seem to be the original source for Stern's conclusions. The problem is that they are limited to itemized returns. Most low and middle income people don't itemize, and the ones who do are those who have large deductions. So low and middle income people who don't give much to charity are left out of the sample.

      But the IRS figures are useful for comparisons in the upper reaches of the income distributions, where almost everyone itemizes. Among people who earn 100,000-200,000, average reported contributions (cash and non-cash) are about 2.6% of income. Among people who earn over 10,000,000, it's about 6.1%. The rich may not be generous in an absolute sense (I like to think that I'd give more than 6% of my income to charity if I made ten million a year), but they do seem to give proportionately more than the rest of us.