Saturday, July 23, 2011

Do the poor give more?

            As a group, Americans are among the most generous.  But, this generosity is not spread evenly throughout the population.  One particularly interesting, and disputed, phenomenon is the “U-shaped” income-giving profile.  This refers to the tendency for those with the lowest and highest incomes to give more of their income to charity.  Drs. Russell James from the Texas Tech University and Deanna Sharpe from the University of Missouri investigated this phenomenon and its causes using expenditure data from 16,422 households.  The data showed that, indeed, the share of income given to charity was highest among those making less than $10,000.  With each additional $10,000 in income, the share given dropped.  This percentage was lowest for those with incomes between $50,000 and $100,000.  Above $100,000, however, the share of income given to charity increased with additional income.  This U-shaped phenomenon occurred in both religious and non-religious giving. 

Previous findings published in the 1990s had challenged the existence of the U-shaped relationship.  However, when this earlier data was reexamined, the challenges turned out to be unfounded.  (The U-shaped relationship disappeared only if researchers intentionally omitted a large set of the households.)

So does this mean that the poor are generous, while the middle class are stingy?  Not exactly.  Two factors prevent this interpretation.  First, the U-shape does not reflect typical behavior.  The proportion of households giving anything to charity is lowest among those with the lowest income.  As income goes up, more households give to charity.  It turns out that the U-shape is caused entirely by the few households that give at least 10% of their income.  The unequal distribution of these highly committed donors creates the U-shape.  Second, these highly committed donors often turn out not to be poor at all.  In fact, low-income donors who give at least 10% of their income have more than six times the liquid assets of others at their income level.  Who are these low-income, high-asset donors?  Typically, they are retirement-aged individuals giving a large share of income, but a small share of liquid assets.  So, although the U-shaped income-giving relationship does exist, it turns out to be caused largely by wealthier donors with lower incomes, rather than by the truly poor.

(Citation: Nonprofit and Voluntary Sector Quarterly, Vol. 36, pp. 218-238.)

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