The Critical Role of Nonprofits in Public Policy and Economic Growth
- Geoff Nelson
- Apr 5
- 3 min read
The non-profit sector is often perceived through a social or charitable lens, but its economic significance is both profound and underappreciated. In Canada, the sector is a major economic force, contributing approximately 8.3%[1] to the GDP and employing over 2.5 million people[2]. This is more than the entire manufacturing or construction industries. This economic footprint demonstrates that the sector is not merely a compassionate adjunct to the economy, it’s a core contributor to economic resilience, innovation, and inclusive growth. For these reasons, greater integration and collaboration between the non-profit sector and all levels of government makes not only moral sense but also sound economic policy.
Non-profit organizations (NPOs) deliver a wide range of services in areas such as health care, housing, education, arts, environment, and social services. These services often fill gaps left by market and government shortfalls, especially in underserved or vulnerable communities. This function not only improves social outcomes but also reduces long-term public expenditure. For instance, preventative services provided by NPOs in mental health or homelessness can reduce future costs in policing, emergency healthcare, and imprisonment.
NPOs also play a vital role in building social connections, encouraging community involvement, and supporting workforce growth. Many provide entry-level job opportunities, skill development, and career pathways, helping marginalized individuals reintegrate into the workforce. Their role in volunteer engagement also fosters civic participation and intergenerational knowledge-sharing, contributing to community cohesion and local economic stability.
Why does Government collaboration with NPOs make economic sense?
1. Efficiency and Innovation
NPOs are often lean, agile, and deeply embedded in their communities. This allows them to respond quickly to emerging issues and innovate in ways that large public institutions cannot. Partnering with these organizations can help governments deliver services more efficiently and with greater responsiveness. For example, in areas like harm reduction, youth services, and food security, non-profits have often piloted models that governments later adopted or scaled.
2. Leveraging Resources
NPOs routinely blend funding from public, private, and philanthropic sources. Strategic partnerships with governments can multiply the impact of public investments by leveraging these additional resources. Governments can provide seed or matching funding, while non-profits bring in community support, volunteer labor, and donations. This diversification of funding also builds program sustainability.
3. Improved Policy Design and Outcomes
NPOs possess localized knowledge and lived experience that can improve policy design. Their involvement in co-designing programs ensures that interventions are culturally relevant, effective, and responsive. Furthermore, by working with established non-profits, governments gain trusted intermediaries that can enhance public buy-in and uptake of services, especially in communities that may be skeptical of or underserved by public institutions.
4. Economic Resilience and Crisis Response
The COVID-19 pandemic revealed the indispensable role of the non-profit sector in emergency response. From food banks to shelters to digital equity initiatives, NPOs stepped in where systems were overwhelmed. Going forward, a more integrated approach between governments and the non-profit sector is essential for building resilient systems capable of adapting to future economic, environmental, or public health-related crises.
5. Local Economic Development
Non-profits are often deeply rooted in local economies. Their operations support local employment, supply chains, and community infrastructure. Municipalities that invest in partnerships with local NPOs often see spillover benefits such as job creation, neighborhood revitalization, and increased property values[3]. Collaborations at this level also strengthen place-based planning and social procurement.
For collaboration to be effective, governments must shift from seeing NPOs as service contractors to genuine partners in public policy. This entails facilitating long-term, stable funding; simplified reporting and accountability structures; inclusion in policy dialogue; and the co-creation of outcome metrics that reflect shared values and community impact.
At the federal level, this could mean modernizing outdated charity laws, creating sector-specific economic strategies, and embedding non-profits in national planning processes. Provincially, governments can integrate NPOs into health and education systems more formally. Municipally, cities can work with community organizations in neighborhood planning, emergency response, and local economic development.
The non-profit sector is an economic powerhouse, a social innovation engine, and a key partner in delivering essential services. Greater integration and collaboration with governments at all levels would unlock even more value for Canadian society, not just in terms of equity and wellbeing, but also in terms of economic efficiency, resilience, and long-term growth. Embracing this partnership is not just a policy choice — it is an economic imperative.
Contact prō ˈbônō Advisory Group to learn more about government collaboration strategies.
prō ˈbônō Advisory Group is a results-based enterprise providing low and no-cost
strategic support and advisory services to charitable and non-profit organizations.
[2] In Ontario NPO’s contribute 7.9% to the province's GDP, constituting $65.4 billion in economic impact.
