Volunteers: Estimating the Economic Impact of Free Labor

INTRODUCTION

Volunteers don't get paid, not because they're worthless, but because they are priceless.

     Sherry Anderson

Unfortunately, not all productive activity is actually included in GDP. Volunteer or unpaid work is not included as it is not only difficult to measure, it has no explicit economic activity related to them that can be measured using I-O analysis. However, the results of that volunteer activity as measured by other economic activity related to the workers (additional tourism, increased productivity, etc.), then one can use that activity as the input, claiming the value exists due to the volunteer work. 

Not all volunteers are essential. Some may perform functions that are wonderful, although not required and the organization would still operate without them. However, it is hard to think about an organization like Girl Scouts or the American Legion running without volunteers. If the argument can be made that “but for” these volunteers, none of the activity would occur, then estimations of their economic impact make sense. However, care needs to be taken when outlining your methodology to avoid valuing volunteer work as full Output-producing jobs.

VALUING VOLUNTEER TIME

The Independent Sector estimates the Value of Volunteer Time for each state and the U.S. each year. The current estimation is $28.54 per hour at the national level. Their methodology is based on average hourly pay “of all production and non-supervisory workers on private non-farm payrolls” from the BLS. They note that following the Financial Accounting Standards Board guidelines, volunteer time should only be included if they are performing a specialized skill. Note that the Value of Volunteer Time is based on the volunteer work, not the person's paid employment. So if a rocket scientist volunteers for a park beautification, the value of his or her time should be based on the earnings of a groundskeeper and not a rocket scientist.

Another way to value volunteer time is using the BLS Occupational Employment Statistics data. This data is released by occupation, so a closer estimate to the actual value of a certain job duty can be found. This is best utilized when a volunteer is performing a specialized skill like a trained medical doctor volunteering to do health screenings at a community event.

A third school of thought is that the value of a volunteer’s time should be based on the hourly wage that the person normally receives for their paid employment. This is problematic on a few levels and is the least preferable method, but may provide useful insight in some situations.

ANALYZING THIS IN IMPLAN

Now that you have estimated the value of the volunteer time you want to capture in IMPLAN, create an Industry Employee Compensation Event in the Industry that reflects the work. Enter the value of the volunteer work in the Employee Compensation. If you know the number of volunteers, add that in using the advanced menu. Also in the advanced menu, zero out the Proprietor Income field. Run your analysis. 

You may only want to estimate the value of the Intermediate Inputs that would be required because of volunteer time, as well as the associated Indirect and Induced Effects. In this case, we recommend that you run either an Industry Employee Compensation Event or an Industry Employment Event and zero out Proprietor Income. Then on your Results, deduct the Direct Employment and Direct Employee Compensation associated with the volunteers. So if you ran $500,000 in an Industry Employee Compensation Event, on the Results screen you would zero out the Direct Employment and deduct $500,000 from Direct Labor Income, Direct Value Added, and Direct Output.

Life's most persistent and urgent question is, what are you doing for others?

     Martin Luther King, Jr.

Written June 4, 2020