Current Trends and Practices within the American Jewish Economy

by Steven Windmueller, Ph. D.

An Introduction:

In contemporary times the Jewish economy was constructed around two principles: sustainability, the capacity to underwrite the Jewish communal system; and impact, the ability to deploy economic resources in order to attract and engage Jewish “consumers.”

Components of the Jewish Economy:

  1. As with all economic systems, the “Jewish” economy is organized around the production, distribution and consumption of its goods and services within a defined market.
  2. Such an economy operates through primary social and economic “engines” that can stimulate growth and promote change; among the driving forces within this economy include the federation-system and its allied social services, synagogue movements, private and community-based foundations, and Israel-oriented charities.
  3. This economic system, as with others, is subject to specific stimuli, which include external or internal crisis, key celebrations, special projects and initiatives, etc… all designed to grow the Jewish communal system.
  4. Clearly, there are also threats or challenges to this system, which include closing and/or the down-sizing specific institutions and programs.
  5. This system contains many core economic resources, including infra-structure-personnel-investments, etc…
  6. As an incentive system motivation plays a key role in generating resources. Such activity is based on either self-interest or moral obligations.
  7. Over time this system has developed specialized activities and the division of labor. In addition, this economy has introduced an array of decision-making units in which contractual arrangements are carried out. Parts of this system remains centrally organized, while other elements are decentralized.
  8. Mechanisms have been introduced establishing rules, norms and standards for both giving and levying fees.

In this survey we will be examining eight specific economic elements:

  1. Analyzing the Shift from the Public or Collective Jewish Economy to the Individual or Private Economic Model
  2. Unpacking the Primary Costs within the Jewish Economic System
  3. Describing Different Forms of Jewish Giving
  4. Understanding the Costs of Jewish Living
  5. Changing Market Environment
  6. Examining the Challenges to the Jewish Economy
  7. Exploring Alternative Income Streams
  8. Changing and Growing the Jewish Economy?

Analyzing the Shift from the Public or Collective Jewish Economy to the Individual or Private Version:

Between the end of the Second World War and the mid-1980’s, the Jewish community would develop a mass-market economy associated with promoting and advancing five core objectives:

  1. Promoting Synagogue Affiliation
  2. Sustaining our Communal System and Building Connections with the State of Israel
  3. Supporting Global Jewish Communities (i.e. Bringing Soviet and Ethiopian Jewry to Freedom)
  4. Memorializing the Jewish Past (i.e. Remembering the Holocaust)
  5. Advancing Human Rights and Eliminating Anti-Semitism

During the course of the 1980’s a shift began to take place as the Jewish economy would undergo a series of structural transitions over the next twenty-five years. This was stimulated by a number of specific factors:

  1. The Rise of “New Funders” and the Availability of Alternative Giving Options
  2. The Growing Significance of Technology
  3. The Transfer of Generational Wealth
  4. The Emergence of New Generations of Jewish Participants with Different Social Values and Communal Priorities
  5. The Formation of Individualized Patterns of Affiliation, Donation, and Engagement

This transition would result in the transfer of revenues from the public (or communal) sector (the federation campaign system) to the private or alternative boutique models of community building, resulting in a pattern of selective engagement.

Unpacking the Primary Costs within the Jewish Economic System:

In understanding the complexity of the Jewish institutional economy, it is important to remind ourselves of the primary budget elements that comprise this system:

  1. Staff-Related Expenses and Benefits (70%)
  2. Building Fees and Maintenance Operations (10-15%)
  3. Fund-Raising, Public Relations, and Administrative Costs (8-18%)
  4. Program Costs (5-10%)
  5. Investment Expenses (3-5%)
  6. Loans and Other Fixed Fees or Charges (3%-8%)

Describing Different Forms of Jewish Giving:

Jewish charitable patterns have differed over time. As within all economic systems, consumers have embraced specific options in their patterns of engagement. There are several sectors or categories that describe Jewish consumer habits related to giving:

  1. Life-Cycle: Donors want to demonstrate by their support their personal connection to the continuity of the Jewish people and its tradition.
  2. Personal Enhancement: This may involve the purchase of art or other cultural symbols or it may revolve around underwriting a specific cause which may hold significant personal meaning to the contributor.
  3. Collective Good: Such donations reflect a commitment to the enhancement and support of the communal system and broader Jewish and social values.
  4. Selective Engagement: Here donors are hand-picking particular causes or institutions to direct their support.
  5. External Investment: Inspired or motivated by Jewish values, donors in this category are directing their support beyond the communal system to causes that reflect and enhance their understanding of Jewish ethical principles of justice and social engagement.

Unpacking the Primary Costs of the Jewish Economic System:

What are the elements that today comprise a “Jewish” family budget? The key here is the overall expense or “cost” of Jewish living that can impact for example a family of four:

  1. Synagogue Membership
  2. Religious Education Fees (Afternoon and Supplementary Education)
  3. Day School Tuition
  4. Informal Jewish Educational Services (Camping-Youth Programs)
  5. Israel Engagement (Travel and/or Support for Israel-Based Programs and
    Organizations)
  6. Federation Campaign(s)
  7. Organizational Dues or Membership (i.e. Hadassah, AJC)
  8. Jewish Learning (Lectures-Books-Conferences)
  9. Kosher Food Requirements and Related Jewish Ritual Expenses (Chanukah-
    Passover-Purim, etc…)
  10. Donations to Key Causes and Charities (i.e. ADL, JNF)

It has been estimated that for a family of four to manage its Jewish family budget it must be able to set aside a minimum of $35,000 to maintain this type of engaged Jewish life-style[1]. This is particularly challenging for families on fixed incomes or who have limited resources upon which to draw.

Changing Market Environment:

A number of additional challenges are present today that directly impact the Jewish economy:

  1. Growth of the Third Sector and the Rise of the Boutique Market: the Arrival of the New Competitive Choices and the Changing Dimensions of the Jewish Marketplace, in particular.
  2. Decline of the Legacy Donor: This class of donors sustained the primary Jewish institutions of the post-Second World War era. As these generations of contributors pass from the scene, are we able to identify and nurture a successor cohort of contributors?
  3. Emergence of the “Aristocracy Donor Class”: A small but significant group of primary funders who are playing an increasingly significant role by organizing and sustaining Jewish institutional life. Jewish philanthropic dollars appear to be concentrated [around] a smaller base of support.
  4. Capacity Levels: The wealth factor while significant among Jews is today more concentrated in a smaller cadre of funders and connected Jews. Often holding fewer ties and commitments to specific institutions or causes, mid-level donors are presented with many more choices of where to donate, and with fewer resources at their command, are often making token commitments to legacy or traditional institutions.

Examining the Challenges to the Jewish Economy:

There are a number of specific and significant issues that will determine the economic viability of organizations. An environmental scan of the Jewish institutional market economy reveals the following results:

  1. Rising labor costs
  2. Declining revenues in some sectors of the economy
  3. Growing competition in a changing marketplace
  4. Dealing with a smaller donor base to support the communal enterprise
  5. Changing social priorities and loyalties

In this scenario, five definitive questions would appear to be particularly relevant:

  1. How can we sustain our institutions and cover our debt service?
  2. How can we secure new income streams and grow our revenue-base?
  3. In what ways can we economize, by cutting costs or sharing expenses, etc….?
  4. How might we improve on our economic position by growing our market share?
  5. Is there the possibility that either the private or government sectors can take over elements of the Jewish economy?

Exploring Alternative Income Streams:

In response to the economic challenges noted above, numerous organizations are experimenting with new income streams and funding schemes. In this new environment the consumer rather than the communal system defines the playing field. Presented below are some of the options being introduced as a way to manage the changing economic picture:

  1. One Fee for a Combination of Services (bundled services): This device is being employed as a way to attract uninvolved families and singles.
  2. Subsidized Services (underwritten by donors): This is designed to attract those currently not being served by inviting them to take advantage of this type of offering.
  3. Fee-for-Service Model (shifting from centralized giving to selective participation): Some institutions are beginning to explore how successful this type of model might play out in attracting new participants and in holding onto existing members.
  4. Payments Based on Capacity to Pay (What can a family or client afford?)
  5. Value-Based Payments (What is it worth to the recipient?): This approach can change the terms of the engagement, where the consumer determines the value of this service adjusting it to his/her ability and interest to support such an activity.

Other institutions have created various business models, as a way to generate additional revenue streams:

  1. Securing Income from Building Rentals, Catering Services, Bingo and other In-House Ventures
  2. Setting-up On-Line Business Operations Providing Jewish Educational and Social Services: Offering these services and resources for a fee.
  3. Developing a “Jewish Product-Line”: Items that are marketed and sold by others to interested consumers.

Changing and Growing the Jewish Economy: Provided below are a few strategies that are currently in play:

Growing New Markets:

How might we develop new options in reaching the “unaffiliated”? In this context is it possible to grow the community’s commitment to outreach? Might this involve engaging non-Jews, similar to what is happening in the Jewish social service arena?

Today we are operating in a global market environment, how might our institutions “do business” on a global scale rather than simply employing a regional or community-based model?

Changing the Options:

  • a. In this scenario might we consider introducing the for-profit sector into the mix where a form of “Privatized Judaism” replaces some elements of the existing communal model?
  • b. In a culture where the model of collaboration and joint marketing among institutions has been historically limited at best and often discouraged, how can we alter the existing operating culture where the idea of collaboration replaces the current “silo” mentality?
  • c. In place of only operating in the nonprofit environment, why not establish separate business structures designed to generate income that can enhance synagogues and communal institutions?

Conclusion:

This paper is designed as a discussion document, constructed to introduce key questions and explore alternative options in light of the changing economic and social environment within the Jewish communal world.

Dr. Steven Windmueller is the Rabbi Alfred Gottschalk Emeritus Professor of Jewish Communal Studies at the Jack H. Skirball Campus of Hebrew Union College-Jewish Institute of Religion in Los Angeles. You can find more of his writings, at www.thewindreport

[1] Gerald Bubis has analyzed the cost of Jewish living using an array of measures to estimate such expenses http://www.ajc.org/site/apps/nlnet/content3.aspx?c=7oJILSPwFfJSG&b=8449821&ct=12484557

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Comments

  1. Excellent article! So much food for thought. Thank you for adding to the discourse and would love to discuss this further with anyone interested in thinking about these issues.

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