Dollars on the Move: The Changing Dimensions to the Jewish Economy
Possibly the most significant social and structural transition taking place within the Jewish institutional world is the departure of a significant part of the “middle sector” of Jewish families and singles from the communal system, in favor of alternative models of participation and engagement. This pattern of disaffiliation is accompanied by the rise of the Millennials and that generation’s disconnect from established institutional loyalties.
Some Snapshot Perspectives
By Steven Windmueller, Ph.D.
As one watches the twists and turns of the world markets, the Jewish economy is also experiencing dramatic changes. A significant number of factors are driving these 2016 economic realities. Several of these developments expand upon earlier trends that were documented in 2013. In addition, this report seeks to identify a number of generic economic characteristics that will have a profound impact on the future of Jewish institutional and community practice.
The Status of the Jewish Economy: Ten Essential Characteristics
1. The decline of the middle class has profound implications for the Jewish community, which has always prided itself as a successful model of the American family. The changing picture of the “near and new Jewish poor” include segments of the Haredi or ultra-orthodox community, a significant cohort of elderly Jews, and the presence of younger Jews struggling to complete their education and to secure entry level positions in this economy.
On the other end of the spectrum, one finds the emergence of a “Jewish Aristocratic Class” that is having a profound impact on reshaping the economic picture of the American Jewish community and its class structure.
In more general terms, middle class Americans now comprise less than half, or 49.9%, of the nation’s population, down from 61% in 1971, according to a new Pew Research Center report. For Pew, middle class Americans live in households earning between two-thirds to two times the nation’s median income. In 2014, that ranged from $41,900 to $125,600 for a three-person household. Jews have taken pride in being identified as an integral part of the middle class structure of the American economy. Will such a definition continue to be valid?
In a related development, job prospects appear to be changing as companies are increasingly hiring more part time and temporary workers. This consolidation and integration of positions in the workforce has in turn changed the nature and character of work in America. What will be the implications for the thousands of younger Jews seeking entry level professional and management positions? Many new workers entering this economy are reporting that they are forced to consider positions below their pay grade and educational preparation levels.
2. Various structural changes have led to a realignment of the Jewish economy. Where once our community operated under one economic model, today, at least three different Jewish economies are in play:
- Traditional System: Mainstream institutions are sustained by “traditional” donors and members who understand their Jewish civic role to be supportive of the community. This “historic” model still represents the established practices embraced by most of our federations, synagogues, and communal agencies. With the redistribution of Jewish philanthropic dollars, however, these institutions are facing greater competition in their efforts to sustain their membership base and campaign targets.
- Entrepreneurial Economy: This model has been embraced by “private, select, and counter-cultural” institutions that are often seen as “start-ups” with a single-issue orientation. Elsewhere, this author has described the evolution of this emerging style of organizing and economic practice as “Boutique.”
- The Sharing Economy (Barter-Borrow-Collaborate): Increasingly, one finds both start-ups and traditional Jewish organizations experimenting with this “third-alternative.” By way of background, the rise of “the sharing economy” has had a disruptive impact in a number of industries and businesses including travel, consumer goods, services, taxis, car rental, finance, and music. This transition in business practices may have long-term implications in changing consumer attitudes towards ownership and in turn how nonprofit institutions learn to adapt to this alternative business plan. In a recent study, 81% of people familiar with “the sharing economy” agreed, “it is less expensive to share goods than to own them individually.” This approach redefines the centrality and culture of ownership, replacing it with an emphasis on collective responsibility.
3. In revamping the communal apparatus in response to these changing features of the Jewish economy, a number of institutions have transitioned from an open-system of governance, where historically the grass roots would enjoy access and participation in the decision-making process, to a system where the “power of the purse” has emerged as the organizing model. A significant part of the wealth of the community is concentrated today among a relatively small sector of families. In the competitive marketplace of charitable giving, donors have sought increased control over communal decision-making and the distribution of their financial resources. In a desire not to lose the engagement and support of their principal funders, major institutions are accommodating to this economic power shift.
This transition of economic power has given way to a two-tiered class structure. Today, a segment of America’s Jewish wealth class has taken control of key communal institutions, transforming these organizations into wholly owned subsidiaries of this financial sector. In turn, one finds the secondary tier comprised of the “recipients” of the social and financial largess offered and managed by this emerging Jewish power class. Possibly the most significant social and structural transition taking place within the Jewish institutional world is the departure of a significant part of the “middle sector” of Jewish families and singles from the communal system, in favor of alternative models of participation and engagement. This pattern of disaffiliation is accompanied by the rise of the Millennials and that generation’s disconnect from established institutional loyalties.
4. The downsizing of affiliated Jewish households (i.e. the rise of the “Religious Nones”) has specific and profound implications on patterns of affiliation, financial support, and membership retention. As “nones” represent the fast growing sector, the impact has major implications for mainstream religious and communal organizations. These changing demographic characteristics have resulted in fewer core donors and the resulting decline of the communal center (i.e. the weakening of the “traditional” institutions within Jewish life).
5. Parts of the communal apparatus are still struggling with the residual effects of the 2008 recession. In particular, the inability of particular organizations to regain the same levels of financial sustainability that preceded the recession period represents a major challenge to the nonprofit sector. This has resulted in the need to contain expenses while delaying the launching of new programs, the introduction of maintenance and remodeling plans, or the hiring of new personnel and the advancement or promotion of existing employees.
6. As a result of a number of the factors outlined above, there has been a growing set of financial pressures on communal institutions and synagogues involving (1) the maintenance and management of properties that includes the upkeep of older buildings and aging cemeteries, and (2) in underwriting the salaries and benefits packages of more senior employees.
The new competitive realities involve the growing presence and pressure in connection with the emergence of new institutions and the existence of an array of “outside” challengers. With more institutional choices one finds donors and participants increasingly selecting options that were not available before. The result of this phenomenon is the diffusion of Jewish economic support, creating an increasingly wider band of causes and activities.
As a result of these and other changing social realities, four types of contributors operate in today’s new economy:
- Institutional (Traditional) Supporters: Direct their funds in support of various causes and activities, borne out of a sense of communal obligation and responsibility.
- Users or Beneficiaries: Benefit from their “investment” and engagement within the community as they see their participation as a purchase of services, i.e. synagogue or JCC membership.
- Investors: By making gifts in support of hospitals, schools and social service institutions, these “investors” are seeking to insure the long-term welfare of these causes or institutions while also guaranteeing their future access (i.e. donors who support hospitals or nursing homes, as examples, with the intent of receiving special consideration should they require such services) and potential recognition and honor as a result of their charitable endeavors.
- Ideological Donors: Based on their religious, political or social conviction, this cadre of givers provides financial support out of a specific commitment or belief directed toward such a cause (Religious Denominations-Schools and Camps-Zionist Endeavors).
7. The Rising costs of Jewish living, corresponding absence of disposable dollars, and the competing options on how to expend “open” or free time represent additional financial and structural challenges that are impacting the changing face of Jewish philanthropy and communal participation.
8. The impact of technology and more specifically, social media and the Internet, in providing alternative access and choice for Jewish consumers, learners, and activists. These new networks of communication have fundamentally altered the way business is conducted and how relationships are managed. As has been discussed elsewhere, the virtual Jewish community is rapidly replacing elements of the “traditional” communal system.
9. A number of new business and income-producing models are now being introduced:
- Fee for a Combination of Services (bundled services): This device is being employed as a way to attract uninvolved families and singles.
- 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. 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.
- Payments Based on Capacity to Pay (What can a family or client afford?)
- 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.
10. The growing presence of alternative business models that are creating alternative revenue streams:
- Securing Income from Building Rentals, Catering Services, Casino Nights, and other In-House Ventures.
- Setting-up On-Line Business Operations Providing Jewish Educational and Social Services: Offering these services and resources for a fee.
- Developing a “Jewish Product-Line”: Items that are marketed and sold to interested consumers.
Dr. Steven Windmueller is the Alfred Gottschalk Emeritus Professor of Jewish Communal Service at the Jack H. Skirball Campus of the Hebrew Union College-Jewish Institute of Religion, Los Angeles. You can see his collection of writings at www.thewindreport.com