Euan Cook reports on why affluent donors are donating smaller proportions of their annual incomes to charity.
Photo by Rondnae Productions
Donations from the UK’s top earners dropped by 21% in the last decade, despite the average annual income rising by 10% during the same period. With charities missing out on more than £2 billion from a widening “generosity gap”, are the rich becoming stingier?
Giving to charities has increased from £14.8 billion in 2011/12 to £19.6 billion in 2018/19. This is fantastic news on the surface. However, there may be an underlying issue with how this wealth is distributed.
The Truth About Donations
The UK’s richest 1,700 people made close to two-thirds of the donations made by the 1%, typically donating 0.21% of their income. Annual incomes around £187,000 typically declare donations of £33 per month. With those whose annual incomes average at £722,000, the typical donation rises to £113 a month: just 0.16% of their income. However, donations across the whole population in 2019 amounted to about £20 a month, roughly 0.80% of the average income.
It is clear, then, that the lower the average annual income in the UK, the greater the portion of an individual’s salary they are willing to donate. To help close this “generosity gap”, Lord Gus O’Donnell has offered a solution:
“The Commission is calling for a collaborative effort between philanthropists, the government, business, and the charity sector to help close this gap. […] At a local level, the nomination of Philanthropy Champions working with Metro Mayors could help to ensure philanthropy is directed to the communities that need it the most” – Lord Gus O’Donnell, Pro Bono Economics
Ultimately, the commission floated the idea of a philanthropy commissioner last October, urging the government to create a funding pot to run civil society infrastructure pilots. Yet is this enough to solve the emerging crisis brewing in less affluent communities?
The UK Winter Crisis
The UK’s most vulnerable have faced dire living arrangements this winter, with one in 10 UK families — around 3 million households — being unable to cover the cost of food and heating. 400,000 households have been left with just £50 a month after paying bills, offering little room for a comfortable lifestyle.
Last January, the UK government finally offered adjustments to the universal credit taper rate, promising 2 million families an extra £1,000 a year to live off. This money, a government spokesperson has said, will become “available through our new £500 million support fund” that pledges to support those who have suffered on low incomes. Considering that the country’s poorest rely heavily on charities for support, it is important to emphasise that the steady decline of donations is not endemic to the UK.
Charity Across the Pond
In the US, income inequality is at a 50-year high. Consequently, American households have reduced their charitable giving by over $15 billion. From 1980 to 2015, households in the top 1% saw their incomes rise by 226%. Comparatively, the bottom 20% saw their incomes grow by 47%.
Despite this disparity, the wealthiest Americans contributed approximately 1.3% of their income to charity in 2011, whilst Americans at the base of this income pyramid donated 3.2% of their income. Thus, those in lower-class brackets generally exhibit higher levels of donation generosity.
The congressional economic committee found that of the 50 largest donations to public charities, prolific universities received 34. Other donations were trickled down to medical facilities and other fashionable charities, leaving much smaller donations (by less wealthy donors) to services pledged to aid those in poverty. Social-service organisations, such as United Way, the Salvation Army, and Feeding America, received zero of the 50 largest donations.
Is it Psychological?
For Paul Piff, a psychologist at UC Berkeley, there is an inextricable relationship between wealth and an increase in unethical behaviour:
“While having money doesn’t necessarily make anybody anything, the rich are way more likely to prioritise their own self-interests above the interests of other people” – Paul Piff, The Atlantic
Furthermore, Patrick Rooney concludes that greater exposure to, and identification with, the challenges of basic living requirements create “higher empathy among lower-income donors”. Wealthy households, who reside in homogeneously affluent areas, were less generous than comparably wealthy individuals who lived in more socioeconomically diverse surroundings.
Conversely, when two polar opposite income groups were exposed to a sympathy-eliciting video on child poverty, the compassion of the wealthy began to rise and the generosity of the two groups became near identical.
Therefore, those who fall into the wealthier bracket are arguably more disconnected from the challenges that lower income living presents. Indeed, the statistics show that although the rich are sympathetic to charities that support those in poverty, they are not empathetic to the cause: they continue to grow more affluent as charitable donations continue to decline across the globe.
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