Andrew G Haldane: In giving, how much do we receive? The social value
of volunteering
Speech by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of
England, at a Pro Bono Economics lecture to the Society of Business Economists, London,
9 September 2014.
* * *
Accompanying figures can be found at the end of the speech.
The views are not necessarily those of the Bank of England or the Monetary Policy Committee.
I would like to thank Lynne Berry, Martin Brookes, Karen Hancock, Sue Holloway, Jane Walsh (Pro Bono
Economics), Stephen Burgess, Jeremy Franklin, Charlotte Hogg, Joanna Konings, Lee Robinson (Bank of
England), Daniel Fujiwara (SImetrica and London School of Economics), Matt Hill (Institute for Volunteering
Research) and Valerie Fender (ONS).
I am delighted to be giving this joint Society of Business Economists (SBE) and Pro Bono
Economics (PBE) lecture. The issue I want to discuss is volunteering and its contribution to
the economy and wider society. This issue provides a natural link between the work of SBE
with its interest in promoting the economy, and PBE with its interest in promoting
volunteering by economists. And, indeed, the work of both in improving societal welfare.
Let me start with a word on PBE, for those unfamiliar with our work. PBE is a charity, which I
co-founded around five years ago with Martin Brookes. Its aim, then and now, is to match
economist volunteers into projects in the charitable sector, often to work on measuring the
social impact of charities' activities. In effect, PBE is a match-maker between economists and
charities.
Why might we match-make between the uplifting art of charities and the dismal science of
economics? Well, our hope was that there were significant gains from trade: on the
charitable side, because of the rising pressures many charities have felt to demonstrate the
impact of their interventions; and on the economist side, because of the usefulness of their
applied skillset for tackling measurement issues of just this type.
Five years on, the heartening news for both sides is that these theoretical gains from trade
appear to have been realised in practice. PBE has worked with over 170 charities, spanning
such diverse issues as homelessness, eating disorders, child exploitation and prison
rehabilitation. And we have matched over 170 economist volunteers into around 85 projects,
with a large lump of unused economist labour waiting in the wings.
PBE's experience illustrates nicely some of the broader points I wish to discuss about the
value of volunteering - value not just to the recipient but also to the provider and to wider
society. In other words, in giving our time through volunteering, we - individually and
societally - stand to receive.
One of the aims of this lecture is to demonstrate that the societal gains from volunteering are
potentially large - and also largely under-appreciated. Certainly, they are not well measured.
At least in official GDP statistics, they are not captured at all. This failure to recognise fully
the value it creates means that volunteering suffers from a market failure problem. At the
end, I will suggest a few avenues for correcting that failure.
The economics of well-being
Volunteering, and the work of PBE, fits under the broader umbrella of the economics of
wellbeing. This has become a growth area of late. And, some might say, not before time. In his
excellent recent report on
well-being, former Cabinet Secretary and PBE patron Gus O'Donnell quotes Robert
F. Kennedy in 1968:1
"[GDP] measures neither our wit nor our courage, neither our wisdom nor our
learning, neither our compassion nor our devotion to our country, it measures
everything in short, except that which makes life worthwhile."
Economists, from Simon Kuznets in the 1930s onwards, have long been aware that GDP
does not measure social welfare (Coyle (2014)). But, then and now, it remains the best
available proxy of the volume of the goods and services an economy produces.2 For this
reason, it remains an essential ingredient when assessing and managing the economy - for
example, when doing my day job of setting monetary policy.
But there are indisputably a much broader range of indicators that are relevant when
assessing the welfare of society more generally. For that reason, in their report for the
Commission on the Measurement of Economic Performance and Social Progress
(CMEPSP), Stiglitz, Sen and Fitoussi recommended a shift away from measures of
economic production towards measures of economic well-being.3
This is easier said than done technically. One approach is to take a set of metrics that are
likely to shape an individual's well-being and combine them - for example, income and
wealth, health and education, leisure and work activities, political voice and governance,
social connections and relationships, the environment and insecurity.
Another is to ask people about the level of their well-being directly, so-called measures of
Subjective Well-Being (SWB). Although that approach may sound simpler, it is not without
measurement problems. Survey responses are influenced importantly by factors such as
context and framing, which hinders comparability across time and countries.
Despite being a fledgling science, several organisations and statistical agencies have started
to construct indices of societal well-being. Here in the UK, the Office for National Statistics
(ONS) now publishes measures of National Well-being in their annual "Life in the UK" report.
According to the latest data, more than three-quarters of the UK population are satisfied with
their lot. I confess to being a touch surprised by this statistic. It is certainly considerably
higher than my own informal sample of rail commuters' faces each day into and out of
London.
Internationally, the UN has recently published its second World Happiness Report (United
Nations (2014)). The UK ranks a respectable 22nd out of 156 countries. The OECD
publishes a range of well-being indicators as part of its Better Life Index. An un-weighted
average of its indicators ranks the UK 12th out of the 36 countries (Figure 1). The UK does
well on measures of income, wealth, security and environment, less well on work-life
balance, education, skills, and housing (Figure 2).
I set out all of this because it has a direct read-across to measuring the societal value of
volunteering, to which I now turn.
The scale of volunteering
You can only measure what you can first define. The International Labour Organisation (ILO)
defines volunteering as:
"Unpaid, non-compulsory work; that is, time individuals give without pay to
activities performed either through an organisation or directly for others outside
their own household".
Within this, there is formal and informal volunteering. The former is done through groups,
clubs or organisations and is typically easier to measure; the latter can be through any
arrangement and so is often much harder to capture.
Clearly, volunteering is work. It also involves producing goods or services outside of your
own household. So playing a musical instrument for your own pleasure does not count as
volunteering, but playing in an old people's home does. Driving your children to hospital is
not volunteering, but driving your neighbours to hospital is. And so on. Figure 3 gives some
more examples taken from the ILO manual.
Given this definition, measuring volunteering activity is likely to be a tricky business. Would
you know how many hours you had spent over the past year helping your neighbours?
Those London commuters might know - a roundish number? - but the rest of the UK
population is unlikely to keep score.
Household surveys can help. In the UK, the Community Life Survey and the British
Household Panel Survey (BHPS) ask respondents about the nature and scale of their
volunteering activities. Although far from perfect, they enable us to build up a good overall
picture of the volunteering sector. And what a picture they paint.
First, the volunteer army in the UK is huge. Figure 4 illustrates the extent of participation in
voluntary activities in 2012, based on the Community Life Survey. Around 44% of
respondents had done some form of formal voluntary work over the previous 12 months and
29% volunteer formally at least once a month. This means around 15 million people in the
UK volunteer "frequently".
Looking at hours worked, this equates to just over 2 billion hours per year spent formally
volunteering. To give you some context, that is just under one hour per week for every
person over 16 in the UK. It is 5% of the total hours worked in the UK by paid employees. It
is equivalent to 1.25 million full-time equivalents (FTEs), or double the number of paid FTEs
4
in the voluntary sector.
Put differently, there are around the same number of FTE volunteers in the UK as there are
paid employees in the manufacturing, construction and real estate sectors combined. Indeed,
the only industrial sectors with a larger UK workforce are wholesale and retail services,
education, health and social work.
And it does not end there. It is estimated that another 170 million hours a year are
volunteered by people less than once a month.5 And to this estimate of formal volunteering
should be added measures of informal volunteering. According to calculations recently
released by the ONS, informal volunteers provide anywhere between 1.7 and 2.1 billion
hours of extra help each year.6
So, all in, volunteering in the UK might amount to as much as 4.4 billion hours per year. That
is 1.7 hours per week for every UK adult aged over 16. It is not far off 10% of the total hours
worked by all UK paid employees. That is quite an army.
Second, volunteering also appears to be big internationally. A group of academics at John
Hopkins University have been pioneers in this field and have published cross-country
comparisons.7 They calculated that, in 2005, around 970m people in the world were engaged
in voluntary activity. Given the growth in world population over the period since, the number
of global volunteers may well now top the one billion mark.
To put that in context, imagine if these volunteers comprised a single country -
"Volunteerland". It would have the second largest working age population of any country in
the world, behind only China (Figure 5).
The Charities Aid Foundation calculates a World Giving Index each year which ranks the
generosity of people in different countries with their money and time. For volunteering, top of
the league are the unlikely trio of Turkmenistan, Sri Lanka and the United States; bottom of
the pack are Yemen, China and Greece. The UK ranks 26th out of 131 countries. This is
respectable, if outside an automatic Champions League place (Figure 6).
Of course, cross-country comparisons can be quite difficult. For example, the high rates of
volunteering in ex-Soviet states, like Turkmenistan and Uzbekistan, are in part down to the
authorities having national days of volunteering - "subbotniks". As these are more or less
compulsory, they stretch to breaking point the definition of volunteering.8
Third, the volunteer army is a diverse one. Volunteering is slightly more prevalent among
older people and slightly less prevalent among people of child-rearing age (Figure 7). But all
age groups make a significant contribution. Women and men are broadly equally likely to
volunteer. And there do not appear to be major differences in volunteering across ethnic
9
minority or socio-economic groups.
Fourth, numbers of volunteers appear to be stable (Figure 8). There is some evidence of
cyclicality in volunteering, with it falling at the start of the recession and rising during the
recovery. A recent report suggested that volunteering numbers had reached a ten-year
high.10 It is possible this upward trend will continue. An ageing population will boost older
cohorts where volunteer participation rates are high. And among younger cohorts there is
evidence of a behaviour shift, with participation rates having doubled in the past decade.
Taken together, these patterns suggest that volunteering is tightly-woven into the UK's social
fabric - a fabric which is large, diverse, international and potentially growing.
Measuring the value of volunteering
So far we have established that labour inputs into volunteering are considerable. But this
does not tell us what value these volunteers create for the economy, much less for society.
This is important when gauging the contribution volunteering makes to societal welfare.
It is possible to build up an incremental, if somewhat piecemeal, picture of this contribution
from its various sources. These are shown schematically in Figure 9 as layers of a
"volunteering onion". At the centre of the onion are the volunteer army, all 15 million of them.
The outer three layers then measure respectively:
• The economic value of goods and services created by volunteers - if you like, the
GDP-equivalent value of volunteering services;
• The private value of volunteering activities, in particular the benefits felt by
volunteers themselves; and
• The social value of volunteering activities, as societal gains may be a multiple of
economic and private benefits.
I want to build up a quantitative picture of these various layers. They take us from a
conventional, GDP-centric measure of economic value through to a more fashionable,
wellbeing-centric measure of social welfare. In other words, this approach combines
elements of both the old and the new when determining the value of volunteering.
Before diving into methodology, let me just highlight a few general caveats:
First, these value layers - economic, private and social - may not be entirely
•
distinct. For example, the private benefits from volunteering may be the very reason
people volunteer in the first place and create economic value. So we should hesitate
before simply adding these benefits together. I will try to resist doing so, but will
probably fail.
Second, value measurement becomes harder the further out you go from the centre
•
of the onion. We can make reasonably informed guesses about the economic value
of volunteering, by adapting national income accounting techniques. And we can
construct some reasonable proxies for private benefits from various surveys. But we
have only piecemeal evidence on measuring the social value of volunteering. This,
in short, is a fledgling science.
• Third, it is striking that virtually none of these onion layers is captured by official
statistical measures of activity, such as GDP. And, indeed, only some are captured
by broader measures of subjective well-being. Measuring the value of volunteering
typically relies on secondary, often non-official, statistical sources.
In combination, this means that very little of the value created by the volunteer sector is
easily visible to statisticians, to policymakers, to politicians, to companies, indeed to the
volunteers themselves. This is a vast, but often invisible, army. So let me try to improve that
visibility somewhat by piecing together some evidence.
The economic value of volunteering
Let's start with the easiest bit - the economic value of volunteering. In other words, when
volunteers give up their time to paint a building, take an elderly neighbour to hospital or feed
the homeless, what is the value of the output they are producing?
GDP measures the monetary value of goods and services produced in an economy.
Because it is not normally associated with a monetary transaction, volunteering activity is not
captured by existing GDP statistics. This point is well-recognised by statisticians, which is
why the ONS publishes a series of
Satellite Accounts to pick up important sources of activity which lie outside GDP.
The Household Satellite Accounts are one example. They measure activities like childcare,
adult care, meal production, laundry services and also the work of volunteers which do not
involve a monetary transaction. In aggregate, these activities are huge. According to the
Satellite Accounts, were they included they would increase GDP by around 80%.
In an ideal world, we would observe the output of volunteers - the goods and services they
produce - and work out what they could fetch in the market, just as with GDP. But there is no
market for services in which no monetary transaction is involved.
What the ILO recommends instead - and what the ONS does in practice - is to capture the
value of the labour input used in producing these services, as a proxy for their market value.
Specifically, the ONS identifies particular voluntary activities from household surveys and
then maps those to paid occupations. Taking the median hourly wage for those occupations,
and multiplying by the number of hours volunteers provide, gives an estimate of the
volunteering sector's output on a replacement cost basis.
Using this method, the ONS calculates that frequent, formal volunteering produced just short
of £24 billion of economic output in 2012. This would be equivalent to 1.5% of GDP. That is
sizable. It would make volunteering one of the most important industrial sectors in the UK,
producing twice as much value as the agriculture sector and about the same amount as the
telecoms or the insurance and pension fund sectors.
Of course, any estimate relies on certain assumptions. Let me highlight three important ones.
First, these estimates consider only formal and frequent volunteering. Second, they assume
that the productivity and the quality of volunteer's work is the same as comparable paid
workers. And third, they assume that wages are a reasonable guide to output.
Taken together, these assumptions may if anything bias downwards estimates of the value of
volunteering. So it is instructive to tweak them to gauge possible biases (Figure 10).
• The first rows in the table show what might happen if you included all forms of
volunteering. Infrequent volunteering does not add that much - the Household
Satellite Account suggests around a further £1.7bn each year. But informal
volunteering is much more substantial. The ONS recently released an estimate of
informal volunteering in 2012 which puts the figure at almost £19 billion - not far off
the contribution from formal volunteering.11 This should reasonably be added to
overall estimates of the economic value of volunteering.
• For most private sector firms actual output is a mark-up over labour costs, reflecting
productivity gains and returns to capital. It is hard to know for sure whether the
volunteering sector follows the same pattern. But in those industries involving
"labour-intensive services", like volunteering, the labour share of output is about
80%.12 In other words, the economic output of those services is about a quarter
more than the labour costs. As the third row in Figure 10 suggests, if volunteering
activities are similar in nature, there is a case for scaling-up our estimates of output
by a similar amount.
The final issue, outlined on the fourth row of Figure 10, is about comparing
•
volunteers with paid workers. In carrying out the same activity as a paid employee,
volunteers may be more enthusiastic, but also less capable. I am more enthusiastic
about painting a shed than my local decorator, but also less competent. So it is not
altogether clear whether the wages of paid workers are good proxies for
volunteering value or not, with uncertainties on both sides.
The final row in Figure 10 offers estimates of the overall contribution of volunteering to the
UK economy. It suggests this could exceed £50 billion per year, or around 3.5% of annual
UK GDP. This would place the volunteering sector on a level pegging with the UK energy
sector (both extraction and utilities). Very few sectors add more value. Clearly, the inner layer
of the volunteering onion - economic value - is a very significant one.
Private value of volunteering
The second layer of the onion is the private benefit from volunteering. This might sound
fluffier than a GDP-equivalent measure. Yet even the hardest-nosed economist would
recognise the existence of those private benefits. Why else would anyone volunteer in the
first place! Volunteering is a prime example of revealed preference theory in practice.
Surveys of individuals overwhelmingly support this conjecture. The 2006/07 Helping Out
survey of volunteers found a range of benefits including enjoyment, satisfaction and
achievement, meeting people and making friends, broadening life experience, boosting
confidence, reducing stress, improving physical health and learning new skills (Figure 11).
The balance of benefits differs across individuals. For example, younger people are most
likely to highlight the importance of acquiring new skills and enhancing employment
prospects, while older volunteers see the benefits from increased social interaction and
improved health. But enjoyment and satisfaction rank high across all volunteer types.
This survey evidence is consistent with PBE's experience. Our economist volunteers are
often young. PBE offers the chance to apply existing skills to different sets of problem in very
different environments. I think without exception, PBE volunteers have found projects
enjoyable and satisfying - and, especially among government economists, liberating too.
Digging a little deeper, these self-reported benefits appear to fall roughly into three
categories: enhanced well-being, health benefits and increased skills and employability. It is
worth considering the evidence on each in turn.
(a) Enhanced well-being
There are various ways of assessing the impact of volunteering on individual well-being.
These include "stated preference" surveys, where people are asked directly about how
factors affect their well-being. But what people say and do are not always the same - and
several studies have shown that this approach may lead to systematic upward biases.13
Perhaps the most authoritative method is to use national surveys of well-being and life
satisfaction alongside data on the characteristics of the survey participants. This approach
lies behind the recent report by Fujiwara et al (2014). This report estimates the impact of
various factors, including formal volunteering, on an individual's life satisfaction.
Their results provide a relatively clear ranking of what factors really matter for well-being.
Health (physical and especially mental) comes at the top of this well-being league table,
followed by employment prospects. On the next rung down, however, sits volunteering. In
terms of personal well-being, this puts volunteering on a similar footing to playing sport.
If you were wondering where watching TV would come in the well-being list I can tell you -
close to the bottom. Indeed, watching TV is found to detract from well-being.14 This I think
confirms what we all knew deep down: X-Factor is bad for you.
It is possible to translate these into monetary-equivalent values - the money an individual
would need to be given to increase their well-being by the same amount. On this evidence,
you would need to be compensated around £2,400 on average per person per year for
forgoing the opportunity to volunteer.15 That is a very significant sum for the average person,
whose median annual salary was only £22,000 in 2013.16
If you multiply that per-person benefit by the 15 million or so regular volunteers, you get a
private benefit of volunteering close to £40 billion per year.17 If you added in non-regular
volunteers, you would get a larger number still. In other words, adding together private and
economic benefits roughly doubles estimates of the value of volunteering, to something
perhaps closer to £100 billion per year.
(b) Health benefits
The Centre for Mental Health estimates that the economic and social costs of mental health
problems are huge. The health and social care costs alone are worth over £20bn, the
associated output losses £30bn and the human costs over £50bn. So anything that improves
mental health, even in a small way, can make a big difference to social welfare.
Volunteering is typically found to have a positive impact on mental health - for example, by
enhancing social integration and engagement.18 Certainly, that is what volunteers
themselves say. Remaining active and socially engaged can be particularly important for
older age groups, post-child raising and post-retirement.
A systematic review of the international literature by Casiday et al (2008) assessed
43 longitudinal, cross-sectional and qualitative studies of the impact of volunteering on
mental health. It found that volunteering reduced the incidence of depression, stress,
hospitalization, pain and psychological distress.
It is difficult to put precise numbers on those benefits. But Fujiwara et al (2014) find that, on
average, the well-being benefit from relief from depression or anxiety is worth around
£37,000 per year. And
New Economy Manchester (2014) estimate that the average cost of treating those suffering
from depression or anxiety is around £956 per year.19 Even a small effect from volunteering
on mental health could deliver large benefits.
(c) Increased skills and employability
The evidence on the impact of volunteering on employability is more mixed. Ellis Paine et al
(2013) find a significant, but weak, effect of volunteering on the probability of finding a job.
Not all types of volunteering will lead necessarily to better employment outcomes. And it is
important not to overlook the potential benefits from volunteering felt by employers, as well
as their employees.
A recent poll by YouGov found that nearly all managers believe that workplace skills can be
gained from volunteering.20 And recent research suggests a link between the emotions
induced by volunteering (like confidence and self-esteem) and factors important in the
workplace (like performance ratings and efficient problem solving).21
Oswald et al (2014) provide evidence that happiness makes people more productive. If
randomly selected individuals are made happier - for example, by having their TVs removed
on a Saturday evening - they are approximately 12% more productive. Since we know
volunteering has a significant impact on an individual's well-being, it is a short step to think it
is also productivity-enhancing.
That, too, is consistent with PBE's experience. Employers of the economists used by PBE as
volunteers have often given fed back that this has enhanced their motivation and skills. And it
is worth just putting in context how big a potential benefit that could be. If the UK's 15 million
volunteers were each 5% more productive, that would deliver a boost to national income of
£23 billion each year.22
Once you tot up the private benefits of volunteering - well-being, health, skills - something
quite striking becomes apparent. The benefits to volunteering might be as large, if not larger,
for volunteers themselves as for recipients. In other words, in giving we really do receive -
possibly as much as we give!
That hard-headed economist I mentioned earlier would at this stage spring to their feet.
Brandishing revealed preference theory, they would say this is obvious - that it is these very
benefits that explain why the volunteer army exists in the first place.
And, once again, they would largely be wrong. For research has shown that people tend
systematically to under-estimate the positive effect for them of giving to others. In a nice
experiment, people were randomly assigned $20 to spend, either on themselves or others.
Those who were told to spend it on others subsequently reported significantly higher
subjective well-being ex-post, contrary to their expectations ex-ante.23
This means that volunteer army would possibly be larger still if individuals had greater
selfawareness of the private benefits of volunteering. When it comes to volunteering,
preferences may be as much concealed as revealed.24
Social value of volunteering
Finally, let's consider the social welfare benefits of volunteering. Why might these differ from
the economic and private benefits? And by how much?
Let's take a simple example. Consider a volunteer who helps out a charity providing support
services for the homeless. Is the value of this activity captured by the hours spent
volunteering? By the amount it would have cost to hire that person to provide that help? By
the amount that person themselves benefit from volunteering?
Well, all of the above are important and large, as I have shown. But they would still
potentially significantly under-estimate the value society should place on this activity. That is
because homelessness comes with wider collateral costs, for the individual most obviously,
but also for society generally: the reduction in employment and income prospects; the
accompanying increased risk of criminal activity and addiction to drugs or alcohol; and the
increased risk of physical and mental health problems.
All of these take a very significant toll on the homeless individual. But they also tax the public
purse, through increased social security, criminal justice and health spending. And that is
before you even get to the wider social costs of, for example, criminality and addiction on
families and societies. These costs are a form of societal externality.
The social value created by reduced homelessness is, then, a potential multiple of the cost of
the labour input to volunteering. But how large a multiple? Well, I can tell you. And the
reason I can tell you is that my thought experiment is not a hypothetical one.
Last year, PBE brought together a team of volunteer economists from Oxera Consulting with
a charity called Centrepoint which does wonderful work with homeless young people in
London.25 Centrepoint were keen to evaluate quantitatively the social benefits of their work.
So the Oxera team sought to capture the benefits of reducing homelessness in getting young
people into employment or training, preventing them from re-offending, treating their mental
health issues and reducing their substance misuse. These are a subset, albeit an important
subset, of the social costs of homelessness.
The results of this study, which was published by PBE last year, are outlined in Figure 12. To
cut a long story short, the study suggested that, for every £1 spent by Centrepoint, there was
a societal benefit of at least £2.40. Or, put differently, Centrepoint delivered a social return on
investment of 140% over a five year period. This was very much a lower bound estimate.
Let me give you a second example of a PBE social impact study, this time on an even grittier
issue - child sexual exploitation. In 2012, a PBE team from the Bank of England did a piece
of work for Barnardo's to judge the impact of their interventions to help exploited children.26
They looked at the reduced incidence of missing person calls to the police, the reduced
probability of becoming classified as Not in Employment, Education or Training (NEET),
reductions in substance misuse and the benefits from secure accommodation. These
benefits are outlined in Figure 13. They suggest a higher social welfare multiplier, perhaps as
large as six to twelve.
This is not miles away from estimates from a recent City of London study. This found that,
when a business invests £1 in employability-related employee volunteering, the social return
is over £11 for society.27
Of course, the precise social multipliers are likely to vary, charity by charity. To give you
some idea of scale, the lowest multiplier we have found from one of PBE's studies to date is
around 2.5, while the highest runs into double-figures. And while the number of studies
conducted by PBE is too small to constitute a representative sample - there are around
161,000 UK charities28 - these studies demonstrate clearly two things.
First, that evaluating these social benefits is usually possible, if sometimes with difficultly and
imperfectly. And second, at least in the cases we have considered so far, the social returns
from the voluntary sector, and hence from volunteering, can be significant multiples of the
labour input cost. Social multipliers are typically well in excess of one.
Despite this, the number of charities who have actually undertaken social cost-benefit
analyses is depressingly small. Research by New Philanthropy Capital in 2012 found that
25% of charities surveyed, and nearly half of those with income below £100,000, do not
measure their impact at all. Given that charities with income below £100,000 make up
roughly 80% of all general charities, this means there is a huge number whose activities are
not evaluated.29
This has all the classic symptoms of a market failure: social welfare externalities which are
not being