The Economic Symphony: How arts and cultural institutions affect local economies and communities

The Economic Symphony: How arts and cultural institutions affect local economies and communities

Nicole Milano

Staff Writer

It’s no secret that arts and cultural institutions rely on outside funding to survive. (You have probably received an appeal at least once from your local public radio station asking you to donate, for example.) According to recent data from the National Endowment for the Arts, contributed income—money from individuals, businesses, private foundations, and government institutions—accounts for 45 percent of an arts group’s revenue, on average.

That’s a significant percentage, and while these organizations’ earned income is respectable, averaging 41 percent of total income (the remaining capital accounted for in the form of private endowments), you might wonder about the value of directing such a significant amount of funding to a sector that is focused on entertainment. Do arts and culture organizations positively impact their communities and the surrounding economy, beyond their capacity to provide “something to do” on a night out? Statistics and historical data suggest that they do.

The national conversation around jobs and employment has been at something at a fever pitch ever since the Great Recession, and a thriving arts community creates jobs. In the United States in 2013, the arts and culture sector employed 4.7 million workers and paid those workers a total of $339 billion in wages, salaries, and supplements. This job-creating potential can be seen at the state level as well: even in Arkansas, for example, a predominately rural state, creative enterprises are the third-largest employer, and Arkansas arts and cultural institutions generate $927 in personal income for citizens.

Consumer spending on the arts has been on the rise in the last two decades, which means good things for national, state, and local economies. According to the National Endowment for the Arts, consumer spending on the performing arts grew 15 percent from 1998 to 2013. Over that same time period, the overall arts and cultural contribution to the United States’ economy grew an impressive 32.5 percent to $704.2 billion in 2013. This data suggests that even when economic times are comparatively tough, one thing remains clear: where there is quality art to be consumed, people will spend money on it.

Beyond the hard numbers, there are other ways in which a thriving arts scene positively impacts its community. Arts organizations such as theatres, symphonies, and public radio are a big draw for both tourists and prospective movers—especially young professionals, who are more likely to spend discretionary income on entertainment than on tangible goods.

The presence of these institutions in a community also increases the quality of life for residents. For example, a recent study out of the University of Pennsylvania investigated the contribution of cultural engagement to community life in Philadelphia neighborhoods. The results of the study indicated a “strong relationship” between culture resources in neighborhoods and a much lower level of stress among residents. Another study of Philadelphia neighborhoods showed a correlation between large numbers of arts and cultural resources and lower levels of violence in neighborhoods. It’s not surprising, given that art can be a positive way of driving dialogue between communities and bridging racial and ethnic gaps.

While these correlations are promising, the challenge remains for arts organizations to maintain affordability for all populations. According to a recent NEA study, approximately 13 percent of Americans each year are interested in attending arts events but don’t, due, in part, to affordability. It’s no secret that theatre tickets are expensive; just look at as the thousands of dollars it cost to score a pair of tickets to the Broadway smash-hit Hamilton in the later half of 2016. The price exclusion factor doesn’t just apply to Broadway, either—it applies to regional and community theatres as well.

If arts organizations are to significantly improve the quality of life in their respective communities, they must be able to keep ticket prices affordable and offer valuable cost-free programs to low-income populations. Many arts organizations offer these programs, but funding is needed in order to keep them high-quality and free to the public. That’s why government entities like the National Endowment for the Arts—which makes up a measly 0.012 percent of the federal budget-—are so important.

Now that the impact of arts and culture on economics and communities is clear, businesses may still be asking: “What’s in it for me?” If a local arts organization reaches out about a donation or sponsorship, why should a business say yes? For one, these organizations won’t be able to maintain their economic contributions without support and partnership. It takes a village to nurture a thriving economy, and not-for-profit and for-profit businesses must work together to keep moving forward.

There are also significant marketing and exposure benefits to partnering with arts organizations. As mentioned earlier, more consumers are spending more money on the performing arts. That translates to valuable opportunities for local businesses to make an impression when a patron sees their name or logo in the program, on signage, on the institution’s website, and more. There’s also the endorsement factor: it’s common sense that consumers are more likely to support businesses that they see as endorsing or supporting the same causes that are important to them. That means that having a business name associated with the local symphony makes symphony patrons more likely to become new customers of that business.

Finally, there are basic tax benefits to supporting local arts charities. Most donations to local cultural institutions are tax-deductible. Though businesses should always confirm that this is the case if a tax deduction is part of what’s important to them, it’s more likely than not that your local arts organizations are not-for-profit, so a donation to one of them could make for a nice write-off come tax time. If a business is going to make charitable contributions for tax purposes, it makes sense for those donations to support organizations that can continue to benefit the business indirectly by stimulating the local economy and improving the quality of life in the community.

Arts funding and partnerships may seem like frivolous expenditures at first glance, but the evidence is clear: a thriving economy needs thriving arts and cultural institutions. With government funding continually at risk, and funding from private foundations becoming more competitive each year, local businesses can and should step up and support cultural institutions as a partner. Not only will it result in valuable exposure and positive associations for the business, it will contribute to the overall betterment of the local economy and well-being of the community. And those are things we could all benefit from right now.