Stuck in the Soup Kitchen: The Dilemma of Giving for Direct Services

Thanksgiving and Christmas are shining moments for America's charitable sector. These are days when churches, soup kitchens, food pantries and other organizations do more than just keep the poor and homeless afloat: They also provide a place for people to gather who might otherwise be alone. That's a beautiful and important thing.

But the fact that a patchwork system of private philanthropy is often the only thing keeping human beings fed and sheltered in the world's richest nation is a disgrace. We should be thankful to those who donate their time and money to caring for the indigent. But we should be ashamed of America's frayed social safety net. And even as we appreciate the generosity of funders behind Feeding America or the Salvation Army or myriad local groups, we need to ask hard questions about direct service philanthropy.

The basic problem, as I've written before, is this: When it comes to poverty, too many funders are plugging the dike instead of working to redirect the river.

While it's hard to quantify this imbalance, a passing glance at the overall data shows that direct human service organizations receive exponentially more money than groups that work to grow the economy, create jobs, improve job skills, build affordable housing, or advocate for a strong public safety net.

Why is that? Why does Band-Aid philanthropy trump efforts to prevent people from being poor or hungry or homeless to begin with?

One reason is that many funders feel they have no choice but to keep funding direct service work at a high level given the urgent human needs that would otherwise go unmet. And they're often right. On the other hand, spending so much money to alleviate the symptoms of poverty leaves less left over to attack the causes—which is surely the more strategic use of philanthropic dollars.

What's the right thing for funders to do?

For starters, they need to recognize that direct service charity is engaged in a Sisyphean fight against problems well beyond its capacities. And so even as philanthropy keeps open soup kitchens and shelters and clinics, funders need to get smarter about leveraging their dollars.

A Broken Economy

Recently, I wrote abou t how Sobrato Philanthropies, a top human services funder in Silicon Valley, was shifting to focus more on fostering economic opportunity and upward mobility. That makes a lot of sense, because as I noted in that post, the biggest obstacle to self-sufficiency for millions of Americans is that they can't earn enough money. And, in many places, the charitable sector devotes huge resources to taking care of the working poor or other victims of an economy that doesn't work for the bottom third or so of Americans.

God bless the funders who are cleaning up the mess created by low wages and high living costs. But every funder left holding this bag should be asking the same question as Sobrato: How can we address the causes of financial hardship?

Outside the Comfort Zone

Of course, going after the causes of poverty is easier said than done, especially for funders who'd rather sidestep thorny questions about equity and opportunity. This terrain can be quite politicized, and feel off-limits as a result. Advocates for low-wage workers in Silicon Valley and elsewhere argue that the best way to keep folks out of soup kitchens is to raise the minimum wage, make it easier to join unions, build affordable housing, subsidize childcare, and so on. Conservatives, meanwhile, argue that deregulation is the key to more growth and opportunity.

Wendy Garen, the CEO of a big human services funder in Los Angeles, the Ralph M. Parsons Foundation, told me that her board was a bipartisan group and so it was hard to agree on public policy interventions. Often, the only systemic levers that funders like Parsons and Sobrato will look at are education and job training, which can only go so far in addressing poverty in a stratified economy where many of the new jobs being created in sectors like retail and restaurants don't pay a living wage.

Stocking Food Kitchens, Cutting Food Stamps

Maybe worse is how many funders are so allergic to advocacy that they stand by and do nothing while policy decisions make their jobs harder. For example: Parsons is committed to improving access to higher education in Los Angeles, but doesn't generally fund advocates fighting to stop tuition hikes at the state's public universities, which used to be almost free. After the most recent tuition hikes, a year at a UC school will soon cost over $15,000, not including living costs.

Hunger is another great example. Feeding America, the leading anti-hunger group, has been pulling in record donations lately, including from hedge fund manager David Tepper and from Howard Buffett. Meanwhile, advocates fighting cuts in food stamps have been outgunned inside the Beltway and substantial cuts to SNAP are going into effect, imposing more stress on already overtaxed food pantries. Feeding America estimates that 49.1 million Americans lived in food insecure households in 2013.

Big Problems, Small Nonprofits

Feeding America has become quite a nonprofit juggernaut, although it's not as large as, say, the Salvation Army. What's striking, though, is how puny human services outfits really are relative to the problems they're tackling, like the fact that a sixth of the U.S. population faces hunger. All charitable giving for human services was $41.5 billion last year, which works out to $891 for each American living officially below the poverty line.

That's not a lot of money, especially when you consider how many other people living above the poverty line are struggling. In Silicon Valley's biggest county, for instance, WPUSA estimated that one third of households earned less than the Self-Sufficiency Standard in 2010, which measures basic expenses for food, housing, transportation, child care and other necessities.

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So the situation boils down to this: Even as tens of millions of Americans endure ongoing hardship in an economy that simply doesn't work for them, many funders won't engage this problem at a systemic level and instead opt for Band-Aid strategies that themselves fall short.

That's got to change. And there are plenty of funders who are working systemically and showing the way. These include national foundations like Ford and Mott, but also local funders who are investing in economic development as well as advocacy.

Funders shouldn't pull the plug on direct service giving, but more need to be thinking about how to transition to grantmaking that actually solves the problems they're worried about.

And here's one data point to close on, regarding which anti-poverty strategies funders should embrace: The only periods during which poverty has actually fallen in the past four decades occured when the economy was growing at a rapid clip.

So whatever else funders do, working to fan growth and prosperity is all-important.