« March 22, 2015 - March 28, 2015 | Main | April 5, 2015 - April 11, 2015 »

April 2, 2015

Grant Funded Research (Michael Simkovic)

Paul Campos of the University of Colorado is once again confused by my research with Frank McIntyre.  This time, the source of Professor Campos’s confusion is not present value calculations, but rather grant funding.

The Economic Value of a Law Degree was not funded through grants.  No disclosure of grant funding appears in that article because there was no funding to disclose.

Two follow up studies, Timing Law School and an upcoming study about differences in the law earnings premium by college major, race and gender, are funded through grants from Access Group, Inc., a non-profit that provides financial education to students and schools and aims to promote broad access to education, and the Law School Admission Council (LSAC), which is an important provider of data and research about law schools (see here and here).

The funding provided through these grants is used to buy out time so that Frank and I can spend more time on research. I do not receive the money for my teaching buyout—Seton Hall is paid so that it can find replacements to teach the classes I would have taught.  The grants also provide funding for research assistants, software and equipment, summer stipends, and conferences.  The payments are scheduled over a two to three year period. 

Frank and I are interested in methodological rigor, not in particular results or outcomes, which in any case are unknowable until after we analyze the data.  We believe in maximizing the transparency of the methods we use for our research so that it can be replicated or challenged by future empirical researchers.  There has never been any effort by LSAC or Access Group to influence or censor our results.

Frank and I are proud of our success securing funding from such highly regarded organizations.  We trumpet their support in the first footnote of Timing Law School, and announced it in our first blog post about Timing Law SchoolI also list the grants and dollar amounts of each on my CV and on my LinkedIn page.

Curiously, Professor Campos and his followers seem to think that the fact that highly regarded non-profit organizations believe our research is worthy of funding is some sort of dirty secret.  We’ve practically been shouting it from the rooftops, so I suppose we should thank him for pointing it out.

Professor Campos also underestimates how common grant funding is in legal research.  Faculty at many other law schools have also obtained grant funding.  At Columbia, Ed Morrison has received grant funding from the National Science Foundation (NSF) for research on mortgage modification.    At Texas, Wendy Wagner has received NSF grants to support studies of administrative agencies.    At Harvard, Alma Cohen, Lucian Bebchuk, and Steven Shavell have all received NSF grants and private foundation grants.   At Yale, Gideon Yaffe and Tom Tyler have received grants.  At NYU, Jennifer Arlen, Stephen Schulhofer and Aziz Huq have all received grants.  At Stanford, Dan Ho, Joan Petersilia and Erik G. Jensen have received grants.

Dalie Jimenez at University of Connecticut has received grants for studies of bankruptcy and consumer finance related issues.  At Fordham, Joel Reidenberg has obtained substantial grant funding from the National Science Foundation (NSF) for research on online privacy, and at least three other faculty members that I know of have also obtained substantial grant funding.  Lee Epstein at Washington University in St. Louis has obtained numerous NSF grants that have funded widely cited empirical research into judicial decision making.  

The authors of After the JD have also received funding from the NSF, NALP and the American Bar Foundation, among other sources.  Thomas Lyon at USC has received substantial funding from the National Institutes of Health, the NSF, and several private foundations for his work on child witnesses, child maltreatment, and domestic violence. At BU, Kevin Outterson has obtained grants to fund research on business models for antibiotic development.

These are just a few examples off the top of my head—there are many others.  As law schools and government funding agencies become more resource constrained, it is natural to expect more faculty to pursue other sources of funding for their research, as faculty members in other fields have done.  Of course, the most likely sources of funding are those who are already interested in the topics and issues of the research.  External funding highlights the importance and relevance of legal research.

I’ve discussed my research with many audiences, from education researchers to labor economists, regulators, law professors, and financial institutions.

Lenders are in the business of predicting and pricing default risk. Research becomes more useful for that purpose as it becomes more accurate and rigorous.  Several for-profit lenders have concluded, based in part on our research, that many graduate and professional students are paying too much for their student loans.  Since professional school graduates are very unlikely to default on their loans or produce losses for lenders, it is profitable to lend to them at lower interest rate than that charged by the Federal Government.  These lenders have therefore introduced refinancing options that both substantially reduce financing costs for borrowers and enable the lenders to earn an attractive return on their investment.  With better data, both lenders and borrowers can win.  

I do think that external funding of research can potentially raise a number of issues.  I’ve alluded to these in my research on Risk Based Student Loans and Mortgage Securitization. Scholars who have written about these issues thoughtfully include Derek Bok, Luigi Zingales (see the chapter on “The Responsibilities of the Intellectuals”), Lee Epstein, and several researchers affiliated with the Safra Center at Harvard.  In my and Frank’s case, the grants simply provided us with resources to do better and faster what we would have liked to do anyway, and perhaps moved certain projects higher up on our list of priorities.

I see a lot of value in universities having the necessary resources internally to support research on topics that are not necessarily amendable to external grant funding.  If Professor Campos believes that law schools should support that kind of research, and charge tuition levels that are necessary to support it, then we agree. 

If Professor Campos or anyone else has a substantive critique of our methods or our data, we welcome constructive feedback.  Indeed, substantive critiques of the working paper version of the Economic Value of a Law Degree improved the published study and helped inspire Timing Law School and our upcoming follow-up.

Posted by Michael Simkovic on April 2, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Science, Weblogs | Permalink

"Legal Realism and Legal Doctrine"

This piece is for a Penn law Review symposium.

Posted by Brian Leiter on April 2, 2015 in Jurisprudence | Permalink

April 1, 2015

What “Employment” and “Unemployment” Mean (Michael Simkovic)

Recently, two criticisms have been leveled against law schools.  The first is an economic critique—law school is not worth it financially compared to a terminal bachelor’s degree.  This critique is incorrect for the overwhelming majority of law school graduates.

The second is a moral critique—that law schools behaved unethically or even committed fraud (see here, here, and here) by presenting their employment statistics in a misleading way.  (While at least one of the 200+ American Bar Association (ABA) approved law schools misreported LSAT scores and GPAs of incoming students, and a former career services employee at another alleges specific misreporting of unemployment data at that law school, I am focusing here not on the outliers, but on the critique against all law schools generally).

The moral critique against law schools comes down to this:  The law schools used the same standard method of reporting data as the U.S. Government. 

According to the critics’ line of reasoning, “employment” means only full-time permanent work as a lawyer.  Anything else should count as either “unemployment” or some special category of pseudo-unemployment (i.e., underemployment) .  (This is apparently based on an incorrect belief that law school only benefits the subset of graduates who practice law).  

Employment and unemployment statistics are not meaningful in a vacuum.  They only become useful when they can be compared across time, for different groups, or for a different set of choices.  For example, prospective law students might want to know that law school graduates are generally less likely to be unemployed or disabled than similar bachelor’s degree holders.  (Frank McIntyre and I combine the unemployment and disability rates whenever possible because of research showing that disability is often a mask for unemployment, although we’d generally get similar results for relative rates if we just used unemployment).

To avoid confusion and ensure that data are comparable, the standard definitions used by the U.S. Government should be used when reporting employment statistics, unless there is an indication that non-standard definitions are being used.  

The standard government definitions of “employment” and “unemployment” are the way we all use these words in ordinary speech when we say things like “the unemployment rate went down this year.”  These are not obscure definitions.  Googling “unemployment definition” and checking the first few results—Investopedia , Wikipedia, About.com, and the U.S. Bureau of Labor Statistics (BLS) website —will get you to the right answer.

So how does the United States government define “employment”?

The most commonly reported and cited official government employment statistics include individuals as “employed” whether such individuals are employed full-time or part-time, whether in permanent or nonpermanent positions, whether in jobs that do or do not require the level of education they have obtained.*

In other words, the U.S. Government counts individuals as employed even if they are employed in part-time, temporary jobs that do not require their level of education.  Indeed, individuals count as employed even if they are self-employed or worked without pay in a family-owned business.

When the government reports education-level-specific employment statistics** it uses the same definitions and does not restrict employment to those who are employed in jobs that require their education level.   Employment includes any employment, whether full-time or part-time, whether temporary or permanent, whether in a job that requires a given level of education or not. 

What about the standard definition of “unemployment”? 

Unemployment is not the absence of employment.  Instead, there are three categories—employed, not-in-labor-force, and unemployed.  An individual only counts as “unemployed” if he or she “had no employment during the reference week”, was “available for work, except for temporary illness” and recently “made specific efforts to find employment.”

Those who are not working and are not actively seeking work for whatever reason—for example, caring for dependents, disability, pursuing additional education—are not counted as part of the labor force.  Unemployed persons as defined by CPS are used to calculate the widely cited “unemployment rate.” The unemployment rate is defined as unemployed persons as a percent of the labor force--in other words, excluding those who are neither working nor seeking work.***

Some law school critics have claimed that anyone who fails to respond to a survey about their employment status should be assumed to be unemployed.  The Census and BLS disagree, and instead weight the data to account for non-respondents. 

In addition to top-level information about employment status, some data sources such as the CPS may also include fields with more detailed information about full- or part-time work-status, industry or sector, and occupation.  Law schools have also historically provided a detailed breakdown of employment categories shortly after graduation in the ABA-LSAC Official Guide To ABA-Approved Law Schools.  In the last few years, law schools have provided even more detail in ABA-required disclosures. (We’ve previously noted some of the problems with focusing on employment outcomes shortly after graduation rather than long-term value added; The ABA's new employment data protocols have additional problems with their definition of "unemployed" discussed below ****).  The National Association for Law Placement (NALP) also provides high level data and a more detailed breakdown. 

The inclusion or non-inclusion of more detailed information does not alter the meaning of top-level information about employment status: the meaning of “employed” is established and well understood by users of employment data.  Commonly used and cited employment statistics have been reported by the BLS from 1948 through the present, and are widely understood by users of employment data.

Indeed, the BLS has noted for decades in its Occupational Outlook Handbook that many law school graduates do not work as lawyers.  Law schools and bar examiners publish bar passage rate statistics which clearly show that many recent law school graduates cannot legally be working as lawyers (unless everyone who failed a bar exam in one state passed a bar exam in another).

Comparing apples to apples using standard definitions reveals that law school graduates are doing relatively well compared to similar bachelor’s degree holders.   By contrast, critics of law schools and plaintiffs lawyers have used non-standard definitions and compared apples to oranges.  

It is not surprising that the courts have dismissed the lawsuits against law schools.  If only the New York Times and the Wall Street Journal were as fair and judicious.

 

*     The primary source of labor force statistics for the population of the United States is the Current Population Survey (CPS), sponsored jointly by the United States Department of Labor, Bureau of Labor Statistics and the United States Census Bureau (Census).  CPS is the source of numerous high-profile economic statistics, including the national unemployment rate. CPS defines "Employed persons"* to broadly include anyone who has done any paid work during the week when it is measured, who worked for themselves or a family member, or who was temporarily absent from work. 

“Employed persons”* as defined by CPS are used to calculate the “Employment-population ratio”.  The Employment Population Ratio resembles the “Percent Employed” statistics reported by law schools.  

Employed Persons” includes:

 

[or]

and

(emphasis added)

 

**    The BLS also reports Employment Population Ratios for specific education levels and age groups such as bachelor’s degree holders and above ages 25 to 34. These statistics are also reported by the United States Department of Education, National Center for Education Statistics.  (To the extent economists have tried to define and measure “underemployment” (see here and here ), it appears to be as or more common among bachelor’s degree holders compared to similar law degree holders).

 

***   The “labor force” as defined by CPS consists only of persons who are either “employed” or “unemployed” under CPS definitions.

 

****  The ABA’s new data protocol counts individuals as “Unemployed” who would instead be considered “Not-in-labor-force” by the U.S. government.  The ABA subcategory, “Unemployed—Seeking” is probably the closest to the standard definition of unemployment.  This misalignment between ABA definitions and standard government definitions of unemployment could lead individuals comparing ABA data to standard and widely used government employment data to erroneously conclude that unemployment for law school graduates is higher relative to other groups than it really is.

Posted by Michael Simkovic on April 1, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Science, Student Advice, Weblogs | Permalink

On April Fool's Day you should visit...

...Legal Theory blog for the latest in "scholarship" from Daniel Farber, William Baude, and no doubt others.

Posted by Brian Leiter on April 1, 2015 in Legal Humor | Permalink

Something sensible, at last, about legal education and the market for lawyers in the mass media...

...in this case The New York Times.

Posted by Brian Leiter on April 1, 2015 in Legal Profession, Of Academic Interest | Permalink

March 31, 2015

The Absence of Evidence for Structural Change: Growth in Lawyer Employment and Earnings (Michael Simkovic)

There have been a lot of doom-and-gloom reports about layoffs and collapsing job opportunities for lawyers.  As we’ve noted before, the relevant question for valuing legal education is the boost to earnings from the law degree across occupations, not the more specific question of what is happening to lawyers, or even more specifically, big law firms. 

But for the sake of argument, focusing more narrowly on the under-inclusive category of lawyers only, what does the data actually show about lawyer employment?  Are doom-and-gloom predictions justified for lawyers even if not for law degree holders?  According to many of the proponents of the structural change hypothesis, signs of structural change were showing up as early as 2010, or perhaps even as early as 2008.  We now have several years of historical data beyond that point to consider whether their predictions, thus far, have proven correct.

Lawyer employment is growing.  This is true both in absolute numbers, and also relative to overall employment.  In other words, lawyers are becoming a larger share of the U.S. workforce. 

Slide18

The data in the chart above is from the U.S. Department of Labor, Bureau of Labor Statistics (BLS), Occupation Employment Statistics (OES), which is a survey of establishments (employers). The blue columns scaled to the left axis represents the absolute number of lawyers, while the red line scaled to the right axis represents lawyers as a percentage of the total labor force.  As can be seen from the above chart, both numbers are trending upward.  

One limitations of BLS OES is that it focuses on employees, not owners, and therefore excludes law firm partners and solo practitioners.  Another leading source of data, the U.S. Census Bureau’s Current Population Survey (CPS), is a survey of households, and includes solos and law firm partners. 

CPS shows much the same trend as BLS OES.  Lawyer employment is increasing, both in absolute terms and as a share of total employment.  The charts below show CPS data.

Slide16

 Slide17

 

The leading government data sources show the same thing—growth in employment of lawyers is faster than (or at least as fast as) overall employment growth.

The practice of law is also becoming more lucrative, at least over the long term.  According to a recent draft paper by Richard Sander and E. Douglass Williams, after controlling for changes in the demographic composition of the legal profession, Sander and Williams find long-term growth in real (inflation-adjusted) lawyer earnings.  (Sander and Williams use IPUMS-CPS data, and focus on white males, since historical data is not as readily available for women and minorities who have joined the legal profession in large numbers only in recent years; To understand the importance of controlling for demographic changes in the profession, consider Simpson’s Paradox).  

Data from the Sander and Williams study is provided in the chart below.

Slide19

After 2010, the picture for lawyer earnings is more mixed.  BLS OES data suggests modest declines in real earnings of lawyers of around 6 percent by 2014.  By contrast, the CPS suggests modest real growth in lawyer incomes of around 3 percent by 2014.  Overall, it’s likely that real lawyer earnings have been close to flat.  Flat earnings are consistent with what has been happening elsewhere in the labor market (see here and here).  Given lawyers’ highly advantageous starting position relative to most other occupations, flat earnings or even modest declines suggest that lawyers have maintained a large relative advantage even as they have grown in relative numbers.  (It’s possible that incomes for lawyers may have become more dispersed over time, notwithstanding the averages—indeed, it would be surprising if that were not the case, given the general trend toward widening income dispersion across the economy).

As noted previously, changes in entry level earnings and employment, though larger than those for the profession as a whole, are consistent with changes at the entry level for the rest of the labor market and established historical patterns.  Young law graduates continue to earn substantially more than young bachelor’s degree holders post 2008.

Within a few years of graduation, about as large a proportion of employed young professional degree holders were working as lawyers after 2008 as before 2008.

 

  Fraction of working professional degree holders working as lawyers

 

Some critics of legal education have focused on “legal services” (mostly law firms).  This is not a good measure of either the value of a law degree, or of the labor market for lawyers.  Most employees in “legal services” are not lawyers, but rather support personnel such as secretaries, paralegals, and business and technology specialists.  Many lawyers and law degree holders work outside law firms. 

Changes taking place in “legal services” might be affecting the non-lawyers who work there rather than the lawyers.  Changes in “legal services” affecting lawyers could be offset by changes affecting lawyers working in other industries.  In other words, legal work could be moving out of the law firms and in house or into other professional service firms such as accounting firms.

BLS and CPS data for “lawyers” provides a much clearer picture of the legal employment market, while law earnings premiums across occupations are the most useful measure of the value of a law degree.

Growth in earnings and employment has been slower in recent years than in the past, to be sure, but that is generally true across the economy.  The case for massive structural change in the legal profession eroding the value of a law degree is not well supported by the data.  

Posted by Michael Simkovic on March 31, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Science, Weblogs | Permalink

A lot of finalists for Dean at North Carolina!

Here.  A strong pool as well.

ADDENDUM:  A smaller pool of finalists at Illinois, including one also in the running at UNC.

Posted by Brian Leiter on March 31, 2015 in Faculty News, Of Academic Interest | Permalink

March 30, 2015

Kant and evidence law in Bulgaria in the 18th-century

At last!

Posted by Brian Leiter on March 30, 2015 in Legal Humor | Permalink

"Normativity for Naturalists"

This paper is for a forthcoming volume of Philosophical Issues (the supplement to Nous) on "Normativity" edited by Ram Neta.  It's a bit more philosophically technical than the typical purely jurisprudential piece, but may interest some readers.

Posted by Brian Leiter on March 30, 2015 in Jurisprudence | Permalink