Legal Secretaries, Paralegals and the Demand for Skilled Workers

A story in yesterday’s Wall Street Journal described the difficulties faced by legal secretaries and support staff in the legal services sector.  The article described downsizing and layoffs at major law firms that seem to have fallen disproportionately on legal secretaries and administrative staff.  There is no doubt that advancements in information technology have reduced the demand for legal secretaries.  The WSJ article also describes how law firms have outsourced some administrative support functions.

A closer look at data from the Bureau of Labor Statistics Occupational Employment Statistics Survey indicates that while the number of legal secretary positions in the legal services sector fell by 17.1% in the past decade, employment of lawyers increased by 9.4% and employment of paralegals increased the most dramatically by 37.7%.

Legal Services

The changing employment patterns in the legal services sector reflects a more subtle shift in the demand for administrative support staff than described in the WSJ story.  Demand has increased fairly rapidly for paralegals and other support staff who possess specialized human capital and technical skills.  In 2002 there were 57% more legal secretaries than paralegals in the legal services sector.  Today paralegals outnumber legal secretaries and the gap in job opportunities is likely to continue.  Paralegals earn about 8% more, on average, than legal secretaries but are able to generate more revenue for their employers and therefore will remain in high demand.

The shift from traditional administrative support staff towards more skilled and technically proficient workers observed in the legal services sector is also occurring in other service sectors.  High school graduates who lack the technical skills and human capital required for these new jobs are likely to struggle in the job market.

Throwing Money at the Chicago Public Schools

Chicago public school teachers are on strike.  Issues include negotiations over possible pay increases, health care benefits, and job security over the next four years.  The negotiations in Chicago are important nationally because tough bargaining will be necessary for cities and states to gain control of the cost of compensation, health care and retirement benefits of public employees.  The bargaining between public administration officials and taxpayers on one side of the table and union leaders and public servants on the other will be instrumental in determining future tax rates, public debt and the quality and quantity of public services.  Moreover, because of the increase in Federal government funding of local governments, taxpayers in swing states such as Iowa, Wisconsin, Ohio and Virginia should be mindful of how their tax dollars have been spent in Chicago.  The funding of public elementary and secondary schools has become a Federal issue. The Chicago public school system is an excellent example of how education finance has changed over the past decade.

The Chicago public schools spent $12,193 per student in 2011.  This is a bit higher than the average for the state of Illinois and for the U.S. as a whole but is far less than the average in other large cities such as New York and Washington, DC.  In a series of tweets on Monday Josh Barro of Bloomberg View identified several reasons why teacher salaries are about the same in New York and Chicago but Chicago has lower expenditure per student: (1) class sizes are larger in Chicago, (2) a smaller fraction of students in Chicago are special needs students, (3) non-wage benefits are less expensive (and possibly less generous) in Chicago, and (4) the pension system for Chicago public school teachers is nut funded as well as the New York teacher pension system.

Federal funding of big city school districts is on the rise.  Nationwide about 12.5% of public school finances are provided by Federal aid.  Put differently for each $1 of local property taxes spent on schools the Federal government contributes 44 cents.  The Chicago public schools rely much more on Federal aid than the average district. About 23.3% of the finances of the Chicago schools are provided by Federal aid.  For each $1 in local property taxes in Chicago that are spent on schools, the Federal government contributes 59 cents.  These figures and the ones that follow are from Chicago public school budget documents.

The fact that the performance and efficiency of the Chicago public schools is now a Federal concern is a relatively recent phenomenon.  The following figure shows that, adjusting for inflation, Federal aid to the Chicago public schools increased by over 85% per student between 2002 and 2011.

Overall spending per student, after adjusting for inflation, has increased by 26.5% since 2002.  More than half of this additional funding has been paid for with Federal aid.  Moreover even though spending per student and Federal aid has fallen very slightly from 2009 to 2011 (adjusted for inflation) overall spending and Federal aid are much higher than just five years ago.

Where did the money go?  Enrollment in Chicago schools fell by 8% since 2002 so there is less reason to build new schools in Chicago than in cities with rapidly growing populations of school-age children.  Class sizes have not changed much in Chicago since 2002 despite the large increases in real spending per student.  The average class size increased from 22.6 to 23.2 for elementary students and fell from 20 to 19.8 in secondary schools.Everyone interested in the future fiscal health of our country should follow the Chicago negotiations between the teachers’ union and Mayor Emanuel.  Taxpayers throughout the country help finance schools in Chicago, New York and other large cities.  The administrators and teachers’ unions need to be responsive to their constituents, who now include taxpayers from across the country.  The Federal government provides more than $1.1 billion in aid to the Chicago schools per year.  This is not a large sum when one considers that the Federal government spends $1.1 billion every two and a half hours.  Nonetheless, quite the late great Illinois Senator Everett Dirksen “A billion here, a billion there, and pretty soon you’re talking real money.”

Two New NCAA Regulations That Will Improve College Football

Last month Tyler Cowen and Kevin Grier offered an explanation of the persistence of the college football bowl system.  They believe the BCS will continue despite the greater revenue generated by a championship tournament, because schools benefit from bowl game publicity and players gain from the bowl experience. The sparse attendance and low ratings of many lesser bowl games makes me skeptical of their publicity value. There are impediments to change, however, so here I propose two new regulations to ease the transition to a playoff system. First, allow non-bowl teams to hold practices until a national champion has been crowned and second, require teams to evenly split gate receipts for regular season non-conference games.

Practice times and player contact is restricted by the NCAA during the off-season. An important non-financial gain from bowl participation, especially for younger teams with more returning players, is the ability to schedule additional practices. If all teams were allowed the same practice time, regardless of their bowl status, teams would be less interested in participating in minor bowl games.

Defenders of the status quo argue that the bowl system makes college football’s regular season the most compelling in sports; one loss could eliminate a team from BCS title consideration. The status quo also encourages many boring September games because Athletic Directors rationally schedule very weak non-conference opponents. The past 12 participants in the BCS championship game played 45 non-conference games. Two thirds of their opponents were not ranked in the top 80 teams, and one of three was outside the top 125 teams in the country. The implication is clear: to improve chances of advancing to the BCS title game a team should schedule 2/3 of nonconference games against vastly overmatched opponents.

The NCAA encourages non-conference mismatches by allowing a team to keep all gate receipts after paying a nominal fee to a weak opponent to come to its campus. The NCAA should require gate receipts to be split evenly with the visiting team (as in the NFL) for all non-conference games. This simple rule would reduce the financial return to scheduling weak opponents. Teams would also take more scheduling risks with a 16 team playoff because a single loss would not end a team’s title hopes.

Many of the 35 bowl games that are played each year would be interesting inter-conference match-ups if they were played in September and replaced the annual parade of lopsided games. Television revenue would be enhanced by the promise of more and better early non-conference games.

I prefer a 16 team tournament that culminates with a game between the last two surviving teams, whether or not they are the “best” teams in the country. Sports contests are entertaining because upsets are possible and outcomes are uncertain. March Madness would be far less compelling if the selection committee chose the country’s 4 highest seeded teams as the Final Four and replaced the rest of the tournament with 60 meaningless basketball “bowl” games.

The rules changes I have proposed are sensible even with a bowl system. First, colleges and universities would be treated uniformly with respect to gate receipts and practice times, whether or not they are football powers. Second, powerful teams would be discouraged from scheduling games against vastly weaker opponents which should result in better non-conference regular season games.

Answering Tim Harford on the Minimum Wage

In Saturday’s Financial Times Tim Harford asks the question “Can the Minimum Wage Create Jobs?”  The simple answer is yes, but not as many as it destroys. Any policy has winners and losers and the minimum wage is no exception. The losers are young and unskilled workers who become more expensive but no more productive to prospective employers. The winners include semi-skilled workers who compete with minimum wage workers and producers of the capital equipment that companies use to economize on unskilled labor. Crony capitalism is not limited to tax breaks, subsidies and bailouts; the minimum wage can also benefit unions threatened by cheaper non-union workers.

Harford cites the “amazing” and controversial Card and Krueger study which showed that a higher minimum wage didn’t reduce employment in fast food restaurants in New Jersey. Putting aside possible problems with their data discussed by other economists, Card and Krueger looked for job losses at restaurants with the least labor intensive food preparation methods in the history of mankind. (e.g. most have outsourced the task of filling cups with ice and soft drinks to their customers to save labor costs). A higher minimum wage raises the relative cost and price of made-to-order sandwiches in labor intensive competitors and may actually increase demand at fast-food restaurants. The Card and Krueger study says nothing about how a higher minimum wage affects the aggregate employment of unskilled labor.

Harford correctly notes that minimum wage laws attempt to treat a symptom of a larger problem. The real problem is that many young workers lack the skills that employers demand. Unfortunately the minimum wage makes it more difficult for young adults to acquire vocational skills because it makes on-the-job training programs less viable. Companies will provide general training only if workers “pay” for it through a lower wage because a company loses its investment when trained workers (who received full pay) leave. The minimum wage limits the ability of young workers to “pay” for on-the-job training and apprenticeships. This is especially costly if vocational and for-profit schools are ineffective alternatives for developing marketable skills.

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