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Wednesday, November 14, 2012

Reforming Legal Education's Finances: Cutting Labor Costs

After two days of discussions on the revenue side of the ledger, we now turn to costs.  A law school looking to cut costs must make a series of decisions.  This post focuses on one set of those decisions.  If a law school is looking to cut labor costs (particularly with respect to faculty), what are the pros and cons of various ways of doing this?

The easiest way to cut costs would be to not fill empty faculty or staff lines.  Based on the AALS entry-level data, it looks like a fair number of schools have taken this approach.  I say this is "easiest" because no one has to be fired or take a pay cut.  But there are real costs as well.  It unbalances a school's faculty by cutting off the influx of new talent. Moreover, if pursued by a large number of schools, it makes things particularly difficult for a set of young scholars who will find that their opportunities are much more limited than their predecessors'.  One year of reduced hiring may be ameliorated over time.  But if schools continue to cut costs, the decision to freeze hiring for two, three, or more years will have a significant impact on schools as well as a generation of aspiring professors.

So how about the other options?  Tenured faculty presumably cannot be fired.  A school that overtly denigrates its tenure commitments is likely to face a severe reputational hit.  Schools may try to get around tenure protections more quietly by beefing up post-tenure review and then making life more difficult for tenured professors who are deemed to be falling short.  Such policies will anger and alienate the targeted faculty, may demoralize the entire faculty, and may also lead to litigation.  But they might (in some individual cases) improve performance or lead to exit.

The other option is to cut salaries.  We'll talk tomorrow about ways in which salaries could be cut.  Without getting into specifics, the advantage of cutting salaries is that you can maintain a larger faculty with smaller costs.  But wages are sticky.  It's true generally, and it has been true in law firms as well.  The demoralization that comes from a wage cut is frequently seen by employers as not worth the cost-savings.  A wage freeze may be more palatable, but given low inflation, it takes longer to have a substantial impact.

So what do you think?  What are the costs and benefits of cutting positions versus cutting salaries?

Posted by Matt Bodie on November 14, 2012 at 10:13 AM in Life of Law Schools | Permalink

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Comments

Another problem with a hiring freeze is that if one accepts (I expect few to do so here) that the profile of the typical law professor with 2.6 years of alleged practice experience needs to change - how do you change that profile in the context of a hiring freeze? If you want to change law schools to be more practice orientated you need professors with practice experience ... which means that if faculty headcount stays where it is, disposing of a proportion of existing faculty.

Posted by: MacK | Nov 14, 2012 11:06:55 AM

I can't speak to every school, but at my alma mater there are a number of truly ancient faculty members that have very high salaries (some because stints in administration - including in one case as dean - seem to have had a one way ratchet effect). These faculty by and large don't do scholarship anymore, although some of them travel around getting accolades for their previous work. They also seem to get preferential access to small, specialized classes to fulfill there already modest teaching requirements. Obviously there are political issues, as one would expect such faculty members to have deep power bases.

The other elephant in the room is the explosion of administrative overhead -- the infamous deanlets and deanlings. I don't know how much of that is forced on the law school by the larger institution and thus beyond the reform ability of even the most engaged law faculty with a compliant dean. But it is worth noting that faculty in many cases find the proliferation personally convenient because some of the more mundane tasks they used to be responsible for under the heading of 'service' are now done by others.

Lastly on the efficiency angle a good hard look needs to be taken at teaching loads. 2/2 should be the absolute minimum outside of a funded sabbatical, but instead it looks like that's slightly above average. Furthermore there should be a student-hours expectation so you don't see of tenured faculty taught 3L seminars and now need to go find adjuncts for the large 1L sections.

As should be clear I think, by and large, the cost cutting can be done through efficiency rather than salary cuts, but there is something worrying about the fact that Ph.Ds in cognate fields (which are increasingly the hiring pool) seem to think law teaching is the path to easy money. What with significantly higher salaries than in the Arts and Sciences as well as less stressful tenure review. Law schools shouldn't be afraid to negotiate aggressively. It is a buyers' market out there.

Posted by: brad | Nov 14, 2012 11:08:12 AM

As is true with all businesses, I think it depends on how severe the cost-cutting needs to be and over what time period. Instead of not filling empty lines, a school might be able to fill them at a slower pace (say, 1 new employee per every 2 employees departing). Schools could also offer retirement packages to senior faculty much like businesses do to senior employees. You'd need to know the details of a school's situation to know what strategy is best, I think.

Posted by: Orin Kerr | Nov 14, 2012 1:30:28 PM

I fail to understand why law professors need all this coddling. Physicists, engineers, architects, draftsmen and technicians have always been subject to layoffs en masse when a skyscraper, bridge, aircraft, bomb, missile or aircraft carrier project comes to an end. Soldiers, sailors and airmen are likewise laid off en masse when a war ends.

I admit that lawyers, like soldiers, have few skills that are useful outside their specific training, lacking as they are in STEM and foreign-language skills. A soldier, at least, can take up a job in any state or country that has an open position, while a laid-off lawyer can't without barriers practice in the next state, much less in a foreign country.

But that's no justification for maintaining the tenure and sinecure system enjoyed by lawyers, deans, et. al. The disadvantages are clear: student needs go unsatisfied while law faculties remain saturated with high-priced deadwood. A better model is the military's policy of "up or out." If a law prof can't be justifiably promoted, he should be laid off. In the end, tenure poorly serves great professors, like my favorite Lino Graglia, who dare to stand up and proclaim the truth.

I'd like to see my university, U of Chicago, get rid of its tenure system. It has a history of swimming against the flow, of protecting the speech rights of its professors, even its pinkos, while Stanford and Harvard, among others, disgracefully bent over as far as they could both to ban Jews and punish their pinkos in spite of tenure. It was actually in consideration of that that I twice rejected admission offers by Harvard and instead accepted the offer of Chicago.

I can't wait to see our legal-education system collapse and all the self-acclaimed profs go dragging through the countryside, like Heinrich Himmler, looking for someone to give them refuge.

Posted by: Jimbino | Nov 14, 2012 2:40:33 PM

It's hard for me to weep over "a generation of aspiring professors" when we continue to vastly oversupply law school grads that the legal market will never absorb. I'll believe that legal academia is serious about change when I see the same level of concern from my faculty colleagues about the aspiring lawyers who will never get the law jobs they want.

Posted by: Jim Milles | Nov 14, 2012 3:40:47 PM

"Law schools shouldn't be afraid to negotiate aggressively. It is a buyers' market out there."

I think this is an important point -- law schools have the upper hand. A friend of mine went through this years meat market. He was what I would have considered a well qualified candidate (certainly moreso than I was when I went through only five years ago). He is, with much stress, waiting to hear from his one and only chance at a job. This school could easily offer him half what they normally would and he would jump at the chance.

If schools want to cut our salaries, increase our workloads, etc., what options do we have? What is our leverage against them?

And just imagine how much worse it will be when, as many have predicted, some of the lower ranked schools actually close down. The market will suddenly be flooded with well-credentialed, experienced law profs.

I have actually scared myself with this post, time to get off the internet and go write something.

Posted by: Dean | Nov 14, 2012 9:21:42 PM

Isn't the expansion of VAPs and fellowships one avenue through which faculty salaries have recently been reduced? Such positions did not used to be so common, but they have proliferated, and have become nearly a requirement for success on the entry-level hiring market. The practical effect is to reduce salaries for new hires, who are now generally expected to work at 30-70% salary for at least the first two years they are in the academy. Plus, these candidates start tenure-track positions as year 1 professors for purposes of both salary and tenure, even though they have the experience of year 3 (or more) professors.

In one of the market threads, people have been discussing how someone currently in a VAP or fellowship who is not having much success on the market should be looking for another VAP or fellowship. Some have said this is the common course. If so, it amplifies the salary-reducing effects of the VAP/fellowship phenomenon.

In sum, one way schools are reducing salaries is by avoiding across-the-faculty cuts by effectively forcing entry-level candidates to accept: (1) two or more years at a substantially reduced salary; (2) a minimum two-year delay before benefiting from any annual tenure-track salary increases; and (3) minimum two year extension of the time it will take to earn tenure.

Posted by: pleepleus | Nov 21, 2012 12:44:23 PM

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