Tuesday, June 10, 2014

Summer 2014 Economics 101

ACADEMIA WELCOME TO THE REAL WORLD - The law school at Seton Hall University has put its untenured faculty on legal notice that their contracts may not be renewed for the 2014-15 academic year. The firings of these seven individuals are not certain, depending on the outcome of other steps the administration will try to bring the budget in balance.

The situation at Seton Hall is representative of many other non-elite law schools. According to the Faculty Senate: firing untenured faculty is a shortsighted approach to managing an academic budget. It encroaches on an important principle of academic freedom, namely that a tenure decision should be based on the merit of the case, not the budget of the department.

Seton Hall’s decision to allow budget considerations to affect tenure outcomes sets an interesting precedent. Law professors, economists and other academics are often called to testify in front of Congress, and academic research is often used to shape legal policy. Academic views are respected precisely because they are free from economic pressures; academics are not beholden to clients. If universities tie tenure decisions to department budgets, deans will be tempted to think about pleasing alumni in determining whom to tenure and whom to let go.

Across the country, law school enrollment has declined as prospective students respond to dismal employment prospects. Seton Hall has slashed its tuition by more than half for well-qualified students, to about $22,000 from $47,000, matching the in-state tuition rate at Rutgers. While reducing class size and lowering tuition is the right response to weak employment prospects, it obviously leaves a hole in the budget.

Neither law schools in particular nor universities in general are well designed to deal with fluctuating revenue. Academic budgets have high fixed costs, largely attributable to the salaries of tenured professors. Budgets have exploded with increases in administrative staff, information technology staff, and health care and pension costs.

During the fat years for legal education — a long run from the 1980s until 2008 — law schools raised tuition, raised salaries and expanded faculty and staff in a race to improve or maintain rankings in U.S. News and World Report.

Adjustments are needed, and Seton Hall’s decision to focus on untenured faculty might appear to make sense. But there is another side to this decision making - Hiring faculty is a unique process intended to separate outside influence and budgetary considerations from the assessment of merit. Deans should and do look at the budget to determine whether to create a new faculty “line” in the first place. Once they make that decision, however, professors, not administrators, decide who gets hired and who eventually gets tenure. The decision is based on peer-reviewed academic merit, not the preferences of deans or budget officers (or venture capitalists or real estate developers).

As a legal matter, budget concerns can be relevant to staffing decisions in extreme circumstances. Even tenured faculty can be fired without cause in the event of a severe financial circumstance known as financial exigency. A declaration of financial exigency requires more than the usual tight budget; it requires an imminent financial crisis that threatens the institution as a whole.

There are better ways to shrink a law school budget. The size of the tenure-track faculty can shrink by retirement and attrition, not involuntary termination. Post-tenure review (by faculty, not administrators) can ensure that faculty members remain productive. Libraries can be moved online. Clinics can be closed, and adjunct faculty can be better utilized to team-teach practical courses alongside research faculty. The size of the administrative staff can be pared down, especially those who manage programs that might be considered luxuries.  Lots of luck.

REAL ESTATE - Nearly 10 million U.S. households are underwater on their mortgages and a similar number don’t have enough equity in their homes to pay the selling costs, a new Zillow report shows.

SEATTLE APPROVES $15 MIN WAGE - The Seattle City Council ... unanimously approved a $15 minimum wage, creating a path over the next seven years to provide the city's lowest-paid workers the nation's highest minimum wage. Fast-food workers, union organizers and labor activists celebrated on the City Hall Plaza after the historic vote with cake and ice cream provided by some local small businesses who joined in support of a plan that will phase-in the $15 minimum over the next seven years. ...

The speed with which the measure went from political slogan to economic reality surprised even advocates, whose campaign emphasized the high cost of living in Seattle and the low pay of even full-time minimum wage workers who currently earn about $19,300 a year. The election of socialist City Councilmember Kshama Sawant in November provided pressure from the left. Her organization, 15 Now, made raising the minimum wage a political rallying cry and convinced many business leaders to work for a compromise proposal.

COLLEGE CHRONICLES – This cartoon is a good example of the state of the Higher Education class room these days:

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Jim Belushi (60), Former President George H.W. Bush (90), Elizabeth Hurley (49), Sasha Obama (13), Tara Lipinski (32), Prince Philip (93).

CLUB SPORTS: GOOD OR BAD? - Stealing home: In Little League's 75th year, coaching dad David Mendell worries that travel teams are undermining community baseball" -- David Mendell, a freelance writer and former reporter for the Chicago Tribune, coaches Oak Park Youth Baseball outside Chicago : "To rise in rankings and win tournaments, some teams, especially in warm climates, play nearly year-round, competing in as many as 120 games per year, more than most minor league players. Travel ball is not new - it's been around for a couple of decades. But participation in full-time travel baseball has exploded in recent years. ... In 2000, Atlanta's first All-American Wood Bat Classic tournament opened with about a dozen teams. This Memorial Day weekend, nearly 100 squads from half a dozen states will descend on fields throughout metropolitan Atlanta ... Players range ... from 8 to 14.

"Rebecca Davis , executive director of the Atlanta-based Youth Amateur Travel Sports Association, estimates that there are tens of thousands of travel teams in Georgia and Florida alone. ... Little League enrollment has declined 20 percent since its peak in 1997, from 3 million to 2.4 million. ... 2.4 million players hardly suggests that community leagues are disappearing. And many ... travel team players also play on their local teams. ... Travel ball ... participation fees average about $2,000 per player ... Some travel ballplayers resemble professional athletes ... [going] from one travel team to another, ... with the name splashed across the front of the jersey usually signifying something other than their home town.


NHL Stanley Cup Playoffs: Stanley Cup winner – Los Angeles Kings in six over the New York Rangers.

NBA Playoffs: Championship winner – San Antonio Spurs in seven over the Miami Heat.

2014 Season to date (36-31)

WORLD CUP – Brazil to beat Spain in the World Cup Final.

MARKET WEEK - The Dow is only about 75 points of 17,000, while the S&P is about 50 points from the 2,000 mark with both coming off record closing highs Friday. The Dow and S&P are also coming off their first three-week winning streaks of 2014.

DRIVING THE WEEK - Increasing numbers of young Americans are heading to college, where they're racking up debt to pay for rapidly increasing tuition costs. Those graduating are being confronted by a challenging jobs market, which eventually leads many to just drop out of the labor force altogether. This in turn has led to an increasing delinquency rate for student loan borrowers.

So, it's no surprise that young people are increasingly opting, perhaps out of necessity, to live at home with their parents.

Next week: Summer movies, summer cocktails, and summer deserts.

Until Next Monday, Adios.

Claremont, CA

June 10, 2014

#V-8, 217

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