Institute - for Research on Poverty Discussion

This paper examines earnings differentials between the private, nonprofit and for-profit sectors, with particular reference to lawyers. An earnings equation is estimated for private laywers, and the characteristics of nonprofit sector, "public interest" lawyers are substituted into that equation to predict what the public interest lawyer could earn in the private sector. The finding is that the public interest lawyers are paid substantially less, that they know this, and that the financial sacrifice is permanen~. Finally, a job-choice equation is estimated which discloses that those lawyers who choose public interest work are different--that is, -----nave cl:tf-feren t preferenc-e-s-f-r-orn-t-rro-s-e-wlro-c-h-o-o-s-e-p-r±vat-e~raw-pr·a-c·t·rc-e-.-­ The difference between the two sets of lawyers in their preferences-as proxied by these background characteristics--mayhelp to account for the willingness of the p~blic interest lawyers to accept lower monetary rewards. Further research is needed to determine whether the differences found for lawyers in the for-profit and nonprofit sector are also found ,in other industries, and whether such differences are found only at the level of management or at lower levels. The goal is improved understanding ,of the behavior of nonprofit relative to for-profit firms. .. Wage Differentials Between the Private For-Profit and Non-Profit Sectors: The Case of Lawyers