All about economic consulting: what it is, how to get a job
Today I want to share a bit about the field of economic consulting. While this site already has a classified listing of jobs in economics, I wanted to highlight economic consulting because it will be of particular interest to readers of this blog.
You should be interested because jobs can be high paying and they are less sensitive to swings in the economy, for reasons explained below.
Plus, my first job was in economic consulting so I have some experiences that I want to share.
What follows is my opinion and general impression from working in economic consulting. Remember I am not an expert so just take the following as my friendly advice and perspective from having worked in the field.
What is economic consulting?
Economic consulting is mostly a type of paralegal work. Each firm supports and offers experts to testify in litigation matters related to economics and finance. In practical terms, that means economic consulting firms produce research, analysis, and testimony to be used in court cases.
An example from the news: When Viacom sued Youtube/Google for $1 billion dollars in 2007, both sides retained experts supported by economic consulting firms.
As explained in Forbes magazine:
In Viacom v. Google, each company could hire as many as 10 experts in different disciplines. Economists will assess the value of the 30-second clip of South Park. Top-notch computer scientists will explain Web video technology. Multiple damages specialists will calculate how much YouTube’s alleged infringement cost Viacom. These opinions don’t come cheap: The top-notch experts bill $800 to $1,300 an hour and require a team of about 10 associates and assistants, who cost $70 to $500 an hour. For a really big case, expert costs could hit $1 million a month, says Kevin Neels, an intellectual property expert at The Brattle Group.
In addition to lawsuits like this, economic consulting also involves regulation work (anticompetitive claims) and specialized areas like transfer pricing.
And as you can see, economic consulting firms often bill out at rates of hundreds of dollars an hour, meaning this is a lucrative field. Also, because the work is litigation related, and lawsuits happen in good and bad economies, the jobs are somewhat “recession-proof” (though few if any fields are truly recession proof).
How much does it pay?
You can get a good idea from the salary surveys at Payscale.
The survey there indicates starting jobs may start at $40,000, but there is a big room for growth, as top salaries are $134,000 in their survey.
But don’t look at salary too restrictively. Like other consulting firms, a big part of the compensation is a sizable year-end bonus that could be 15-25 percent (Payscale surveys show bonuses from $1,000 to $24,000).
What qualifications do I need?
Generally the formal requirements for an entry-level position are a bachelors degree, a decent grade point average, knowledge of economics, and an ability to use Word/Excel. They also look for people who know how to use statistical packages like SAS or STATA.
(Speaking from experience, the economics background required is not overwhelming, though lacking knowledge could restrict you from certain cases that involve econometrics or financial modeling. If you read this blog regularly you probably know enough economics to get a starting analyst job).
One thing to keep in mind is that higher company positions require a PhD or MBA. These degree requirements are usually strict…conducting research and supporting testimony as an expert is often a reputation game. So if you want to advance to the top, you can expect that you will have to do some graduate work.
This is why the research assistant position is often a 3-5 year job before people consider whether to move into another field or to do some graduate work and return.
What does a starting consultant/analyst/research assistant do?
There are a lot of names for the starting level position, but I think research assistant is the most appropriate. The tasks are similar to what a student might do when supporting a professor’s research. There is document research, data collection, data analysis, and auditing.
–Document research can take two different forms. One form is collecting articles from research databases like Lexis/Nexis. The other form is going through court testimony and discovery documents to understand all the arguments.
–Data collection is also a broad area. There are times when data collection means going to a database and gathering specific information for a table. Other times the task involves contacting data providers for information and making a judgment call on whether the data is appropriate.
–Data analysis is the most interesting part of the job. This involves using statistical and mathematical models to produce the heart of the testimony—the damage estimates, the competitive market shares, etc. Often you will work with experts in academia to build and implement complex models.
–Auditing is a crucial part of the job, although not the most interesting. Because the analyses are intended for legal use, there is a lot of quality control on checking numbers and formatting data properly. Auditing is checking another person’s work, and the best way of doing that is by reproducing the work on your own. It can be laborious but it often reveals methodological errors and offers easier ways to approach the same problem. Very important: auditing is anywhere from 25 percent to 50 percent of the job. You must be comfortable doing this before you take the job.
What are the best parts of the job?
The two best parts of the job are the people and the cases.
People are generally very smart, and it’s tough to find another job in industry (besides other consulting) where you get similarly smart colleagues. Most of the people have MBAs or PhDs and making connections here can help with recommendation letters if you plan on attending graduate school. It is also great to work with academic experts who are leaders in their practice areas. In some companies, the structure is flat enough to allow talented research assistants to interact with the experts.
The cases can be interesting and intellectually challenging. There is the legal aspect which raises issues about what kinds of arguments will be convincing. There is also the academic aspect about how to frame the issue properly to fit the analysis within accepted research theory.
One thing to keep in mind is that the work you do is heavily dependent on which firm you work for and which cases you get assigned on. There are different practice areas, such as accounting, energy, intellectual property, telecommunications, and each firm and office tends to specialize in different areas. Research this before you apply.
What are the worst parts of the job?
Every job has its bad parts, and it is only fair that I share the things I didn’t like. I would rather give an accurate picture of the job rather than a glowing one so you know what it’s about.
The two major downsides for me were the amount of auditing and deadlines.
The first is that auditing is a big component of the job. It can be mentally frustrating to find yourself spending hours manually checking data. And you have to really pay attention to detail because quality control is a big issue. On the plus side, remember you’re every job has undesirable work, and you’re getting paid well for doing this work.
The other downside is work is deadline driven. Everyone is expected to pitch in and work long hours during the final crunch. Sleep, weekends, and holidays are all compromised during this time. This is common in many consulting jobs.
This sounds interesting…where can I apply?
The main companies, in alphabetical order, are:
(leave a note in the comments if I omitted someone, I pulled this list from Wikipedia)
What skills should I emphasize for my resume/during interviews?
Honestly if you don’t know yet, you probably haven’t been reading very closely!
Okay, I’m just joking. But I am going to repeat myself a bit and say the job is about research and being detail oriented.
Here is some advice I gave a friend applying to an economics consulting job:
1.Emphasize any technical background.
As I said above, the economics requirement is very minimal. The thing they wanted to know the most is how much data work I had done. If you’ve worked with large data sets or run any experiments that would be a huge advantage. I hadn’t done this either, so I used my experience of being a Princeton Review teacher where I analyzed practice tests and told people where to improve. The goal is to tell them you know how to use Excel and work with data programs.
2. Be ready to know about some very basic econ terms
The interview can often have a case study, but it will be very easy. In my company there was data for revenue and price and you had to solve for quantity (rev = pq). Then you were asked to solve for marginal revenue. Here are a couple examples of case questions:
http://www.acethecase.com/site/1438552/page/758891
3. The writing sample (if requested)Partly this is about showing off that you can do research. But this sample is also about grammar and attention to detail. Pick something that has been proofread carefully. It does not have to be economics related, but you will probably want to have something you have already written rather than writing something new that could have tons of grammatical or other errors.
Anyway, I think I have exhausted all my knowledge on this subject. I hope this gives you some idea of the field of economic consulting.
Ask questions in the comments, and if you apply, good luck!
