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8667.0 - Legal Practices, Australia, 2001-02  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 25/06/2003   
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  • Explanatory Notes

INTRODUCTION

1 This publication presents results from a survey of legal practices and other legal organisations for the reference year 2001-02. This is the fifth time the Australian Bureau of Statistics (ABS) has conducted this survey. Previous statistics were released for 1987-88, 1992-93, 1995-96 and 1998-99.


SCOPE

2 The scope of the survey was all units on the Australian Legal Directory (ALD), that would be classified to class 7841 - LEGAL SERVICES of the Australian and New Zealand Standard Industrial Classification (ANZSIC). ANZSIC class 7841 consists of businesses mainly engaged in providing legal services. The scope was then broadened to capture other legal services organisations, such as legal aid authorities, government solicitors and public prosecutors and community legal centres which may have been drawn from other ANZSIC classes.


STATISTICAL UNIT

3 The statistical unit used to represent private legal businesses, and for which statistics are reported, was the legal practice. Many legal practices consist of a single entity. Other practices consist of more than one entity (e.g. legal firm and a service entity, such as an administration or service company or trust).

4 For the purposes of this survey, where a practice was conducted through a legal firm and a separate service or other entity, these entities were consolidated and treated as one practice if the service entity provided resources to a single legal practice. Where a service entity provided services to more than one legal practice, the service entity was excluded from the results presented in this publication.

5 The concept of the legal practice is not commonly used for legal aid authorities, community legal centres, government solicitors or public prosecutors. The term organisation is used to describe these business entities, and the organisation was the statistical unit for these business types.


COVERAGE

6 The frame used for the Legal Practices Survey was taken from the Australian Legal Directory (ALD). The ALD is primarily based on registrations of solicitors and barristers to the relevant state regulatory bodies. The directory is updated annually to take account of new registrations.


COMPARISON WITH OTHER ABS STATISTICS

7 Annual data for the legal services industry is published in Australian Industry (cat. no. 8155.0). There are important differences between the statistics published in the Australian Industry and Legal Practices publications and users should use caution when making comparisons between the two sets of estimates. The estimates in the Australian Industry publication provide a consistent annual measure of economic activity by industry (as defined by the ANZSIC), which allows the analysis of year on year change in key data items in the legal services industry.

8 The Australian Industry publication presents summary statistics for detailed ANZSIC industry classes. The aims of the publication are to show the relative importance of each industry class to the Australian economy, and to allow patterns of change or growth to be analysed across detailed segments of the Australian economy. The industry estimates presented in Australian Industry are used in the compilation of the National Accounts, and in the derivation of economy-wide indicators such as gross domestic product (GDP).

9 The Legal Practices publication complements the annual series of key data items for the industry with a detailed examination of the structure of legal practices and other organisations involved in legal services for the reference year of the survey. For private legal businesses, Legal Practices had a focus on the legal practice, rather than the business entity that is used to compile ABS industry statistics. The practice was used as the statistical unit in order to provide a more complete description of the structure of businesses involved in legal services and the economic activity generated by legal practices. This is done by including administrative service units and other practice entities in the survey although they might be coded to ANZSIC classes other than LEGAL SERVICES (ANZSIC Class 7841).

10 The main differences in estimates between the two surveys are:

  • the statistical unit for private legal businesses used in Legal Practices was the legal practice, hence consequent inclusion of non ANZSIC class 7841 entities, such as administrative service units that related to a legal practice; and
  • the inclusion of government legal organisations that may be outside ANZSIC class 7841.


HISTORICAL COMPARISONS

11 While comparisons are made between 2001-02 survey results and earlier iterations of the Legal Practices Survey, the reader should bear in mind that the survey was not designed to support accurate estimates of change, and should exercise caution when comparing 2001-02 results to earlier surveys. The effect of sampling variability on historical comparisons is discussed in paragraph 23.

12 Investigations into data quality for the 1998-99 survey revealed that not all respondents were using as strict a definition of pro bono work as was intended. The questionnaire wording was improved for 2001-02 to make it clearer that free first consultations, cases involving contingency fee arrangements, and incentive discounts for regular clients should not be included. A new category of legal aid cases, at a reduced fee or without expectation of a fee, was also introduced to prevent some legal aid cases being reported in other categories of pro bono work. The 2001-02 survey estimates showed a lower level of pro bono work than in 1998-99, but this is thought to reflect the methodological changes made to the collection of the data as well as non-sampling error. For an explanation of non-sampling error refer to paragraph 24. The estimates of pro bono work should be used with caution.


RELIABILITY OF THE DATA

13 When interpreting the results of a survey it is important to take into account factors that may affect the reliability of estimates. Such factors can be classified as either sampling or non-sampling error.

14 The estimates in this publication are based on information obtained from a randomly selected stratified sample of legal services practices and organisations in the Australian business population. Consequently, the estimates in this publication are subject to sampling variability, that is, they may differ from the figures that would have been obtained if all units had been included in the survey. One measure of the likely difference is given by the standard error (SE), which indicates the extent to which an estimate might have varied by chance because only a sample of units was included.

15 There are about two chances in three that a sample estimate will differ by less than one SE from the figure that would have been obtained if all practices in Australia had been surveyed, and approximately 19 chances in 20 that the difference will be less than two SEs.

16 Sampling variability can also be measured by the relative standard error (RSE), which is obtained by expressing the SE as a percentage of the estimate to which it refers. The RSE is a useful measure in that it provides an immediate indication of the percentage errors likely to have occurred due to the effects of random sampling, and this avoids the need to refer also to the size of the estimate.

17 The following table contains estimates of RSEs for a selection of the statistics presented in this publication.

RELATIVE STANDARD ERRORS FOR TABLE 1.1 SUMMARY OF OPERATIONS

Solicitor practices
Barrister practices
Patent
attorney practices
Government solicitors/Public prosecutors
Legal
aid
authorities
Community
legal
centres
Total
%
%
%
%
%
%
%

Practices/organisations at end June
3
4
-
-
-
2
2
Locations at end June
Capital city and suburbs
5
na
np
-
-
20
3
Other
9
na
np
-
-
21
8
Total
4
4
1
-
-
12
3
Employment at end June
Solicitors/barristers
2
4
1
-
-
10
2
Patent attorneys
39
. .
1
. .
. .
. .
9
Other
4
15
1
-
-
11
3
Total
3
7
1
-
-
9
2
Income
Income from legal services
2
9
1
-
. .
. .
2
Government funding
. .
. .
. .
-
-
6
1
Other income
8
24
8
-
-
26
7
Total
2
9
1
-
-
6
2
Expenses
Labour costs
3
20
1
-
-
7
2
Rent, leasing and hiring
3
13
2
-
-
8
3
Other expenses
3
10
2
-
-
6
3
Total
3
9
1
-
-
6
2
Operating profit/surplus before tax
3
10
1
-
-
28
3
Operating profit margin
2
3
1
na
na
na
na
Return per solicitor/barrister
2
9
. .
. .
. .
. .
. .

- nil or rounded to zero
. . not applicable
na not available
np not available for publication but included in totals where applicable, unless otherwise indicated
Copyright Australian Bureau of Statistics, 2003


18 As an example of the above, the estimate of total income for legal practices in 2001-02 was $10,636.1m and the RSE was estimated to be 2%, giving a SE of approximately $212.7m. Therefore, there would be two chances in three that, if all units had been included in the survey, a figure in the range of $10,423.4m to $10,848.8m would have been obtained, and 19 chances in 20 (i.e. a confidence interval of 95%) that the figure would have been within the range of $10,210.7m to $11,061.5m.

19 The estimates presented in the main tables of this publication are recorded to a high degree of accuracy, to enable estimates to be accurately added together, or otherwise used to derive new statistics or indicators. This precise recording is not meant to imply a high degree of accuracy in the estimates. RSEs should be used as a guide to determine the appropriate degree of precision to use when working with the estimates to draw conclusions. For example, if the estimate of total income of $10,636.1m has a SE of $212.7m and there are two chances in three of the true value lying between $10,423.4m and $10,848.8m, then an appropriate precision to use when citing the estimate is $10,600m. Most of the estimates presented in this publication are only accurate to two significant figures (estimates in thousands should be rounded to the nearest hundred, estimates in hundreds should be rounded to the nearest ten, and so on).

20 The sampling variability for estimates at the state/territory level was higher than for Australian level aggregates. Within states/territories, the sampling variability, and therefore the RSEs of estimates for smaller states and territories were higher than for the largest states. Survey estimates for the smaller states and territories should therefore be viewed with more caution than those for other states. RSEs for Queensland, South Australia, Western Australia, Tasmania, Northern Territory and Australian Capital Territory were typically 2 to 5 times higher than the corresponding national estimate RSEs. RSEs for New South Wales and Victoria were typically 1.5 to 2 times greater than the corresponding national figure.

21 The sampling variability for estimates for solicitor practices at the smaller size category level was also higher than for all practice aggregates. Survey estimates for the size categories with fewer than 10 principals/partners should therefore be viewed with more caution than those for all practices. RSEs for estimates relating to practices with one principal/proprietor were typically 2 to 3 times higher than the corresponding all practice estimate RSEs. RSEs for the size categories 2 principals/partners, 3-5 principals/partners, and 6-9 principals/partners were typically 3 to 6 times greater than the corresponding all practice figure. RSEs for the 10 or more principals/partners category were typically fairly similar to the corresponding all practice estimate RSE, due to the large proportion of these practices selected in the survey sample.

22 The sampling variability for estimates for barrister practices by barrister type or years at bar were also higher than for all practice aggregates. RSEs for estimates by barrister type were typically 1.2 to 1.5 times greater than the corresponding all practice estimate RSE, and RSEs for estimates by years at bar were typically 2 to 5 times greater.

23 The sampling variability for estimates of movement or change that are obtained by comparing 2001-02 survey results with previous results are also subject to high levels of sampling variability. The standard error (SE) of the estimate of change is approximately 1.4 times the standard error of the 2001-02 estimate. For example, the survey estimated that total solicitor practice income increased from $6,191.5m in 1998-99 to $8,378.6m in 2001-02, an increase of $2,187.1m. The standard error of the 2001-02 estimate of total income is $167.6m. The standard error of the estimate of change was estimated to be 1.4 times $167.6m, or $234.6m. This can also be expressed as a relative standard error of 10.7% of the estimate of change in total income.

24 Errors other than those due to sampling may occur in any type of collection and are referred to as non-sampling error. For this survey, non-sampling error may result from such things as deficiencies in the register of businesses from which the sample was drawn, non-response, imperfections in reporting and/or errors made in compiling results. The extent to which non-sampling error affects the results of the survey is not precisely quantifiable, but its impacts can be broadly identified. One such example is in relation to pro bono work. Many legal practices, particularly large practices, did not keep records on the number of pro bono hours worked by solicitors/barristers, hence they provided an estimate of its value. Every effort was made to minimise non-sampling error by careful design and testing of the questionnaire, efficient operating procedures and systems and the use of appropriate methodology. Survey estimates subject to a high level of non-sampling error have been suppressed or provided with relevant cautions.

25 Estimates that have an estimated relative standard error between 10% and 25% are annotated with the symbol '^', estimates with an RSE between 25% and 50% are annotated '*', whilst estimates with an RSE greater than 50% are annotated '**'. Caution should be exercised when using these estimates.

26 Where figures have been rounded, discrepancies may occur between the sum of the components and the total. Similar discrepancies may occur between a proportion or ratio, and the ratio of the separate components.


REFERENCE PERIOD

27 Data contained in the tables in this publication relate to all operations of legal services practices and organisations in Australia during the year ended June 2002. Financial estimates included the activity of any legal practices or organisations that ceased or commenced operations during the year. Counts of practices included only those practices that were operating at 30 June 2002. Employment included only those persons working for a legal practice or organisation during the last pay period ending in June 2002.


ACKNOWLEDGMENT

28 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated; without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.


DATA AVAILABLE ON REQUEST

29 Inquiries about these statistics and more detailed statistics than those presented in this publication should be made by telephoning the contact shown on the front page.

ABBREVIATIONS

'000 hthousand hours
$'000thousand dollars
$mmillion dollars
ABSAustralian Bureau of Statistics
ALDAustralian Legal Directory
ANZSICAustralian and New Zealand Standard Industrial Classification
CLCcommunity legal centre
CLEcontinuing legal education
GDPgross domestic product
IVAindustry value added
OPBToperating profit before tax
OPMoperating profit margin
RSErelative standard error
SEstandard error


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