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Friday, July 1, 2011

Tamanaha: The Crunch Is Coming for Law Schools

Tamanaha Brian Z. Tamanaha (Washington U.) responds to this morning's post, Is the Sky Really Falling in Legal Education?:

Ted, Please address the one factor you failed to mention: the rise of tuition since 1990--at a rate that far exceeds inflation--relative to expected return.

The crucial question is whether enough prospective students will decide it is worth it pay $150,000 to $200,000--plus opportunity cost--for a law degree even though (based on BLS projections) perhaps a third will not practice law. (It was a lot cheaper in 1990 to go to law school and end up doing something else.) Furthermore, about half of the graduates overall who do obtain lawyer jobs will land in the first mound of the bi-modal distribution of salaries--where pay has lagged in real terms. At law schools lower in the hierarchy, a substantial majority of the grads who get lawyer jobs (the winners) will land in this category. Compared to 1990, graduates today who end up in the first mound pay much more and get less for it.

Law schools are selling a product, and our continued viability depends upon whether enough people want to purchase it at the price we are selling. (What you say about professor pay, while important to us, is not relevant to this question.)

The "crunch" I am warning about will come from a continued decline in the number of applicants--bodies to fill seats. That decline (since 2004) is real--and the google trend line points toward further declines. Any law professor who doubts this should have a conversation with their admissions office. Competition for students, who bid up scholarships with much more information these days (see Law School Numbers), is fierce, and the most reluctant ones will be those who must pay full price. Many students get a price reduction through this process, but there are financial limits to this: law schools need a substantial number of students to pay a lot.

The sky will not fall on all of legal academia--so if that is your argument you are correct. My view is that a significant number of schools will be under severe financial pressure in coming years for three reasons (given the difficulty we have of trimming expenses): fewer students will want to attend, scholarship offers will rise, and the number of transfers out will go up (at lower schools), draining revenue from the back end.

I may be wrong about the future, of course, but I hope law faculties begin to discuss these issues.

Thanks for your comments on my post.

For more, see:

http://taxprof.typepad.com/taxprof_blog/2011/07/tamanaha-the.html

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Comments

Prof. Tamanaha: A personal thank you for being on the front end of social justice (i.e., exposing the horrible realities of pursuing a law school education in light of foreseeable job prospects and fraudulent career data promulgated by law schools).

I'm sure this isn't easy, what you are exposing cuts contrary to your monetary interests, but you have conviction.

With the Loyolas of the world and the clueless UC Irvine chutzpahs of the world, you are a much needed breath of fresh air. (kudos to Henderson at Indiana-Bloomington too).

Please keep it up!

Posted by: Loyola '05 | Jul 1, 2011 2:05:20 PM

I'm sorry, but it was cheaper in the early 90's is a load of cr*p.

Back then a normal single family house on the in a good school system near work cost about $250-300k. My wife and I had a combined $200+k in law school debt. We joked how we had a mortgage to pay but no place to live. If my wife left me, I would have been evicted from my ~600-700 sq ft apartment because I would not have been able to pay the rent.

The only way to pay off the loan was BIGLAW money. And during the early and mid 90's the market for 1st year attorneys (as well as others) sucked. It only picked up in 1997. I wrote over 300 letters (yes, back then we wrote letters) during 3rd year of law school to find a job between NYC and DC. I got 1 interview. I'm from a top 25 east coast, 10-15% of my class, law school. 300 law firms for 1 interview.

my school was slighly more than 50% employed at graduation, and many of those were from the night program who were moving up to be attorneys at the firms they were paralegals at.

so don't give me the good old days crap. Schools charged ridiculous tuition forcing students to take out ridiculous loans. the model was no different then than it is now.

Posted by: tax guy | Jul 1, 2011 3:09:01 PM

Well, it depends on where you live. My Phoenix house that cost $50,000 in the late 70s would sell today for $80,000, down from $200,000 during the boom years. Meanwhile, annual tuition at Arizona State has increased from about $5,000 to about $20,000.

The real cost, however, was the loss of income while held hostage in a classroom, being spoon-fed legal anecdotes by professors who tried to teach the same way it was done a century earlier. I understand things aren't quite so bad now, but I could have learned more in half the time, had the faculty been interested in education, not pontification.

There are a couple models for running any business. One is to spend as much as you want, then divide the cost among the customers. The other way is to determine a fair price that the customers are willing to pay, then design the product to meet that point. We all know how most law schools approach that choice.

Posted by: Bob | Jul 1, 2011 4:49:40 PM

I think there is a very effective retort to this by Prof. Ted Seto a couple of posts down.

Posted by: mike livingston | Jul 2, 2011 5:59:13 AM

I think the worst thing that could happen would be for law faculties to start talking about this . . .

Posted by: Lionheart | Jul 6, 2011 6:46:33 AM