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Saturday, December 28, 2013

Leichter: It's Still Not a Good Time to Apply to Law School

The American Lawyer:  No, It's Still Not a Good Time to Apply to Law School, by Matt Leichter:

In mid-December, the ABA Section of Legal Education publicized the number of first-year students for the fall of 2013—39,675. The decline in 1Ls since the 2012-13 academic year exceeded 10 percent—the biggest one-year drop since the early 1950s. Meanwhile, the average number of 1Ls per law school reached its lowest level since 1968.

Thanks to these developments, some writers argue, legal education is becoming a fairer deal, and savvy applicants who buck the downward trend will be rewarded. While it's certainly true that generous merit scholarships enable prospective law students to pay less for a legal education now than they would have a few years ago, there are still many compelling reasons to believe the benefits of law school still don't outweigh its costs—and won't for the foreseeable future.

The ABA Journal recently reported on the most rigorous analysis of the applicant decline's impact on potential job opportunities for future law school graduates. In the article, Appalachian School of Law professor Paula Marie Young shared a dialogue on the subject with Professor Deborah Jones Merritt of The Ohio State University Moritz College of Law. Using National Association of Law Placement (NALP) and ABA data, Young maintained that by 2015 or 2016, the number of ABA law school graduates will equalize with the number of lawyer job openings. Merritt asserted that Young misread the ABA's graduate data, and the more accurate equilibrium estimate is 2021. The discussion then shifted to whether "JD Advantage" jobs should really count in these calculations and whether positions classified as "full-time" fairly represent indefinite career jobs because they only need to last one year to count.

It's not fruitful to rehash the entire back-and-forth in detail, and while I generally agree with Merritt's line of thinking, there are additional points worth considering that may make even 2021 an overly optimistic estimate. ...

[A]lthough it's not invalid to use NALP or ABA jobs data, it should be noted that the Bureau of Labor Statistics (BLS) just released its own employment projection for the 2012 to 2022 period. The news is mostly bad. ... Here is my estimate of the cumulative number of law graduates and licensed lawyers over the previous 35 years compared to the current number of employed lawyers and active and resident attorneys.

... A generation of Americans maturing into a lifetime of chronic underemployment and debt will not be able to afford homes, start families, open businesses, or discharge their student loans. Lawyers who would normally serve them in "small law" matters like estate and business planning will increasingly struggle to find clients. Prospective law students have little reason to compete with them.

Law school optimists are undeniably right that many people finishing law school in 2017 will pay less for their educations than their recent, underemployed predecessors did. It's also certain that law school will continue to be a prerequisite for some of the most prestigious positions in society, such as the judiciary. However, a host of other data points indicate that the profession law school applicants hope to enter won't provide the long-term, career-spanning employment that justifies three extra years of education. They would be wiser to walk by.

http://taxprof.typepad.com/taxprof_blog/2013/12/american-lawyer-.html

Legal Education | Permalink

Comments

Leichter is making some tenuous, if trendy, assumptions - and extending them all the way to 2022:

"A generation of Americans maturing into a lifetime of chronic underemployment and debt will not be able to afford homes, start families, open businesses, or discharge their student loans. Lawyers who would normally serve them in 'small law' matters like estate and business planning will increasingly struggle to find clients."

Wow, really? The recovery has been a disappointment, sure, but can you really say the broader unemployment rate won't keep dropping and things won't pick up - in general and derivatively, for lawyers - in the next few years? Just about every indicator is higher right now than it's been since 2007. I don't claim that we're on the cusp of a boom. But a lot of data points indicate the gradual recovery is continuing.

It bears noting how much legal work is tied to the health of the broader economy. The crappy economy has seriously hurt M&A and capital markets work for basically 6+ years now. After an initial countercyclical boom in 2008-10, bankruptcy lawyers have had less to do because with rates low companies can just borrow more money instead of file. If the consensus view that the broader economy will continue to improve is right, the corporate work will return and once interest rates climb so will the bk work. (Separate from the larger economic issues, my guess is that Dodd-Frank will also continue to provide a small boost to lawyers for several years to come.)

I can't say these things for sure, of course, so I wouldn't declare them a fact. But Leichter's argument assumes the economy is royally screwed for the long haul, which is a facile conclusion and one readers should not casually accept. Doesn't mean they should go to law school either, of course, but let's not let our priors interfere with the basic analysis here.

Posted by: anon | Dec 29, 2013 4:42:26 PM

Leichter is using BLS data; he's not making his own assumptions. The Bureau of Labor Statistics is the best "crystal ball" available and certainly beat's Anon's bunk conjecture.

Posted by: Bobby Dobb | Dec 30, 2013 11:27:24 AM

Bobby Dobb: a bit simplistic. Per the report on which Leichter based his pretty chart, BLS predicts "legal occupation" jobs rising at just about the same rate as all jobs during this window (10.7% vs. 10.8%). You need a JD for almost all of these jobs. At the same time, the data show far fewer people enrolling in JD programs. In general, when there are fewer people looking for more jobs, how does that affect labor market dynamics?

He cited BLS data, sure. But his interpretation is colored by his ideological commitments.

Posted by: anon | Dec 30, 2013 5:16:53 PM

"But his interpretation is colored by his ideological commitments."

Amen to that. Readers of these sorts of articles need to keep in mind that legal academia is not the only interested party here. For whatever reason, the anti-law school movement has its Savonarolas, and no one should forget that.

Posted by: Alan A. | Dec 31, 2013 6:38:11 AM

@anon,

The BLS has made its third downward revision to legal services jobs in the last four years. I think the ten year average for new openings, including attrition, is down to about 19,000 per year. In 2009, it was predicted as 24,000 per year or so. We are a very long ways from seeing an equilibrium in law school graduate supply versus demand, to say nothing of the six or seven year backlog of graduates who have yet to gain a foothold.

Posted by: Unemployed Northeastern | Dec 31, 2013 9:06:38 AM

@UN

If you think the argument rises or falls on BLS data, it's worth noting that there is a good chance they will be revised upward as the recovery picks up (just as they were revised downward as it went into decline). This is both because more growth = higher demand for legal services and because lawyers who've been putting off retirement have seen their 401k's go through the roof in the past year. Leichter would dispute the premise of this argument because he appears to believe the economy is in permanent decline. I disagree.

Note that my point is limited: maybe the sky isn't falling. I am not saying "it's time to rush off to law school." It is costly in time and money and there are lots of good reasons to do other things with one's life. But assuming the next 6 years will be like the last 6 seems like a tenuous one.

Posted by: anon | Dec 31, 2013 10:32:41 AM

"If you think the argument rises or falls on BLS data, it's worth noting that there is a good chance they will be revised upward as the recovery picks up (just as they were revised downward as it went into decline). This is both because more growth = higher demand for legal services and because lawyers who've been putting off retirement have seen their 401k's go through the roof in the past year. "

Actually, I just saw an article on Business Insider or Bloomberg or somewhere of that ilk of BLS's 2002 projections for 2012 across a number of industries, alongside actual 2012 numbers. The BLS overestimated every sector of the economy except for mining and government employees. And mind you, 2002 was in the midst of a pretty bad recession, too, and they still overestimated virtually every sector they studied.

I believe that widespread hiring in the legal market is in permanent decline. Legalzoom isn't going away. LPO's aren't going away. Productivity gains at the expense of new hires aren't going away. The avoidance of training new workers isn't going away (nor is it limited to law; see Wharton prof Peter Cappelli on this nefarious trend). Corporate clients cutting bills and refusing new associates' work product isn't going away. Austerity in government and public interest hiring isn't going away anytime soon. Even the Simkovic study admits in one of its first graphs that lawyer salaries have been essentially flat at the 25th, median, and 75th percentiles since the late 1990's, while tuition sure hasn't been. I see very little to indicate that the legal profession can return from its largely self-caused purgatory.

Posted by: Unemployed Northeastern | Dec 31, 2013 11:39:41 AM

@UN

I am not convinced that outsourcing and automation in the areas you mention spells long-term decline in lawyer employment. There are countervailing factors, and the same was said about tech during the last crash. The points about employer and client aversion to training are characteristic of any market with weak demand. No employer or client really wants to train/pay for green employees. But when labor market conditions are not absolutely awful, they do, and they will again. These existential doubts seem to pop up in several industries each time the economy dips.

Federal hiring seems unlikely to come roaring back in the near term, but austerity in state and local governments is over (there is a lot of data on that). I assume charities, including public interest legal organizations, receive more donations when the economy does better, but I have no special insight there. Such organizations provide critical services to vulnerable people, but as a percentage of legal employers they're not big.

Tl;dr: law is not special, and when we see improvement in the labor market in general, we will see some improvement in the market for lawyers.

Posted by: anon | Dec 31, 2013 12:47:03 PM

Anon,

Who can make these forecasts? Answer: The Bureau of Labor Statistics. They do and they did, and they do it as their job each and every day. Believe it or not, they take into account improving market conditions, etc. etc. Given all of that, they still come out with circa 20,000 jobs.

Posted by: Bobby Dobb | Jan 3, 2014 2:00:26 PM