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Pepperdine University School of Law

Thursday, November 3, 2016

After Indiana Tech, How Many More Law Schools Will Close? 20? 80? Will A Top 25 School Be Among Them?

ClosedNational Jurist, Indiana Tech Law School to Close in June:

Indiana Tech Law School’s future seemed doomed from the time it opened in 2013.

It was the state’s fifth law school and the 26th in the Midwest region, and critics said there was no need for another law school, especially in a time of declining enrollment numbers and fewer legal jobs.

And now, after losing nearly $20 million and graduating one class of students — just two of whom passed this year’s bar exam — the school announced it’s closing at the end of the school year [Faculty, Students To Sue Indiana Tech For Fraud In Law School's Closure]. ...

The likelihood of law school closures has been a hot topic among law school professors and bloggers for the past two years.

Jerry Organ, of University of St. Thomas, compared today’s law school environment to what happened to dental schools in the 1980s. Ten percent closed due to a significant decline in the number of applicants. Could 10 percent of law schools shut down, he asked?

Dorothy Brown, of Emory University School of Law, believes a top law school will shut down in the next two to four years. “Primarily, the law school would have to be hemorrhaging a lot of money over a sustained period of time with no end in sight,” she wrote. “Not just a one-time deficit, but millions of dollars in deficits over a sustained period.”

And David Barnhizer, of Cleveland-Marshall College of Law, said 80 law schools are at risk of closing. “Just as the legal employment market is over-saturated due to the surplus numbers of graduates law schools pumped into the system over the past twenty years, the productive capacity of the law school ‘industry’ is entirely out of balance with all foreseeable need for law graduates,” he wrote. “Given the direction the traditional employment markets for lawyers are heading no more than 80-100 law schools could easily serve America’s need for new law graduates.”

In a Kaplan Test Prep survey, 65 percent of law school admissions officers thought it would be a good idea if at least a few law schools closed.

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Comments

There are about 44,000 JD degrees awarded every year in this country. Given the number of working lawyers there are, the length of time people spend in the workforce, and allowing for some career switching, one could staff the profession with 26,000 degrees awarded each year. Close 40% of them?

Posted by: Art Deco | Nov 3, 2016 6:42:23 AM

A lawyer I correspond complains that law school curricula are designed to train appellate judges. He offers that he and his classmates got out of law school in 1982 clueless about the workaday world of law firms, something the senior partner in the firm that hired him was vociferous about. At the same time, the course work was terribly padded. His view is that law degrees should incorporate much less classroom instruction and that aspirant lawyers should work in firms under the supervision of a licensed attorney 'ere sitting for the exam. His view is that 1 year in school (he does not specify whether he means an academic year or a calendar year) and 2 years of apprenticeship would be about right.

Posted by: Art Deco | Nov 3, 2016 6:53:07 AM

Obviously some should; whether they will is another matter. I can think of one law school not too far away that probably should close but its revenue keeps the parent university, which has terribly mismanaged its finances, afloat.

It's worth noting that Indy Tech's $20 million loss is equivalent to 1/5 of the university's endowment.

Posted by: Unemployed Northeastern | Nov 3, 2016 8:46:36 AM

In a Nutshell . . .

Few would disagree that market for lawyers has declined greatly over the past 15 or so years due to many factors, especially: (1) corporate clients increasingly will not pay to train inexperienced associates, leading to the decline in Biglaw employment; (2) globalization reduces the need for U.S. lawyers for document review and other low-level tasks; and (3) decline of the middle class reduces the amount of paid work for solo and other small practices.

Young people who know about these structural changes in legal employment increasingly tend to select other career options. The immense structural declines in the legal employment market, by discouraging potential law students, has created "excess capacity" in the legal education market. The cost of maintaining that "excess capacity" is high. An example is tenured faculty, whose numbers cannot be reduced easily.

All other factors being equal, some of that "excess capacity" has to shrink, resulting in a future of fewer and smaller law schools. Simple economics.

Since the automobile industry seems to be a popular comparison industry in these blogs, let's look at it a moment. Say there is a massive overproduction of cars, and the "excess capacity" of cars is sitting on dealers' lots all over the country. All "other factors" being equal, the cost of keeping those cars unsold will eventually bankrupt the car dealers. To solve the problem, Detroit introduces "other factors" to bring demand for new cars up. Among these are: easier credit, lower-interest loans, trade-in "incentives", give-aways, and extra options on cars. Detroit can also reduce excess capacity by shutting down some assembly lines, and by discontinuing orders to the supply chain, idling workers and businesses.

Among "other factors" affecting the legal education industry is the Federal Government's too-generous loan programs (easy credit), and the IBR/PAYE type options which tend to encourage students to select the law school option. Also, the toleration of lowered admissions standards is another "factor" that tends to stave off the day of "fewer and smaller". These "other factors" have given the legal education industry quite a reprieve from the future of fewer and smaller law schools. We have seen smaller, but until the Mitchell/Hamline merger there has been no step toward "fewer". Indiana Tech would be only the second reduction in the number of law schools.

The market for lawyers has gotten no better in the past 15 years. Law schools have had many, many, years to recognize this problem and to adjust to it. Most industries would have been absolutely belted by the heavy hand of economics facing such a large decline in the demand for their products or services.

So I, too, agree that some law schools have to close. Fortunately for them and their employees, the landing to Planet Reality will not be nearly as harsh as it has been in other industries.

. . . And that is my view, in a nutshell.

Posted by: Old Ruster from JDJunkyard | Nov 3, 2016 9:19:27 AM

@Art Deco,

1. I think the number of law school grads who get full-time, long-term, license-required jobs within ten month of graduation is down to about 21,000 per year now, though I don't feel like digging through the employment reports at the moment. This is before we get to whether those jobs pay enough to halfway justify the cost of law school.

2. Given that most law professors practiced for two years or less before entering the academy, I wouldn't hold my breath that law schools CAN become more vocationally / professionally oriented anytime soon, even if they wanted to.

Posted by: Unemployed Northeastern | Nov 3, 2016 10:02:56 AM

(3) decline of the middle class reduces the amount of paid work for solo and other small practices.

There is no such thing as 'the decline of the middle class'. The population of salaried employees and small business is not declining, nor are their proportions in the workforce declining. Inegalitarian changes in income distribution are endowed with grossly excessive significance.

Posted by: Art Deco | Nov 3, 2016 11:40:42 AM

Few would disagree that market for lawyers has declined greatly over the past 15 or so years due to many factors,

The Bureau of Labor Statistics lists 5 occupations for which a post-baccalaureate law degree would be the signature preparation (lawers, law clerks, hearing examiners, arbitrators, and magistrates). It reports that there were 633,000 people employed in such occupations in May 2008 (before the economy imploded) and that there are 673,000 so employed today. IOW, there has been a 6.3% increase in the employment of lawyers while the total number of employed persons grew by 2.2%. However, you're handing out 44,000 JD degrees every year and another 4,500 LLB degrees. That suggests you're suffering from severe burnout (with lawyers remaining in the profession for a mean of 14 years) or that nearly half of these people granted degrees are repairing to other sorts of work. Suggest that it's filtering back to potential customers of these law schools that the value-added of a law degree isn't what it's cracked up to be because half the time you will be working in fields for which legal training is a job market signal and not preparation.

Posted by: Art Deco | Nov 3, 2016 12:08:59 PM

How many? Let's see. In 80's, 20 percent of dental schools closed when they had excess capacity. That same percentage applied to law schools would mean that about 40 schools close. Law school transparency put 37 schools with too many students at serious risk, so if the ABA bothers to enforce its guidelines, I think that should be about right.

Alternatively, if the Department of Education starts tying employment outcomes to the the amount of loan disbursement, I would guess around 80 schools would close.

Posted by: wtfreqkenneth | Nov 3, 2016 12:51:28 PM

Also, I doubt a top 25 school would close. They tend to have large endowments behinds them which could sustain them for decades. A top 50 school? Definitely. Who on earth thinks that a school like Tulane is worth $51,000 per year for a 60% chance at a job? No one.

Posted by: wtfreqkenneth | Nov 3, 2016 12:54:31 PM

Every year, there are more lawyers, more lawyers as a share of the workforce, and lawyers make more money.

If there is a glut of lawyers, someone forgot to tell the labor market that.

Posted by: Meh | Nov 3, 2016 2:16:14 PM

2. Given that most law professors practiced for two years or less before entering the academy, I wouldn't hold my breath that law schools CAN become more vocationally / professionally oriented anytime soon, even if they wanted to.

Don't ask. Tell. The state legislatures can repair this, and Congress can assist. Pull federal subventions to legal education. Remove state subventions to private higher education entirely. Then define a new schedule of degrees and certificates for state university law schools, with sketch descriptions of content. Allow aspirants to take the bar exam without a degree.

Posted by: Art Deco | Nov 3, 2016 4:47:23 PM

I'm skeptical that a Top 25 school would close. These days, schools are buying LSAT/GPA numbers to help their US News scores, which is largely what makes them a Top 25 school. Given that, a Top 25 school that was struggling to make ends meet could just buy less and let its numbers fall. The school's rank could or would fall, but it wouldn't be losing money at that point.

Posted by: Orin Kerr | Nov 3, 2016 8:38:47 PM

The schools that are in the most danger of closing are the ones that are dipping into the lower than 150 LSAT folks. Which is increasingly attractive for schools with declining revenue. People at that LSAT score and below, as highlighted by Law School Transparency, are at major risk of failing the bar exam. So unless there is a major move to make the bar exam easier (they will call it "social justice", but the reality is hard economic incentives for T3/T4 schools), many of these schools are going to be making very difficult decisions involving the trade offs between revenue and having students that aren't capable of practicing law. I don't think the ABA can continue to dilute standards with the dept of ed breathing down their neck.

Posted by: Hotdog | Nov 4, 2016 9:25:35 AM