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Wednesday, August 16, 2017

Law Schools Are Looking For Answers In All The Wrong Places

David Barnhizer (Cleveland State), US Law Schools: Looking for Answers in All the Wrong Places:

On a very regular basis we see reports on the state of how many people are taking the LSAT, applying to law school, actually enrolling in law schools, comparing applicants’ LSAT and GPA credentials with students from previous years, as well as how law schools’ graduates fared in the job market.  This latter category has become a bit more complex and slightly more honest, including paying attention to whether the jobs were subsidized by the law schools in an effort to improve the placement statistics, required a law degree and bar passage, or if an advantage was created for people who had received a law degree.

This entire process of “casting bones” to interpret whether law schools have weathered the storm of declining demand for their educational services is mainly a bunch of unproductive “navel gazing”.  This is because it fails to look closely at what is happening in the world external to the parochial focus of law schools in terms of specific tiers of the legal profession, the dramatic and increasing shrinkage in jobs of many kinds — including law — alternative ways to obtain “law knowledge” and legal services, flat or declining wages over an extended period, the rise of the “gig” economy, and the aging of the American population and the significant financial and employment pressures under which Millennials are now functioning. 

Added to these considerations is the rapid development of Artificial Intelligence systems and robotics [AI/robotics] not only for use by lawyers and law firms, but by businesses, governments and potential clients.  Use of these technologies is eliminating human jobs, and therefore potential clients, in large numbers and the situation is projected to become far worse, as is discussed below.  These are the factors most relevant to the demand for law schools’ educational services by applicants and for law school graduates by potential employers.  Failure to understand this is why most people trying to understand what will be the future of American law schools are looking at the wrong things.

David Autor, an economics professor at the Massachusetts Institute of Technology, says that as the United States economy is being “hollowed out”: “New jobs are coming at the bottom of the economic pyramid, jobs in the middle are being lost to automation and outsourcing, and now job growth at the top is slowing because of automation. … Nowhere are these advances clearer than in the legal world.” As the middle class population shrinks and there is increasingly limited space at the top of the employment and wealth pyramids where do the displaced people go?  An obvious answer is “down” the socio-economic scale.

Another answer is that they do not go to extremely expensive law schools that no longer provide a “ticket to ride” up the “status and reward ladder”. Far beyond the issue of “micro” trends of how many applicants take the LSAT, apply to US law schools, actually matriculate into those law schools, and receive decent paying traditional jobs after graduating that allow them to repay the mountain of debt accumulated during their educational process, are the “macro” questions of what is occurring in terms of the demand for legal services, the decaying “paying ability” of those seeking those services, and the creation of alternative means for delivering law knowledge and some legal services.  This includes that there are ongoing inroads on traditional legal services being stimulated by Artificial Intelligence applications by which non-lawyers can obtain previously esoteric knowledge about law. A description of LegalZoom.com tellingly explains that it: “is an online legal technology company that helps its customers create an array of legal documents without having to necessarily hire a lawyer.”

http://taxprof.typepad.com/taxprof_blog/2017/08/law-schools-are-looking-for-answers-in-all-the-wrong-places.html

Law School Rankings, Legal Education | Permalink

Comments

I agree and disagree with Barnhizer’s article to some extent. Technology also creates jobs. For instance, businesses need engineers to design their automated assembly lines. They also need technicians to maintain these automated systems. A common complaint from businesses lately has been that they cannot find employees with the right skills. As for the changes in the legal profession, don’t forget that corporations have limited consumers access to the courthouse through mandatory arbitration clauses. Corporations like Wells Fargo defrauded consumers and have used the arbitration clauses to stay out of court. Lawyers have less business now and consumers have less protection.

Posted by: anon JD/MD | Aug 16, 2017 5:03:08 PM

"They also need technicians to maintain these automated systems. A common complaint from businesses lately has been that they cannot find employees with the right skills."

A common complaint among the programmers is that HR drones usually drop in some arbitrary experience requirement for programming language X to appease their middle management superiors. Trouble is the arbitrary and made-up experience requirement is often a longer period of time than that language has existed, and thanks to the keyword searching resume filters, people who cannot meet that impossible experience requirement are automatically rejected. This is just one of the ways that the "skills gap" is complete bunk.

Posted by: Unemployed Northeastern | Aug 16, 2017 5:57:53 PM

Anon et al:

Of course there will be some carry over jobs, and there will be new jobs including the kind about which you are speaking. But there will not be enough of either to match what we consider should be the demand and there will be extremely large numbers of people who could and should work for whom there are no jobs. That is why Gates, Musk, Zuckerberg, Branson, Hawking, Buffett, Charles Murray and others are saying we must have a Universal Basic Income guarantee. Larry Summers remarks that there is no way we can afford such a large scale program but the issues go far deeper than fiscal. In any event, I am finishing up a book with the working title of "Perfect Storm: Artificial Intelligence, Robotics, and the Threat to Work and Democracy" that looks closely at all this and looks at the sweeping impacts of AI/robotics on work, social order and disorder, governmental budgets and revenue generation, tax strategies, trade protections and the disruption of our system of political "semi-democracy". Bottom line--we are in serious trouble.

Posted by: David | Aug 16, 2017 7:51:44 PM

BLS data demonstrate that lawyer employment and incomes have grown steadily over last two decades. This premise of job shrinkage reminds me of a Seinfeld episode - it's all wet.

Posted by: Anon | Aug 16, 2017 10:50:57 PM

If law schools want more customers, may I suggest: (1) Knock it down to two years, and (2) allow part-time students. Worrying about innovation is like peeing into the wind, you just get wet and smell bad. There will always be a market for critical thinkers, i.e., those with an innate curiosity about the world.

Posted by: Dale Spradling | Aug 17, 2017 5:09:58 AM

In the area of law I know best (wills & trusts), the view among many is that non-clients are welcome to use these online documents - it just makes more business for us later! The assumption of LegalZoom and this article seems largely to be that lawyers don't know how to do anything that cannot be reflected in an online form (I'm not talking about sophisticated AI). The wills casebook is full of people who thought they didn't need to bother with a lawyer - and ended up employing several for the sake of avoiding one. This is no guarantee of anything, of course, but it is a reason for at least limited optimism in areas of law that actually require advice and judgment (which is more of them than some people might think).

Posted by: Diane Klein | Aug 17, 2017 6:45:10 AM

@David,

Your books sound intriguing; do you have an estimated date for publication?

@Anon 10:50

Let's see what BLS says about lawyers: " more price competition over the next decade may lead law firms to rethink their project staffing to reduce costs to clients. Clients are expected to cut back on legal expenses by demanding less expensive rates and scrutinizing invoices. Work that was previously assigned to lawyers, such as document review, may now be given to paralegals and legal assistants. Some routine legal work may also be outsourced to other lower-cost legal providers located overseas.... The federal government is likely to continue to need lawyers to prosecute or defend civil cases on behalf of the United States, prosecute criminal cases brought by the federal government, and collect money owed to the federal government. However, budgetary constraints at all levels of government, especially federal, will likely moderate employment growth.  Competition for jobs should continue to be strong because more students are graduating from law school each year than there are jobs available."

And of course it is a well-known law of economics that when there are more applicants than jobs, wages go up. Wait, that's not right at all.

And as always, since this "BLS shows steady lawyer employment and salary growth" mantra appears like clockwork:

- BLS data does not include the ~33% of attorneys who are solo practitioners, the average salary for which is $49k.

- BLS employment data for lawyers by definition does not have anything to do with the 40% to 50% of law school graduates each year who fail to become lawyers.

- Per NALP, the number of FT/LT/license-required jobs has dropped 12% in just the last few years.

- Also per NALP, the real median starting salary for the Class of 2016 is down 22% from that for the Class of 2008.

Posted by: Unemployed Northeastern | Aug 18, 2017 10:12:20 AM

There is no question that a fairly substantial number of lawyers will survive. No one is saying a complete wipeout. But to the extent that lawyers' earnings are increasing at large law firms it is in part because numerous firms are cutting lawyers, reducing new associates and using Artificial Intelligence and associated technologies to replace the expense of human workers and do more with less. For a period, at least, we can expect the gross take of such firms to remain the same or perhaps even increase a bit, but salaries will look decent in such law firms because there are fewer equity partners to distribute to. But put the big law firms and earnings aside and think about solo practitioners who make up a significant portion of lawyers in private practice. While there are some in that tier who have significant earnings there is a much higher number of solos who aren't earning anything much. I set out Ben Barton's analysis below. As law schools that mostly lack prestige and have a hard time maintaining enrollments dip more deeply into the lower realms of what are considered acceptable credentials for their admissions, in what tier of law practice do we really think those lower end admittees are going to wind up? They may be overly hopeful, naive, desperate and so forth in their decisions to go to law school but their chances of obtaining a decent paying job on graduation or the potential for their providing mediocre service to clients is not encouraging.

As to the observation that there will always be space for the "best and the brightest" I have no doubt that is true, but as the system continues to compress that space will be harder to find and one of the problems across the board is that there will not be enough jobs to go around. Add to this the fact that what is going on right now is a progression taking place over time. If you go beyond the Abstract that Paul posted and look at some of the job loss data and the timing of when the worst of it hits then it becomes obvious.

David

http://www.businessinsider.com/middle-class-lawyers-are-a-dying-breed-2015-6
Middle class lawyers are a dying breed
• Benjamin H. Barton, "Glass Half Full"
• Jun. 24, 2015,
• The middle class of American lawyers is hollowing out.
• Every year since 1967 the IRS has collected and released data about the tax returns of two different groups of lawyers: solo practitioners and law firm partners.
• Adjusted for inflation, in 1967 law firm partners earned roughly $173,000 and solo practitioners earned $74,580.
• Both of these amounts were above the median income, and while partners were wealthier, there was not an unimaginable gap between the two groups.
• By 2012, solo practitioners had seen their incomes fall to $49,130, a 34% decrease, while partners earned $349,000, a 100% increase.
• $49,130 is not the starting salary for solo practitioners. It is the average income of all 354,000 lawyers who filed as solo practitioners in 2012, including those who have practiced law their whole lives.
• By comparison, the average starting salary of a 2012 college graduate was $44,000 and the median household income in the U.S. was over $51,000 that year.
• And it is not like these lawyers earn less because their jobs are easy: being a solo practitioner is really hard! These lawyers must stay abreast of lots of different areas of the law and help real people with serious problems on a limited budget.
• In 2012 partners in law firms earned more than seven times what a solo practitioner earned. These IRS numbers actually understate the discrepancy, because the IRS includes all law firm partners, from small town partnerships to mega-firms in New York.
• If you use the average earnings of equity partners from the fifty most profitable law firms the gap widens considerably. In 2012 the wealthiest American law firm partners earned $1.6 million, thirty-two times what a solo practitioner averaged.
• Such is the duality of the information age and income inequality. American lawyers used to be able to count on a middle class existence. Now law school is much more of a high stakes gamble.
• Some law graduates may become very wealthy indeed, and some will still be middle class, but many more will be saddled with massive debt and little hope for a steady income.

https://www.seo-for-lawyers.com/there-will-be-fewer-law-firms-after-2017/.
There Will Be Fewer Law Firms After 2017
Posted by Luke Ciciliano | Feb 7, 2017 | The Failing Legal Profession | 0 |
This is the first post in what I consider to be a very important topic to address. The title of this post should give you an idea on what I’m going to be talking about – the fact that there will be fewer law firms and attorney jobs at the end of 2017 than there are at the time of this article. The number of firms and positions for attorneys will continue to shrink, quickly, in the coming years. …
It is crucial that lawyers be aware of these issues. First, our country has continued to produce an excess of attorneys even though the amount of work for them to do is declining. The legal profession currently employs roughly 55,000 fewer people then it did in 20071. Since 2007, however, the number of attorneys in the US has increased by 172,2032. Gee….I can’t imagine why wages are going down and grads can’t find jobs. Second, marijuana legalization, declining marriage rates, and other factors mean that less cases will be entering the system going forward. Third, technology related to automotive safety is greatly reducing the amount of work for those in the personal injury and insurance defense fields. Now that driverless technology is here (yes, it’s here and not simply “coming in the future”), the amount of work for those attorneys is going to dry up even quicker. This isn’t even getting to what advances in artificial intelligence will do to lawyers over the next few years. Finally, while many will struggle and be forced to leave the profession, there are things you can do to protect yourself.

https://www.law360.com/articles/858265/artificial-intelligence-has-biglaw-rethinking-associate-hiring

Artificial Intelligence Has BigLaw Rethinking Associate Hiring
By Aebra Coe
Law360, Grand Rapids (November 2, 2016, 3:06 PM EDT) -- A new breed of associate may inhabit the law firm of the future, according to legal technology experts who predict BigLaw will hire fewer young attorneys and give them more sophisticated work as artificial intelligence and automation technology are increasingly used for more mundane legal work.
When posed with the question of what a law firm will look like in 20 years with the increased automation of legal work, industry analysts differ on how the details will sort out, but all agree on one thing: There are changes coming.

New technologies are numerous. There’s Ross Intelligence from IBM, billed as an “artificial attorney” because it uses artificial intelligence to answer legal problems, as well as similar AI tools; there are multiple providers like Luminance and kReveal that offer legal document review to reduce the traditionally heavy time burden involved in tasks like legal due diligence and contract review; and there are a number of increasingly sophisticated e-discovery and project management tools on the market.

The influx of such technological aids is likely to create the need for fewer associates, staff attorneys and paralegals to perform basic research and due diligence work, according to Mark Yacano, global leader of Major Lindsey & Africa LLC’s managed legal services practice.

As law firms shift away from hiring large numbers of associates, they will begin to become more selective in their hiring, creating a slimmer, more elite fleet of associates, Yacano said.

“Associate hiring is going to, over time, continue to be more selective and more surgical because there will be increasing tranches of routine work that firms or clients will be able to do using technology,” he said.

The typical law firm staffing model right now is a pyramid: A large number of associates come in, while only a few make partner, Yacano said. The staffing model of the future may look like a much skinnier pyramid as a select few attorneys are chosen as associates to perform the socially and creatively complex tasks that technological tools cannot accomplish, he said.

That effect will also be felt by paralegals, said Richard Tromans of TromansConsulting, who blogs about artificial intelligence in the legal industry at ArtificalLawyer.com.

“As AI becomes more widely used for matters such as due diligence, the number of paralegals needed for ‘process work’ will drop,” he said. “Associates who partners expect to progress and develop into client winners and advisers should probably see no impact in terms of hiring. In fact, as AI will make firms more productive and able to take on more work, we could see a rising demand for high-quality associates.”

Posted by: David | Aug 18, 2017 10:36:52 AM

Two corrections. Lawyers are generally perceived to be at low risk of automation. See, e.g., Osborne & Frey. Autor never said "Nowhere are these advances clearer than in the legal world." That appears elsewhere in a NY Times article that contains the first part of the Autor quote.

Unemployed Northeastern keeps trotting out the 49K figure from Ben Barton's book without understanding how it is calculated. The figure is based on IRS sole proprietor tax filings. Many solo lawyers - particularly high earning ones - do not file as sole proprietors. The IRS data Ben uses also includes part-time attorneys and attorneys who, for whatever reason, report no income. It even includes people in the legal services industry who are not lawyers (think notaries). The data has some value, but not as a measure of solos' incomes.


Posted by: Milan Markovic | Aug 18, 2017 2:52:35 PM

Mr. Markovic, you are correct. The IRS numbers are gumbo. However, if the 1967 and 2012 numbers were figured the same way, there is some validity to comparing the two. However, like you, I understand LLCs were not around in 1967 and even the use of S Corps by professionals was limited. Wouldn't be great if the IRS would allow academics to study their aggregated numbers?

Posted by: Dale Spradling | Aug 19, 2017 10:09:52 AM

Frey and Osborne's 2013 report is both a landmark and already obsolete. That is how fast the AI developments are moving. Their analysis is already ancient history. Plus, AI applications are "force multipliers" for individual law firms and lawyers that allow them to do more with less in a finite market in which people are seeking legal services and can pay for them. In such a finite market if lawyers are able to generate quality services with less effort and time investment, and if there are more lawyers seeking the benefits of the paying market then the earnings per lawyer will go down. Add to this the fact that if people's earnings (potential clients) are static or declining their ability to pay for services at traditional levels is falling. This has direct effects on lawyers' earnings. It is also a fact that many people have been going into solo practice because they have no other options. Now add to that the fact that law schools with limited prestige and geographical employment/placement reach are now admitting applicants that they would never have admitted even six years ago because of what they considered questionable credentials. Assuming these students are able to graduate and able to pass the bar where do you think they will be employed as a general matter?

Posted by: David | Aug 19, 2017 3:41:10 PM

David asks "Assuming these students are able to graduate and able to pass the bar where do you think they will be employed as a general matter?"

I believe this is the point when the usual defense brigade builds a mountain of straw about the non-elite JD being a secret ne plus ultra MBA and that Google, Bain, and General Electric alike all toss suitcases of money at halfway-sentient law school graduates who can't land an interview at a failing two-person "law firm" in Peoria.

Posted by: Unemployed Northeastern | Aug 19, 2017 10:27:23 PM

Northeastern:

I am almost finished with he book and have barely thought about what to do with it. I haven't sent it to prospective publishers because it has been changing and evolving so fast it sort of stuns me. This is the most complex thing I have ever attempted and I generally attempt some intriguing projects. But I do think I have pretty much "nailed" it to the point not only of my capabilities but what is likely to occur. The thrust is not simply AI/robotics but what are the effects that the multiple technologies are and will have on our jobs, societies and ways of life. This is totally a fluid tapestry. It is amazing what is happening and the developments in AI/robotics and their applications change by the moment, but most of the changes do not create a pretty picture for human work and societies. As I suggested in one response, sure, there will be jobs remaining for the best human minds. There will be jobs for some lawyers. In most areas it is not that we are dealing with "buggy whip" factories in which old tech is entirely replaced by new tech. BUT the new tech is infiltrating and replacing significant "task sectors" of many areas of work, including law. That means not only that work will be changing in fundamental ways but that there will be a dramatic decline in the number of human workers required to achieve baseline productivity in a great many fields of work--including law.

Posted by: David | Aug 20, 2017 2:22:08 PM