Paul L. Caron

Monday, August 5, 2013

Anderson: Is the Abysmal Job Market for Law Grads Due to Demographics, Not Structural Change?

Robert Anderson (Pepperdine), Where Have the Lawyer Jobs Gone?:

Between 1980 and 2005, the median age of lawyers increased from 39 to 49. ... The number of lawyers [in California] between 55 and 75 has swelled in 2012 far beyond the numbers in 2003. ...

That means that the reported oversupply of lawyers may well result from demographic factors, rather than permanent changes in the legal market. The demographic factors, in turn, probably result from a combination of lawyers waiting longer to retire because of 401(k) accounts decimated during the financial crisis together with the "bulge" of baby boomers working their way through the system.

If this demographic pattern is responsible for displacing jobs for young law graduates, it would seem to be good news for recent and prospective law school graduates, albeit good news that may take some years to materialize.

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You are absolutely correct, "Arizona Bob". The system is rigged and that is the only thing that has allowed it to be sustained for so long. I can see a national shift to a 1. national bar admission, and 2. formal and informal change in who is allowed to "do things considered law" at least at the transactional level. There are many people who can provide as good or better advice about specific areas of legal need than a lawyer. I am amazed that the system filled with artificial market entry barriers has survived as long as it has. Basically I assume it is because lawyers dominate legislatures and the Supreme Court has somehow deferred to the supposed traditions of the legal profession in the sense that it is unique, self regulating and "ethical". When the legal/structural changes occur they will be rapid, stunning and signal the death of law schools (two thirds of them) as we know them.

Posted by: David Barnhizer | Aug 6, 2013 1:57:43 PM

Was David Barnhizer thinking of the problems at Rutgers-Camden when he mentioned gas station service attendants in his list of disappearing "service" jobs? Because New Jersey is one of those places (Oregon being the other) where motorists are not allowed to pump their own gas. And it's also one of those places where intelligent, educated people are unable to buy or sell a home without the assistance of lawyers.

Well, I suppose they can try, but the legal profession and real estate profession have the system twisted into such a kabuki dance between buyer and seller that, my friends there tell me, it's difficult to overcome.

Here in Arizona, we amended our state constitution back in the 50s to make sure that real estate agents could negotiate and write contracts without the involvement of lawyers. The lawyers didn't want the business. The world did not come to an end. But in New Jersey, it must be an embarrassment to be involved in a legal profession that almost demands lawyers on both sides of a residential transaction. Law professors who contribute to the perpetuation of the system, must be doubly embarrassed.

Maybe in California, the longevity of lawyers can be attributed to the estate planners waiting for their clients to die so they can collect the statutory probate fees. Yes, the living trust industry has put a dent in this cash flow, but "maximum fee" is still enforced as "minimum fee we all agree to charge." Try finding a lawyer in California to do five hours of work for $2,500, when the allowed percentage is $25,000.

Posted by: Bob | Aug 6, 2013 11:27:41 AM

The "crisis" is not only demographics or only structural change within the legal profession. Nor is structural change within the legal profession itself the only structural change playing into this situation. As businesses and other forms of economic activity undergo structural alterations lawyers who serve those interests have to adapt their business forms to respond to client needs. Those adaptations will almost inevitably involve efficiency and cost measures that reduce the numbers of lawyers involved as well as the amount of time spent on a case, project, dispute, transaction etc. But the problem has numerous causes and no cures from the perspective of everything returning to a recycled state of "normal" identical or similar to the past thirty years. Lawyers are a service provider. Think of what has happened to other service providers as economic changes occurred. Where, for example, are the: 1. railroad conductors, 2. telephone operators, 3. check out clerks, 4. bank tellers, 5. gas station attendants who fill gas tanks, check oil and tire pressure?

This is only a beginning list of service providers who have been replaced in whole or part by technological changes. Lawyers are simply another service provider and the nature of the job and the demand for lawyers' services is changing rapidly. Think about the legal information available to "regular" people on the Internet on estate, tax, contracts, forms, state laws, real estate transactions and deeds, and much more. This in itself is altering what people need from lawyers or what they think they need. It also has created a sort of independent "Non-lawyer legal profession" that is providing services previously limited to lawyers. Again, the existing formal legal profession is not in control of the critical changes that are taking place and ALL OF THEM result in less of a need for lawyers in the traditional sense. Other matters impacting on this transformation include some of the following.

1. Too many lawyers "pumped" into a declining system over the past 15 years.

2. Those lawyers compete with each other and represent a huge bulge of unneeded service capacity. This overcapacity would have existed without all the other changes noted above but taken together the effects are profound.

3. The price of law schools has gone up steadily because the ability of law students to borrow the full price plus living expenses has been like an out-of-control credit card system in which the reality of the burden hits home only after the student has graduated. Law faculty had no incentive to inhibit tuition costs because they reaped all the benefits and suffered none of the consequences--until now and the next five years when some schools fail and faculty are cut loose.

4. My best guess is that in the next five years or so of the slightly more than 200 US law schools maybe 25 will close, another 25-50 will approach a "negative critical mass" and be on the edge of closing or radically alter their curriculum and faculty structure with a shift to some sort of small permanent core along with a cadre of temporary faculty, adjuncts, contract staff and so forth.

5. In something like 50% of the law schools traditional law faculty will be involuntarily eliminated as a matter of costs and/or parent university dictates.

6. The calls for a more relevant legal education are incompatible as a matter of costs with the traditional model of legal education due to the labor intensivity of many of what are called "skills" courses. To the extent that approach is adopted in any significant manner "something will have to give". That "something" is a combination of elimination of traditional faculty slots, a reallocation of declining resources to the skills operations, and the hiring of a host of part-time and temporary teachers. Whether this actually produces ay better skills education of the kind needed in a legal profession that doesn't hire the new graduates anyway because there aren't jobs probably doesn't matter. In any event, in much of my experience a core problem with lawyers is not that they couldn't do a reasonably competent job now, but that many lawyers for a variety of reasons simply do not work up to the levels of quality of which they are capable. "Having skills" is not the same as "applying skills".

Just a few thoughts.


Posted by: David Barnhizer | Aug 6, 2013 7:00:12 AM

" The demographic factors, in turn, probably result from a combination of lawyers waiting longer to retire because of 401(k) accounts decimated during the financial crisis together with the "bulge" of baby boomers working their way through the system. "

Note that that will also hold for the current generation of lawyers; they'll suffer from very low salaries and unemployment from now until - well, until things change.

Which means even if things turned around in the legal field in (say) 2020, to the point where the cast-offs of the previous decade are now employable, those people will still be working until they can't.

Posted by: Barry | Aug 5, 2013 6:44:20 PM

Eric Rasmussen: "But probably it isn't just a bulge. Have class sizes fallen? Maybe what happened is that law schools grew a lot in the 60's and then stayed just as big after teh baby boom passed. "

What actually happened is that they kept expanding up until a couple of years ago. They were cash cows, whether public, private, standalone or attached to a larger university.

Posted by: Barry | Aug 5, 2013 6:42:13 PM

In terms of being good news for recent grads, you'd need to understand what the impact is of immediate (1 to 2 year) un or underemployment in the law field (people who don't have a position requiring a JD after graduation) and whether these individuals (on average) ever recoverl. The evidence from a study on Bachelor degrees is that graduating during a recession causes a significant short fall in income that only rectifies itself 10 years after graduation. The anecdotal evidence is that anyone without a top tier job in the first year after law school is relegated to the bargain bin. So a demographic wave of retirements might help the 2015+ law grads, but could do nothing to help current law grads.

Posted by: SN | Aug 5, 2013 6:00:13 PM


Well, if that $50k salary means that law grads must go on welfare for 10 to 20 years (IBR, PAYE), cannot muster a down payment for a house, and cannot fund their retirement adequately in their crucial 20's and 30's (or invest at all), well, the answer may surprise you. There was a big labor economics study out of Demos last week that estimated that for an average couple with average student loan burdens - $26k each - they will lose $208,000 in household wealth, mostly from diminished home equity and retirement contributions vs. their non-student loan holding peers. And that is under a best-case scenario where each person works in a college level job, never experiences unemployment, and gets yearly raises. If we scale that up to the two-lawyer couple who each owes $175k or so for their education, well, you get the picture.

Posted by: UnemployedNortheastern | Aug 5, 2013 12:03:15 PM

You keep using that phrase, "good news." I do not think that phrase means what you think it means.

If the extension of legal careers is "structural" rather than cyclical (all lawyers now work until they drop), there is no reason to believe that it is merely temporary.

Really, what the chart tells us is that unlike before, lawyers are practicing longer -- OR -- it is harder than it was before to break into law -- or some combination of the two.

This most definitely is not "good news" for young lawyers or for potential law school applicants. It is bad news.

Posted by: Inigo Montoya, esq | Aug 5, 2013 9:30:33 AM

On the future for current graduates:

1. If there *is* just a baby boom bulge, then even though salaries may be low for 30 years, the high salaries after that could make up for it. If you had to choose between $50,000 at age 25 and $2 million at 55, on the one hand, and $100,000 at 25 and $1 million at 55 on the other, which is better?

(2) But probably it isn't just a bulge. Have class sizes fallen? Maybe what happened is that law schools grew a lot in the 60's and then stayed just as big after teh baby boom passed.

Posted by: Eric Rasmusen | Aug 5, 2013 8:05:07 AM

Great point!

It makes me wonder what's going to happen in Japan in 20 years, since they doubled the number of entering lawyers between 2000 and 2008. See my paper with Prof. Ramseyer:

Posted by: Eric Rasmusen | Aug 5, 2013 8:01:05 AM

Barry: On point #1 I completely agree. These graduates, along with those from the past few years, may not see any benefit from this. On point #2, I should make crystal clear that I am not predicting a "surge" in the legal career field. I am merely pointing out the possibility that the current drought may relent somewhat because of demographic factors.

Bob: It's true that the charts include inactive members, but it's true for both 2003 and 2012, so that does not explain the difference between the two. If there have been changes that make inactive status more attractive in 2012 relative to 2003 that would lessen the relevance of the data. However, it looks to me that there was the same percentage inactive in 2003 and 2012, so I don't think that explains it.

Posted by: Robert Anderson | Aug 5, 2013 7:28:47 AM

"Demographics"; is that fancy-talk for "too many lawyers"?

Posted by: Ike | Aug 5, 2013 7:27:34 AM

The California chart appears to include the 21% of state bar members who are inactive.

There may be a number of reasons for retired lawyers to maintain their inactive status by paying $125 a year in dues. There may be even more reasons for retired lawyers age 70 and older to maintain their inactive status, since their dues are waived.

Posted by: Bob | Aug 5, 2013 6:06:19 AM

"...albeit good news that may take some years to materialize. "

Two comments:

1) For people just graduating, or about to attend law school, good employment news which materializes in a decade is actually not good news. At that point, their careers will have been established, and established low. If there actually is demand, will firms hire laterals who've been doing low-level work, or fresh grads?

2) Theories that we are due for an upcoming surge in a particular career field due to a retirement wave are common, and always false. From the shortage of Ph.D.'s and professors predicted in the 1980's, to STEM shortages predicted several thousand times per year, they just don't happen.

Posted by: Barry | Aug 5, 2013 5:42:13 AM