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The most prevalent form of degradation in academic life


head in sand

Legal academia is very much on the defensive at the moment, which is all to the good. The mixture of outrage and pearl-clutching which greeted David Segal’s latest entry in his series in the New York Times on the state of American legal education is a sign of, if nothing else, the extent to which law school faculty and administrators are finally noticing that we are dealing with that most dreaded of things, a genuine public relations crisis. (Unlike the economic and personal disaster which has been overwhelming a growing percentage of our graduates for many years now, this is one crisis which cannot be ignored).

Given that reaction, this seems like a good time for a restatement of some fundamental points, to help avoid a deflection of the conversation into tangential issues such as the actual value of legal scholarship, how much law professors get paid, how much Socratic method nonsense still inhabits our classrooms, etc. (Many thanks to Matt Leichter’s invaluable Law School Tuition Bubble for collecting and analyzing much of the data cited below).

POINT ONE: Over the past 20 years, the share of the nation’s GDP attributable to the legal services sector has deteriorated significantly. In the late 1980s, the legal services sector represented slightly more than 2% of GDP (the same percentage as in the mid-1970s). As of 2009, that figure had declined to 1.37%. Contrary to the standard narrative within legal academia, which assumes an increasing or at least steady demand for legal services relative to overall economic growth, the demand for legal services within the American economy has been declining, relative to the rest of the economy, for the past two decades. In other words, “law” (as an economic entity) appears to be a mature industry in relative decline.

POINT TWO: The rate at which American law schools are producing aspiring lawyers far outstrips the demand for new lawyers, and this has been the case for many years now. The Bureau of Labor Statistics estimates that the economy will produce an average of approximately 24,400 new jobs for lawyers per year over the next decade. ABA-accredited law schools are producing 45,000 new graduates per year, while non-accredited schools produce several thousand more (Approximately 53,000 people pass state bar examinations each year). An important sub-point about these statistics is that the BLS estimates are not for how many jobs will be filled by new law school graduates: they are for all new legal jobs. What this means is one can’t assume, for instance, that half the 50,000 aspiring lawyers (conservatively speaking) that enter the market each year will get law jobs, since some of those new jobs are going to be taken by people already in the market for attorney jobs who were not currently employed as attorneys. Obviously, this problem gets worse over time, as the surplus of lawyers without law jobs continues to increase.

POINT THREE: The cost of law school is, in economic terms, arbitrary. Given the faith in well-functioning markets that well-functioning citizens in our society are expected to maintain, this point is extremely counter-intuitive, but it is, given points one and two, essentially undeniable. For more than twenty years now, the demand for the services of American law school graduates has been declining relative to the demand for other economic goods (not constantly, of course, but the overall trend is clearly negative). For much if not all of that same time, the output of American law schools has far exceeded the demand for that output, and now appears to be in a roughly two to one ratio. Yet since 1985, tuition at private law schools has increased by 2.5 times in real terms, while resident tuition at public law schools has increased more than fivefold, again in real terms. In other words, over the past quarter century, the relative change in the cost of acquiring a law degree has borne no rational relationship to the relative change in the value of a law degree.

POINT FOUR: There is, to this point, almost no sign that this arbitrary relationship between the change in the cost of acquiring law degrees and the change in their value is going to move toward a more orthodox economic relationship, in which the decreases in value trigger decreases in price. Law schools continue to raise tuition at far faster than the rate of inflation, and the market for the graduates of law schools — which it bears repeating has been bad relative to the rest of the economy for many years, for reasons that have nothing to do with the recession that began in 2008 — continues to deteriorate. An extrapolation of current trends into the very near future, i.e., four years from now, suggests that private law school tuition will average $50,000 per year, and will be more than $60,000 at some schools, while average resident tuition at public law schools will be as high as private law school tuition was in 2007. This means that the total cost (tuition and related expenses, plus opportunity cost) of attending law school will be approaching $300,000 for many students and will be at least $200,000 for the vast majority. Meanwhile, it appears that around half these graduates will not have real legal careers, defined as long-term employment in jobs requiring law degrees, and that indeed for a significant percentage of them acquiring a law degree will have made them less employable than they would have been otherwise (In other words, for these graduates, law school will have turned out to have been a bad investment even without regard to the direct costs and opportunity costs incurred by attending it).

POINT FIVE: These otherwise unsustainable trends are being maintained by a combination of unlimited federal educational loan money and, to a lesser extent, poor information regarding the actual relationship between the costs and benefits of acquiring a law degree. Any significant change in either of these factors, but especially the first, will lead to a massive disruption in the current economic structure of legal education in America.

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  • It’s not the demand for law school graduates that affects law school behavior. It’s the demand for law school education by students.

    As long as the demand for education is strong, tuition will go up. It’s the feedback between future earning potential and student demand for education that is lagging or broken.

    It apparantly takes a long time for such “career value” information to percolate through society.

    • Scott Lemieux

      It’s worth noting, however, that this market is heavily distorted by taxpayer-subsidized loans.

      • For all education loans, yes. Not anything specific to law schools.

        All the “financing” does (whether subsidized or not) is put off the day of reckoning when cost > benefit. Much like the housing market.

      • Nick

        Not to mention the schools’ distorted first-glance job numbers, salaries, etc. Nobody tells you that the market looks like this, they tell you that the average income is $100K+.

    • mpowell

      It apparantly takes a long time for such “career value” information to percolate through society.

      This isn’t really that surprising. There is basically no direct link from actual salaries to student knowledge. Nobody will tell you anything. Most students are less informed than if they just looked up the BLS statistics. The funny thing is that corporations know exactly how much different jobs pay because that’s how their HR departments set salary targets.

  • L2P

    Very much like this summary!

  • Murc

    I graduated high school twelve years back and all my guidance counselors and my parents were telling me ‘be a lawyer, you’d be good at it.’

    I probably would have but thank god I didn’t listen.

    (Fun fact: my Mom put my Dad through med school by working illegally as a paralegal. Ah, the 70s. Good times!)

    • rrbill

      The only state that licenses paralegals in California, and that only since the 1990s. Therefore, I can’t understand what was working illegally as a paralegal in the 1970s. In 49 states a paralegal is someone who calls herself a paralegal.

      • Murc

        Er… okay, I might need to ask her to flesh out that story, then.

        All I know is that she told she 1) worked as a paralegal, but that it was 2) under the table, and 3) in addition to that she was preforming legal services that she was, technically speaking, not licensed to be doing so. Not being a lawyer myself I don’t know the ins and outs.

  • wengler

    What we really need is a lot more doctors and a lot less lawyers.

    People will finally get the message when a DoctorLawyerCop show comes along and talks about how the lawyer is hanging out behind the hospital warming his hands with a garbage can fire.

    • BigHank53

      Only if there’s a law school dean burning in the garbage can.

  • Njorl

    Is this a plug for Yglesias’ book?

  • legion

    So, the lesson here seems to be that lawyers don’t know jack about economics. Duly noted.

    • L2P

      Economics? Lawyers are GREAT at economics. Arcane gibberish that can’t be proven right or wrong is really kind of our specialty. You should see teams of battling lawyers simultaneously “proving” that a merger both will and will not cause a plague o’ locusts o’er the land.

      I’m sure law professors right now are gearing up to prove that, as a matter of Economics, it makes perfect sense to graduate twice as many lawyers as we can employ and for them to owe twice as much in debt as they can reasonably repay. I’m sure the answer will have something to do with incentives to exceed. Tyler Cowan’s probably helping out with the answer to that one.

      But business? Oh. That. Yeah, lawyers are TERRIBLE at business. Amazing how many firms grossing $20M a year go under. . .

      • CBrinton

        The total lack of business acumen by most attorneys was (and possibly still is) part of the business plan of some unscrupulous booksellers.

        Federal law is crystal clear on your obligations if you are sent unsolicited merchandise: you have none. Unsolicited merchandise is a gift. You don’t have to pay for it, you don’t have to send it back, you don’t even need to send a thank-you note (39 USC 3009).

        However, at least until 10 years or so ago (and maybe even now) it was a regular practice of some marketers of legal publications to send new solo practitioners books they hadn’t ordered, along with invoices. A high enough percentage would pay the bill (not having kept any records of what they’d actually ordered) to make up for the others who actually knew the relevant law.

  • mike in dc

    300k in debt in a few years? Pssh, I’m near that number already. A lot of part-time JDs can easily run up 250k in debt, just by taking extra money for living expenses over four years instead of three.
    I do feel like asking the career counselor at my alma if she believes she could still get a lawyer job, and if so, could I please have her current job?

  • Tom M

    The part of our business I run just completed a competitive bid process for legal services. The cost went down between 40 and 60% saving several million each year. We had 11 firms bid on regional packages.
    15 years ago, I hired lawyers in NYC who got $600/ hour and charged combined rates in big cases at more than $225/HR. Not anymore. Lawyers aren’t a dime a dozen but the day is closer.

  • superking

    So, what drives demand for legal services? Companies obviously need lawyers, and individuals need lawyers in tort cases (which are fairly rare), criminal cases (common), family & probate (constant), and consumer cases (fairly common).

    If demand for legal services is down is it down because there has been significant corporate mergers that actually reduce the number of corporate clients? This seems likely to me, but I don’t know. Is demand down because a lot of people who would otherwise need an attorney are representing themselves? I think this happens a lot in consumer and family cases, and is really an issue of affordability of legal services. Is demand down because insurance companies now handle a lot of tort cases, especially motor torts, without a need for legal intervention? (I was just in a minor car wreck, so I now know how this works.)

    I have for a long time thought that we have plenty of attorneys, but they are distributed poorly because attorneys often can’t make a decent living on a probate case, or a simple will, or a $1000 contract issue. Obviously, education loans partially drive up the target salary of many attorneys. Is there a way, though to create a better distribution of attorneys that will ensure more people have legal representation when they need it?

    Or do we just need better anti-trust laws that create more competition in other industries, and thus more clients for attorneys to assist?

    • Peter H

      There’s two things to consider. First is that legal services have shrunk as a share of GDP, but that does not mean that they’ve shrunk in absolute terms, just that they grew slower than the rest of the economy. This makes sense if the market was well served in the 70s, and hasn’t had much of any need to expand.

      Second, many legal services have shrunk, particularly divorce (no fault) smaller torts (insurance negotiations and small claims court), probate is much less of a fight with the estate tax mostly gone except for the very biggest estates. Also, legal research is made 10x easier with the advent of the internet. In my field (patents) a searcher would have to go into a research library to pull copies of patents they kept on file to do research for a client. I can now see them all online, and they’re indexed by Google.

  • Anonymous

    This hits the nail on the head about the relative value of a JD (and, increasingly, bar passage.) There are fewer jobs nowadays that explicitly require legal research, writing, reasoning, or advocacy. For many employers, a JD is a net negative in that it suggests that the applicant has mismatched skills for the position, or is simply applying as a filler job. And yet, students continually apply to law school with no intention of actively practicing law, and then take and pass the bar.

  • Anonymous

    The problem is that those who need the help of legal services don’t have access to it for a variety of reasons. Pro-business state legislatures blocking recovery, attorneys unable or unwilling to aid the poor, etc. The need for justice is greater than ever, it’s just not available. Legal services are not widgets sold at Wal-Mart and should not be valued accordingly.

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  • Hessick

    There’s still this belief that a legal degree is a door opener for multiple career paths. It’s just not the case anymore. Law schools ( and bar associations) still push this message while other advanced degrees have moved into the business and finance fields that attorneys used to move into.

  • MK

    I’d be interested to see these statistics controlled for the relative prestige of the law school. It could well be that the proliferation of law courses from the top universities to the average community college could bear much of the responsibility for the market saturation, and these community college graduates could be the ones who are missing out.

    I doubt, for instance, that there is an unemployment problem amongst Ivy League law graduates. Somewhere down the scale of prestige, there would be a point where graduates from a particular law school are more likely than not to fail in finding a law job.

  • boo-raddle

    I suspect Ivy League lawyers don’t have anywhere near the employment problems that afflict the other “99%” lawyers, but I figure that most of them are hurting in some way, however small, and that the pain is going to get worse if current trends persist. This is anecdotal, but I have done low level doc review and “crap work” with a number of lawyers from top-tier law schools. I also did this grunt work with an occiasional lawyer from an Ivy. While it is probably true that most Ivy attorneys are safe at the moment, one can’t ignore the fact that 10,000 laywers were laid off from blue chip firms in the DC/NY markets in 2009. And the depression of wages is real and surely harms nearly everyone with the exception of perhaps a handful of top graduates from the Ivies.

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