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The beginning of the end for the law school bubble

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escher

I suspect that in retrospect 2011 will be remembered as the year the law school bubble finally began to burst. It began with David Segal’s first big piece in the New York Times on the lengths law schools were going to in their attempts to hide the actual employment situation from prospective students, and it ended with numerous schools rushing — in the wake of several active and prospective class-action lawsuits — to put something resembling actual employment and salary data up on their web sites.

A commenter asks a $6.4 billion dollar question:

I used to believe that in ten years (which can pass in the blink of an eye), tuition will go from its current level of $45,000 to $73,000; the number of law schools would go from 200 to about 220 and the “% of law grads getting real lawyer jobs” would go from its current 50% rate to about 25-30%.

In other words I assumed that we were far from that critical point.

But now I wonder.

Could we see some of the really notorious low ranked school (e.g. that one that rhymes with stooley) have trouble filling all their seats this year? That would be such an incredible development if true.

No one can know precisely when the current model of American legal education will collapse, or whether that collapse will be sudden, or take place in the social equivalent of slow motion. But the crash is coming. Here’s the cyber-equivalent of an Escher drawing in regard to this question. First, a post from Top Law Schools, in which a Michigan State Law School 3L offers to take questions (Note that MSU is, to the extent such a definition makes sense, an ideal representative of an “average” ABA law school, in that it’s currently ranked 95th-99th out of 200 ABA-accredited schools. We are, in other words, a very long way from the bottom). Naturally, he’s asked if he and his law school friends and acquaintances have jobs. His response:

I do not have a job. Several of my friends have jobs lined up (two in large firms, two in a medium-sized firm, one with a corporation, etc). However, I have a lot of friends (I’m counting 8 just off the top of my head) who graduated last year and they all have jobs now. Of course this is all anecdotal…I don’t know what the percentage of employed 3Ls is. It’s a pretty dismal market (as I’m sure you know) but, honestly, I’m not too worried about it. I’ve received an outstanding education at Michigan State and I realize I may need to wait until after I pass the bar to find a job. It sucks but it is what it is. It’s just gonna take some flexibility and patience I think…through no fault of my own or MSU.

Obviously the placement is great in Michigan and pretty good in Chicago (especially if you spend 1L or 2L summer out there). Our DC placement is pretty rad too because we have a semester program down there. There’s a large MSU alum group in DC as well.

Here’s the other half of the drawing.

For all I know MSU just threw its NALP stats up on the internet this week (perhaps in response to the Law School Transparency Project’s request to all ABA schools that they do so), so this student doesn’t even know these stats are now available. Or perhaps he doesn’t want to know what they are. Under the circumstances, this would be a perfectly understandable defense mechanism.

The short version of these statistics can be summed up in less than 30 words: Nine months after graduation, MSU Law School had determined that 33 of the 348 graduates of its 2010 class were employed as attorneys in positions that paid $60,000 or more. The average law school debt of the 85% of the class that graduated with such debt was $108,444.

In the wake of those two sentences, it really shouldn’t be necessary to continue the autopsy in any greater detail, but those of a morbid disposition can linger over such factoids as the specific employment status of the 150 graduates listed as “employed” in the private practice of law. This group includes 12 solos, 69 [!] graduates employed full-time with firms of 2 to 10 attorneys, and nine more employed part-time with firms of that size — and one of these was listed a temporary employee. Think about that: part of what counts as “employed as an attorney” for the purpose of all those NALP figures is part-time temporary employment with a firm of ten lawyers or less . . . but again, what’s the point of lingering over the crash site’s gory details? Better to simply note most of the people at the scene were killed, a few escaped with injuries of varying severity, and one guy walked away without a scratch (he must have been the one paying attention in Drivers Ed).

A side issue about which I’m genuinely curious: what’s with the huge numbers of graduates who are listed as taking jobs with firms of 2-10 attorneys? Fully a third of the national class of 2009 who are listed as working in private practice nine months after graduation are in this category, and at lower-tier schools the percentage is much higher. Conversely, at elite schools practically no one is in this group. Intuitively, one would think it would be quite difficult to get a real job with an enterprise that would on average have to increase its total attorney workforce by 20% just to hire you. I suspect that many jobs in this category are semi-imaginary: that is, they are temporary contract positions, featuring low hourly pay and no benefits, or (often unpaid) clerking gigs that in palmier days were filled by law students, or they represent a couple of equally unemployed classmates banding together to start a “firm.”

Anyway, the juxtaposition of the MSU 3L’s post and the newly published MSU placement stats raises the fundamental question of just how much real transparency, when it arrives (and we are still far away from that point), will affect the decisions of people who will have to decide whether the kind of tradeoff represented in those employment and indebtedness stats makes any sense for them.

We have a long way to go, but, on the last day of 2011, we are a lot closer to answering that question than we were on the previous New Year’s Eve.

Which reminds me: Happy New Year. Let’s hope it’s a good one.

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  • Craigo

    I’m sure you’re right to some extent about “imaginary” placement, but the stats for small-practice hiring don’t sound all that surprising. A new associate who can be expected to bill 2000-2500 hours for a medium to high five-figure salary is a huge net gain for most of these firms.

    • When I graduated from law school I interviewed with a number of smaller firms. Then in practice I got to know a larger number of small firms.

      The most attractive, you can identify the moment you walk in the door. They have professional offices, professional staff, competent attorneys and an air of success. Some of these firms are hiring a lawyer with the expectation that the lawyer will remain with them for years. Others simply want somebody to take the load off. The best case scenario, which seems all too rare, provides a partnership track. More commonly the partnership ranks are full and if the lawyer doesn’t build his own book of business as he goes along he won’t become a partner. At the other extreme are firms that will simply load up the lawyer with work until he gets exhausted and leaves – albeit usually with decent experience for whatever comes next.

      Next, there’s a category of firms that is a bit stressed financially, but needs extra help to deal with mundane matters (perhaps work done under contract that doesn’t pay particularly well) or to help them deal with the times when they get overloaded. They may hope for the lawyer to build up his own business and self-create a partnership track, or they may be indifferent, but you’re unlikely to become a partner unless you demonstrate the ability to bring in substantial revenue independent of the firm. At the better end the firm will offer sufficient support, supervision and training to turn you into a decent lawyer. Some firms will toss a bunch of files on your desk, point you to the computer or whatever they have by the way of a law library, and let you muddle your way through.

      On the bottom end, there are law firms that seek out the desperate law school grads or struggling young lawyers, get as much work out of them as possible, then (one way or another) send them on their way – there’s no intent to offer training, a career path or a decent income. Promises may be made of eventual bonuses or shares in the proceeds of cases, but many of these firms will either break their promises of shared fees or fire the lawyer before a big case comes in then deny him any share of the fee he won for the firm, or point to the lack of a written promise and deny that the arrangement applied to that case. At some level the lawyers who work at this type of firm figure out the game pretty quickly, and perhaps know what’s going on even when they sign on, but they don’t have a better option if they want to practice law.

      Even in the better small firms, the compensation scheme is often skewed against the new guy. At one I recall, the newer lawyer would be assigned municipal contract work that would keep him on the road most days, with the firm earning whatever the contract allowed for the service provided. Lawyer salaries were modest with the promises of bonuses – but you could only earn a significant bonus if you brought in work at your standard hourly rate, so if they were giving you all of their contracted work you would inevitably be found to be underperforming as compared to the other lawyers even if you worked longer hours. You might have a career, but that was pretty much contingent upon another lawyer’s leaving and, around the time the opening arise, the receng law school graduate child of a partner, local politician or judge not being hired into the spot above you.

      If you do want to work in a small firm, my suggestion would be to go after the best experience, not the best salary, and to figure out quickly whether you have a viable career path with the firm or if your better path is to prepare to switch firms once you have some experience, or to develop enough experience to start your own practice. The joy of pretty much any small firm practice is that you’ll end up with enough exposure to the entire case that you’ll develop transferable skills.

  • Jonathan

    Simpsons s08e13 “Sweets and Sour Marge”

    I’m surprised you haven’t posted the scene where Marge & Lisa hire a lawyer yet.

  • Superking

    A side issue about which I’m genuinely curious: what’s with the huge numbers of graduates who are listed as taking jobs with firms of 2-10 attorneys? Fully a third of the national class of 2009 who are listed as working in private practice nine months after graduation are in this category, and at lower-tier schools the percentage is much higher. Conversely, at elite schools practically no one is in this group. Intuitively, one would think it would be quite difficult to get a real job with an enterprise that would on average have to increase its total attorney workforce by 20% just to hire you. I suspect that many jobs in this category are semi-imaginary: that is, they are temporary contract positions, featuring low hourly pay and no benefits, or (often unpaid) clerking gigs that in palmier days were filled by law students, or they represent a couple of equally unemployed classmates banding together to start a “firm.”

    I think your intuitions would be wrong. The thing to remember about the practice of law is that the the plurality of attorneys are engaged in solo or extremely small firm practice. If your ever driving in out statute Colorado, or even downtown Boulder, and you see a sign that just says “Law Office,” well that’s a solo practitioner or atwo guys sharing an office. It is almost as if you are buying into some big law myths yourself here. Big law firms employ something like 15% of new graduates and probably less than that amount of all attorneys. The majority of people in the country live outside of new York, washington, dc, Los Angeles, San francisco and Chicago. And those people need tons of legal services–wills, deeds, title issues, insurance defense, social security, plaintiffs work, transactions at small businesses, and, of course, criminal defense. The legal market isn’t defined by corporate law, but by individuals in rented offices grinding cases for people who don’t have any money.

    • Murc

      The legal market isn’t defined by corporate law, but by individuals in rented offices grinding cases for people who don’t have any money.

      I would say that the legal market is defined by both of those things.

      And grinding out cases and doing probate work for people who don’t have any money seems like an AWESOME way to repay your six-figure debt in a timely fashion. Maybe you can afford to buy a house in your mid-fifties! Yeah!

  • Sophia

    Ugh. Paul, your comment about “imaginary” placement is obnoxious and revealing of your privileged and somewhat ignorant perch. At some point, is your analysis going to take into account the social good provided by those silly people who take on too much debt to become lawyers and end up working for the poors and the middle class? Do you have a master plan to staff every PD office in the country with people who got full rides to first tier schools?

    It’s not that I disagree with your project encouraging prospective law students to make better informed decisions. But my cynical and grumpy lawyer ass still has a sentimental attachment to the idea that one should become a lawyer because you want to help people with their problems, not because you think it’s a surefire way to riches. Some people actually value helping others more than they value being a property owner. And society is better off because of their choices.

    • Paul Campos

      There seems to be some misunderstanding here. In the abstract, I’m all for people going to law school to become PDs and DAs and other government lawyers. In the concrete, THERE ARE NO JOBS AVAILABLE FOR ENTRY LEVEL LAWYERS IN THOSE AREAS. To the extent this isn’t true, the few jobs there are don’t pay nearly enough to service the average law graduate’s law school debt if that person insists on indulging in such luxuries as rent and food.

      As for working for a small practice, helping people with “no money” with their legal problems, it’s much the same problem. The small law practice market is even more heavily saturated than big law. How exactly is a new graduate (who of course knows next to nothing about practicing law) supposed to actually make a living in small law? I wonder about these tiny firms that can turn around and suddenly start billing out 2000 more hours a year of work if they just hire a new law grad. What I wonder about, given everything I’ve seen about the current state of the legal market, is how many such firms actually exist, given that most small firm lawyers are struggling to get by as it is.

    • Murc

      But my cynical and grumpy lawyer ass still has a sentimental attachment to the idea that one should become a lawyer because you want to help people with their problems, not because you think it’s a surefire way to riches.

      That’s not really what Paul is saying, though. The state of the legal practice as it stands isn’t just ‘you’re not likely to become rich’ its ‘you are EXTREMELY likely to enter a state of debt peonage and if you work at all, you will be doing work that is of dubious benefit and is a gross misuse of the skills at your disposal.’

      That doesn’t help anybody. At all.

    • mpowell

      Well, that’s fine and all, but right now these low tier law schools are acting like a leach in this process. It’s nice to have people providing low cost law services, but they should not have 6 figures of debt they’re working off. Even without state subsidies there is no reason for law school to cost this much. (and do we even need law school in its current incarnation for this purpose at all?) And the only way for law school costs to come down, especially at the bottom end, is for them to be subjected to the kind of price pressure that they ought to be given the economics of the situation.

    • L2P

      Do you have a master plan to staff every PD office in the country with people who got full rides to first tier schools?

      We don’t need a master plan for that. Because of the awful state of public finance right now, most public agencies are fully staffed and only hiring de minimus numbers right now. The DOJ had a hiring freeze for the past 2 years. And when these agencies DO hire, they will be hiring people who either clerked their for free the past few years, or who have extensive work experience.

      I don’t have an answer for providing legal services to the middle class at a decent price. Being a lawyer generally is a miserable experience for most people, and I don’t know many people who would do it for $60,000 a year for the rest of their lives AND all the joys of running their own practice. People become lawyers either to make tons of money (most of them) or to provide public service with a lower-paying but secure job (fewer of them). I don’t know anyone who wants to combine the risk of private practice with the crappy pay of public service.

  • Wait a minute, 33?

    What your link actually says is that, out of the 342 2010 MSU graduates for whom employment status is known, 150 are working as lawyers. Among the 65 who reported salary information, the median salary is $60,000. So the logical conclusion would be that half of the 150 working as lawyers, or 75, are earning that much.

    Now, you might say that the people who didn’t report their salary are probably earning less than those who did; someone else might suppose they’re earning more. But there’s certainly no basis for assuming that none of them are. Your method is like saying that if we have a poll of 1,000 Iowa voters and 20% of them say they’ll vote for Ron Paul, then Paul is looking at 200 total votes statewide. Which, just, no.

    Don’t get me wrong, your larger argument seems right, and the fact that fewer than a quarter of MSU graduates are earning a middle-class salary as a lawyer is damning enough. But there’s no need to spoil a good point by exaggerating it.

  • There was a law review article, published around 1990, I believe by a law professor, that took a very cynical (and funny) line on the profession of law, alluding to the treatment of newer lawyers by their employers (an image along the lines of, when the firm starts sinking, the newer lawyers get tossed out of the windows like ballast).

    I do suspect that people start to view law school more cynically during a recession, but when the economy rebounds, hope returns and people start hearing stories about aggressive recruiting of law students rather than either how the less-recruited law schools’ graduates fare or how long the boom is likely to last.

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