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How law schools priced themselves out of the higher education market

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‘How did you go bankrupt?’ Bill asked.
‘Two ways,’ Mike said. ‘Gradually and then suddenly.’

— The Sun Also Rises —

Over the past half century, higher education in America has been a spectacularly successful growth industry. At the beginning of the 1960s about 400,000 people were graduating each year with four-year degrees: by 1970, the demographics of the baby boom and the passage of the original Higher Education Act had combined to more than double that figure.

Despite the baby bust (there were fewer 18-23 year-olds in the US in the late 1990s than there had been 30 years earlier), enrollments and graduation totals grew slowly but steadily between the early 1970s and the late 1990s, and then began to zoom upwards again about 15 years ago: annual college graduation totals increased by 56% between 1998 and 2014. American colleges and universities currently produce nearly twice as many bachelor degrees annually as they did forty years ago, and about four times as many as they did 50 years ago. (The traditional college-age population cohort is only about 10% larger than it was in 1974).

Still, there may be storm clouds on the horizon.

Overall enrollment totals at colleges and universities declined slightly in 2012 and 2013, although the rate of decline appears to be slowing. Whether that decline, small as it has been, is a function of an improving economy and thus increasing opportunity costs for potential undergraduates (this seems doubtful), or a harbinger of the beginnings of an actual rebellion against the ever-growing cost of higher education, remains to be seen.

As to latter hypothesis, the experience of American law schools may prove instructive.

Many people are aware that law school applications, and to a somewhat lesser extent enrollments, have collapsed over the past four years. (Enrollments haven’t fallen as quickly because a significant minority of law schools have adopted de facto open enrollment policies for anyone who has a college degree, an LSAT score, no matter what that score might be — even this formal requirement may be dispensed with soon — and a less than hair-raising criminal record.)

What’s generally unappreciated is that, relative to the population of new college graduates, law school enrollments were sliding for 30 years even before the recent sharp contraction. To put it in crass economic terms, law schools had already been losing market share for a generation, and the present crisis is merely bringing that fact into particularly sharp relief.

Numbers

Law school enrollments between the 1960s and the 1980s were affected by an overwhelmingly significant factor, which was the entrance of women into the legal profession in more than token numbers. This immense shift in social mores took place at a remarkable speed. In 1967, less than 5% of first year law students were women; over the course of just the next six years, this percentage more than quadrupled, and then doubled again over the course of the next decade. In short, while less than one in every 20 law students was a woman in the late 1960s, fifteen years later two out of every five law students were women.

Note that this radical change had very little to do with the percentage of annual college graduates who were women, which was already 43% in 1970. Basically, the influence of traditional gender roles was so strong in the legal profession that, until the 1970s, legal academia maintained an informal rule that law students should be drawn almost exclusively from the population of male graduates, even though this rule was very much against the economic self-interest of law schools, since it all but eliminated almost half of their natural market for students. (This is one of an endless number of illustrations of how, contrary to simplifying assumptions employed in classical economic theory, ideological considerations often trump economic interest).

In large part because of this change, law school enrollments exploded by 171% between 1960 and 1980, outstripping even the breakneck pace at which college graduation totals were increasing during these years. Here are the totals of law school matriculants over this time, expressed as a percentage of the total number of college graduates during the previous academic year, and broken down by gender:

1960: 3.98%
Male: 5.90%
Female: 0.44%

1970: 3.68%
Male: 6.82%
Female: 1.04%

1980: 4.55%
Male: 5.70%
Female: 3.35%

(In other words, the total number of students entering law school in the fall of 1960 equaled just under 4% of the total number of college graduates the previous spring. While the number of male law school matriculants equaled nearly 6% of the number of male college graduates that year, the number of female law school matriculants in 1960 was equal to less than one in 200 of the total female college graduates that year).

It turns out that, in comparison to the market for higher education as a whole, 1980 represented Peak Law School:

1990: 4.20%
Male: 5.19%
Female: 3.32%

2000: 3.52%
Male: 4.15%
Female: 3.04%

2010: 3.18%
Male: 4.0%
Female: 2.56%

2014: 2.06%
Male: 2.55%
Female: 1.69%

Another way to express the decline in law school market share is to look at the number of law degrees awarded in a year as a percentage of graduate degrees awarded in that year. By this measure the decline will be even sharper. Law degrees represented 8.75% of all graduate degrees awarded in 1980, and 4.71% of all graduate degrees awarded in 2014. Since far fewer people are enrolling in law school now compared to three years ago, this percentage will fall considerably further over the next couple of years. Based on last fall’s enrollment, the graduating class of 2017 will include about 34,000 JDs, which will, per government projections, equal about 3.3% of all graduate degrees awarded two years from now.

Male college graduates are now 63% less likely to go to law school than they were in 1970. Perhaps an even more startling statistic is that, even though women now make up 47% of all law students, the rate at which women college graduates enroll in law school has declined by almost half since 1990.

All this means that, while total college enrollment more than doubled between 1974 and 2014, total JD enrollment at ABA law schools this fall will be back to the same level it was at 40 years ago, when there were 163 such schools, as compared to 204 today. As the numbers above illustrate, this isn’t merely the product of the sharp decline in applicants and matriculants over the past four years: it’s the culmination of 35 years of declining market share.

That contraction is a product of a couple of very straightforward factors. First, as a percentage of the overall economy, legal services have constituted a declining sector for the past quarter century. Second, the cost of getting a law degree has risen inexorably for six decades now.

While it’s true that even minimally transparent information regarding employment outcomes for law graduates was generally unavailable until just three years ago, and that making such information accessible has no doubt played a significant role in the sudden acceleration in the declining demand for law degrees, the numbers above illustrate that this demand has been, relatively speaking, falling for a long time. Indeed for a generation now, law schools have been in the process of pricing themselves out of even the wildly distorted market for higher education in America, although it took the shock of the current crisis to make this clear.

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