Monday, December 10, 2012

Supply or demand?

Several commenters asked if I could discuss the impact of more law schools--and more JDs--on the entry-level job market. The percentage of law graduates who obtain law-practice jobs with nine months of graduation has been declining. Is that due to reduced demand for law graduates? Or is it due to increased supply--schools graduating more JDs? Here are some attempts to answer that question.

First, here's the graph I posted earlier this week, showing the percentage of law graduates who obtain entry-level jobs requiring bar admission. That percentage has been declining for a quarter century, despite modest rises during economic recoveries:


Now let's add a line showing the number of JD graduates from ABA-accredited law schools. That line appears in red in the updated graph below. I've plotted the number of graduates in 1000's to keep the scales similar:


That's a little hard for the naked eye (or brain) to parse. One line is in percentages, while the other is in  absolute numbers. Let's make this easier by plotting directly the number of jobs requiring bar admission that law graduates reported nine months after graduation. I've estimated those numbers from NALP sources, trying to account for the fact that reporting levels have changed over time. Here are the best numbers I've been able to generate:


What do we make of this? To me, there are two important points about this graph compared to the original one. First, the original graph does miss a 2005-2008 spike in the absolute number of law jobs. The increased number of law graduates flattened that peak when we looked at the percentage of graduates obtaining law-practice positions. If we look at the absolute number of positions, there were more entry-level law jobs during 2005-2008 than in 1985. My estimates from NALP figures suggest that there were 30,986 of those jobs in 1985 and 33,451 during the peak year of 2007.

But second, and equally important, the overall pattern is discouraging. The 2005-2008 boom looks much stronger when measured in absolute jobs, rather than percentage of graduates, but those years were not the culmination of steady growth that many professors seem to assume. Instead, those years offered a hiring burst in a market that has otherwise been declining. Notice in particular that the absolute number of jobs is lower in 2011 than it was in 1985-1990.

The bottom line is that both supply and demand seem to have played a role in reducing the number of law-practice jobs that new JDs obtain. The increased number of graduates makes it harder for all of them to find jobs. But demand also seems to be falling. When we plot the absolute number of law-practice jobs obtained by new graduates, the line doesn't move upwards with occasional dips for a recession. Instead, the overall direction is downward--with many more years below the 1985 hiring level than above it.

The downward trend is particularly surprising when we consider the rapid expansion of the U.S. economy during the last quarter century. Inflation-adjusted Gross Domestic Product was $6,950 billion in the fourth quarter of 1985, and $13,441 billion in the fourth quarter of 2011. In an economy that has more than doubled in size, grown in technological sophistication, and intertwined with economies worldwide, wouldn't we expect a need for more lawyers rather than fewer? Why has the demand for new lawyers declined overall since 1985?

That is the subject of another post. Meanwhile, the numbers are grim. Supply is up, and demand is down. That's not a recipe for  market success.

58 comments:

  1. Here are a few thoughts on why demand has not increased with the economy. First, over the past 30 years some jobs that previously went to attorneys may have been shifted to paralegals. One can hire a very smart paralegal, for example a grad of a first rate school, for the same price as a grad of a third rate law school. Second, technology may have reduced the need for lawyers, for example by making it easier to search for cases.

    ReplyDelete
    Replies
    1. Title companies got rid of the bread and butter too.

      Delete
  2. The legal academy's canned response to this will be as follows:

    Demand can only increase, as it inevitably will, by which point those attorneys currently un or underemployed will be able to re-enter a profession that, at no point in its contemporary existence, has ever been welcoming to re-entering or back-classed lawyers, in which case you should then consider one of any number of entirely anecdotal and vaguely-defined alternate career paths for JD-holders.

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  3. "Why has the demand for new lawyers declined overall since 1985?"

    Of the top of my head:

    1. Outsourcing to India (not as bad as other industries, but it is happenning)
    2. Rise of DIY outfits like LegalZoom, Nolo, etc. ...
    3. Increased leverage at firms, particularly BIGLAW
    4. Technological efficiencies -- Online research, word programs, etc. ...
    5. Increased reliance on non-lawyers, as mentioned above

    ReplyDelete
    Replies
    1. The lawyers who are working just work more hours to avoid hiring more employees

      Delete
    2. We don't really need another "Duh!" DJM post to tell us why demand has dropped, nor why supply has increased.

      We know.

      The problem is not what's happening, but how to solve it.

      Law professors are great at telling us what has happened, but not very good at figuring out common sense solutions. See every law review article ever written for examples.

      Can we look forward instead of backward?

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    3. The "solution" is to cut by half the number of law schools and shut off the fedloan spigot. Because the law school syndicate will never voluntarily reform itself, these things will only result from a continuing decrease in law school applications and a continuing increase in student loan defaults.

      Delete
    4. "The "solution" is to cut by half the number of law schools and shut off the fedloan spigot. "

      Just doing the latter would do the trick, I think.

      Limit it to (e.g.) $20K for all post-UG schooling.

      Let those who really really want to be lawyers (as opposed to those who go for "well, wut else shouldah I do?" reasons) find a way to pay for school.

      LS tuitions would plummet. Half of the schools would crash as they lost money.

      Delete
    5. And how exactly is someone supposed to "find a way to pay" a quarter of a million dollars?

      Delete
    6. Anonymous from 7:05December 11, 2012 at 8:32 AM

      Did you miss the next line? You know, that part about "LS tuitions would plummet".

      Which they would. If the spigot runs to a $20K trickle, tuition would drop.

      How much? Dunno. Precipitously is a guess.

      In addition - reinstate BK protections.

      Now your questions in relation to "how is someone supposed to find a way to pay" become,

      "On a truly open market, what interest rate does it require to successfully underwrite the kids having a 3.1/155, compared to the kids with a 3.8/168?"

      and

      "On a truly open market, is there ANY interest rate that will to successfully underwrite the kids having a 3.1/155, and if not, is that an indication that they should not go to law school in any event?"

      Delete
    7. Anonymous from 7:05, 8:32December 11, 2012 at 8:36 AM

      "On a truly open market, is there ANY interest rate that will to successfully underwrite the kids having a 3.1/155, and if not, is that an indication that they should not go to law school in any event?"

      Correction - re-write as with added bolded text...

      "On a truly open market, is there ANY interest rate that will to successfully underwrite the kids having a 3.1/155, and if not, is that an indication that they should not be borrowing money to go to law school in any event?"

      Delete
    8. No, don't make the change in bold. I don't care whether they have to borrow money to do it or not: people with a 3.1/155 have no business attending law school.

      Delete
    9. That"s ridiculous. You must be an Ivy League puke. How I loathe you elite assholes.

      Delete
    10. I'm not the "elitist puke" who spoke above, but I'm incredulous that you think someone who can't manage a GPA higher than 3.1 or an LSAT higher than 155 deserves to go to law school. Such a person has no aptitude for law school, and probably also lacks any kind of study skills or work ethic. I went to a no name college, on scholarship, studied from an LSAT bookt that I bought for 12 bucks, and still scored far, far higher than those scores. No lawyers in my family. No rich people in my family. Nothing elite about my background, unless you consider rural central PA somehow "elite." Your argument is a joke.

      Delete
  4. As DJM points out, it's not merely decreased demand for attorneys. It's that this is happening during a 25+ year span during which GDP more than doubled.

    To the other comments' explanations, I will add---

    These GDP gains were concentrated at the top of the economic pyramid, and in fact the period 1985-present saw middle and working class net worth decline.

    There is no widespread demand for attorneys because there is no widespread wealth.

    ReplyDelete
    Replies
    1. Excellent point. GDP is misleading as a measure of overall prosperity. So even the 2005-2008 "boom" is overstated.

      Delete
  5. For too many years attorneys were too expensive for the average joe so most people constructed their lives so as to never need an attorney.

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    1. AnonymousDecember 10, 2012 10:11 PM

      "For too many years attorneys were too expensive for the average joe so most people constructed their lives so as to never need an attorney."

      They still are, and most people *try* to construct their lives,..., but that frequently doesn't work.

      Delete
  6. Does a drowning man die because of the water in his lungs, or a lack of oxygen?

    Obviously both are the cause.

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  7. At one time, the profession of law was riddled with latin so non-lawyers couldn't understand a foreign language coupled with legalese. Now, there are pre-printed forms at most, if not all, courthouses across the country for child support, visitation, custody, domestic abuse, change of name, adoption, criminal diversionary programs and on and on. These forms are usually fill-in-the-blank and provide space to explain your answers. They also can be obtained in Spanish for the convenience of those not versed in English. And if there is still a problem, there is usually an address and phone number of legal services which is free. Plus, you can always go on the county's website and there are even more legal forms which can be downloaded.

    I've seen judges sign court orders that were presented by people that were handwritten, sometimes unreadable and sometimes in pencil, on colored paper. I've also seen civil complaints, answers and other pleadings similar to those orders mentioned above. There have also been social services agencies that will tell people you don't need a lawyer for that and you can use the money to pay off your fines, court costs or retribution.

    This is just a small example of the diminishing demand. As far as the oversupply side, that's rather obvious in any telephone directory.

    ReplyDelete
    Replies
    1. So.... two questionsDecember 11, 2012 at 6:20 AM

      1. I think I can agree with all the ways you've related that people are now helping themselves (I do not have your personal experience of these, but they're similar to what else I have heard anecdotally). But my question goes to the part of this that I have not heard anecdotally related:

      - Is this a bad thing overall? On average, are these people harming themselves, or are they generally managing to muddle through to an acceptable outcome, while saving themselves the fees one of us would have made?


      2. What is a "telephone directory"?


      ;-)

      Delete
  8. Game. Set. Match.

    The field is glutted, brainless lemmings.

    ReplyDelete
  9. A blogger named Steve Sailer has a favorite theme: that the US economy is increasingly a struggle between the clever and the not-so-clever, with the smartest people now handily winning the race by creating institutions and standards that reward them and their children at the expense of everyone else.

    The higher education bubble -- of which law school is the most extreme part -- seems to be an example of this.

    The smartest people in the law school equation are the bankers and the law profs/admins. They have manipulated the system so that, over the last 20 years, their positions have become increasingly protected by the Treasury, the law and the culture.

    Everyone else loses. Adjuncts lose, being paid little even though many have more practical experience and are better teachers. The students lose, for reasons all readers of this blog know. Alumni and other practicing lawyers lose, faced with a flood of competition.

    The smartest people gamed the system and won.

    ReplyDelete
    Replies
    1. So.... where do you teach?

      Delete
    2. I'm not convinced that it's "the smartest people". The key above is "them and their children": there's a moneyed aristocracy that keeps others from advancing.

      Delete
  10. I'd been asking for the graphic, so thanks. I'd also wanted to see ABA accredited schools on there as a function of tome (maybe with a right y axis to keep it clean), but that's ok. The graph could also be normalized to 1985 grads as 100% baeline to see % increase in the last decades, but that can be eyeballed. If 1985 is about 37000 grads, that's about a 20% increase in number of grads per year today versus '85. Is it readsonable to think that there were 20% more ABA schhols accredited in that time? Did it go from 170 or so schhols in '85 to 200 or so today, or did class sizes get a lot bigger?

    And yeah. Aside from 2005-08, that's a pretty obvious downward linear fit if your numbers are to be believed.

    ReplyDelete
    Replies
    1. You could also plot both 'numbers'graphs on the original '%' graph putting on a right y-axis appropriately scaled so the number of grads data are more obvious. EVEn without ABA schools on there too.

      Delete
    2. Because you are correct that it is confusing to have %s and #s in thousands graphed on the same scale. That's not natural or intuitive and can be easily made more comprehensible.

      Trying to get some LPs to work with data and produce and display useful data (and I think this is) takes baby steps, but we'll get there.

      Delete
    3. "I'd also wanted to see ABA accredited schools on there as a function of tome (maybe with a right y axis to keep it clean), but that's ok. "


      The USNWR already reports, for each ABA-accredited law school, the individual library statistics.

      Delete
    4. the real issue is that the schools are faking the data. Did you read the latest from the plaintiff in the TSJL lawsuit? They are alleging that TJSL was straight-up faking the data--they claimed that TJSL was entering entire chronological blocks of survey returns are employed, followed by a smaller yet entire block of unemployed. So obviously, if this is true, TJSL data is worthless. And recall that one of the former employees of TJSL was told that faking the data was done everywhere in the law school industry.

      So analyzing this data is useless because a lot of the data is faked.

      Delete
  11. It has been said many times before - demand is not there because no one is retiring. 60, 70 and 80 year olds working in law is very common. especially now when their financial future is uncertain.

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    Replies
    1. The economics of the law never made much sense except to a few in BigLaw. My husband is 68 and he never made enough to retire. The money runs hot and cold. You can have a great month then earn nothing for three or four or six months.

      Delete
    2. "My husband is 68 and he never made enough to retire. "

      Ouch. Sorry to hear about that.

      Delete
    3. i am not saying things are rosy all over, but i worked at two mid law firms where people, inlcuding new hires, did very good. plenty of money to go around at mid law firms too.

      Delete
  12. don't forget that the BLS lawyer employment stats were jiggered by law school influence just a couple of years ago. In about 2008 the BLS stats showed about 555K lawyers in lawyers jobs and about 200K self employed lawyers. Then the next year the stats were changed to about 775K lawyers employed as lawyers. Complete BS, and no doubt changed due to law school influence on the BLS.

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    Replies
    1. This is an interesting allegation** and should likely have left tracks, if someone has the ability and energy to chase it down.


      **That BLS decided to re-categorize (dissolve the category of) "self-employed lawyers" - almost a third of the employed lawyer pool - into the larger category of employed lawyers, and that it did so under influence of someone who stood to benefit from such re-categorization.

      Delete
  13. "The lawyers who are working just work more hours to avoid hiring more employees"


    This was written upthread. And it's not just in law firms. I've friends in corporate legal depts who say they are at half strength compared to 5-7 years ago. Has the work reduced comparatively? Nope. They're just told, "make do".

    ReplyDelete
    Replies
    1. and hire paralegals to do the work.

      Delete
    2. Nope. Staff has been similarly reduced.

      Delete
    3. Agree with 8:11. The modus operandi at all law firms I've seen has been to cut lawyers and cut support staff. "Make do" without a para and secretary. You can type, more things are "electronic."

      When the file's a mess, it's your fault.

      Delete
    4. "Agree with 8:11. "

      All right-thinking people do. :-)

      You bring up messy files. 10 years ago it was, "Lawyers are NOT permitted in the files room".

      Now it's DIY.

      Delete
  14. Using raw GDP figures leads the author to see a "rapid expansion of the US economy during the last quarter century" that is simply not true.

    GDP figures include private and government debt, which do not indicate a healthy, booming economy but an economy built on a mortgaged future. You must remove AT LEAST the government debt figures to get a meaningful feel for the true health of the economy. When you do that, you see that the US economy has been waning for the last 15 years.

    GDP has only been made to look acceptable in the last several years by MASSIVE government spending which is 40% borrowed or printed money and does not represent a growing economy but simply a growing government.

    Further, to argue that because our economy is now "intertwined" with global economies, we should expect a greater need for lawyers is to completely miss the point of globalization for America.

    Globalization means that American workers, once the highest paid workers in the world, now compete with EVERYONE, including the lowest paid workers in the world. This results in the wages of Americans going down in order to compete. Everything that can be outsourced will be outsourced to the cheapest location and that location will usually NOT be America. Globalization means FEWER JOBS AND LOWER WAGES FOR ALL AMERICANS.

    These facts, combined with all the others mentioned here in comments, explain why the demand for legal services has not increased much while the supply of lawyers has EXPLODED due to various other factors such as "free" student loan money to anyone. The future for legal employment in America is abysmal.

    TPTB use false stats such as the unemployment numbers, CPI and GDP to fool people into thinking the US economy is healthy so as to retain power. It works with some people, such as the author of this post. It's a lie, though, and such lies have consequences as people fail to take appropriate action because they WANT to believe the lies.

    Telling ourselves that our economy is growing based on false stats is similar to grade inflation where students keep getting A's for lower and lower performance. We are fooled into thinking people are 'educated' and competent when, in fact, they are not and actually have fewer skills than their predecessors despite spending more time and money on education.

    ReplyDelete
    Replies
    1. "...to argue that because our economy is now "intertwined" with global economies, we should expect a greater need for lawyers is to completely miss the point of globalization for America. "

      I'd say that be careful of characterizing a rhetorical question as if it were an argument.


      But don't misunderstand me - no complaint with the main bulk of your commentary.

      Delete
    2. What is the point of writing:

      "In an economy that has more than doubled in size, grown in technological sophistication, and intertwined with economies worldwide, wouldn't we expect a need for more lawyers rather than fewer?"

      This blog isn't moot court, high school debate or Bill Clinton's perjury trial where you "win" by nitpicking everything.

      Everyone needs to understand:

      1) The economy has NOT doubled.
      2) Technology ELIMINATES law jobs.
      3) Globalization is REDUCING ALL employment in the US.

      Only by understanding these issues do people have a chance of avoiding a "higher education" mistake. Believing lies to justify law school is the whole problem here.

      Delete
    3. It is called a rhetorical device to set up...December 11, 2012 at 8:42 AM

      You ask,"what is the point of writing: "In an economy ... ... wouldn't we expect a need for more lawyers rather than fewer?" "


      The point is, it is just a rhetorical device. It was used to set up the very next paragraph, which began:


      "That is the subject of another post."


      Get it?

      (Or in the immortal words of Bluto Blutarsky, "It's a ZIT, get it?")

      Delete
    4. You nailed it... it really is a zit, Bluto.

      You didn't read the PRECEDING 2 sentences:

      "The downward trend is particularly surprising when we consider the rapid expansion of the U.S. economy during the last quarter century. Inflation-adjusted Gross Domestic Product was $6,950 billion in the fourth quarter of 1985, and $13,441 billion in the fourth quarter of 2011. "

      Still think it's just a rhetorical device to set up the next, thrilling installment? Or, perhaps, the author is laboring under the illusion that our economy is growing?

      I'm hoping my comments will enlighten the author (and readers) a bit and help make the next post a little more useful. Get it?

      Delete
    5. So Sorry, I am guessing thatDecember 11, 2012 at 9:39 AM

      So Sorry, I am guessing that the reading comp portion of the LSAT was not your high point.

      Hopefully you made up for that (as many of us do) with relatively higher scores in the puzzles and other sections.

      Have A Great Dane!

      Delete
    6. How's that giant sucking sound sounding about now?

      Delete
  15. School of Hard KnocksDecember 11, 2012 at 8:25 AM

    (upthread) "The key ... : there's a moneyed aristocracy that keeps others from advancing."


    Huh. That sure doesn't explain how I dragged myself up out of the gutter to become the master of all I survey.


    OTOH, I do suffer from extreme myopia.

    ReplyDelete
  16. Re: lawyers working more hours to avoid hiring more employees, this is also true in government now. My fed. agency has been seriously understaffed due to budget shenanigans in Congress for years now. They finally hired a bunch of new people this year, but that number still hasn't made up for the number who have left, let alone the increased staffing needed due to the increased workload. I usually work 10 hour days, no lunch. Do I get overtime? Hahahaha, no! It's "do more with less" as they said on The Wire...

    (now the commenter who semi-literately screams that "anyone can get a gubmint job and pay off his/her debt in five minutes flat!" can go ahead and jump in...)

    P.S. I'm writing this on my "lunch break," aka, "scarf a sandwich at my desk."

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    Replies
    1. This is the most ridiculous thing I've read in a long time and I worked for the government for 8 years. They can't fire you. You simply leave at 5pm and if the work doesn't get done, too bad for the government. If your boss gets upset, that's his problem. There's nothing he can do as long as you worked 40 hours (or 35) during the week. Maybe what you're complaining about is that you can't take anymore 2 hour lunches (those were very popular at my agency).

      Delete
    2. You have no idea what you're talking about. I know many lawyers in many different agencies, and not one of them reflects your stereotypes. And if you had such a cushy gig at "your agency," why are you not still working there, idiot?

      Delete
    3. And, if you think federal judges just sit back and say, "Oh well, didn't file your brief on time, but you're the government! That's ok! I don't care!", then there is no hope for you joining reality.

      Delete
  17. Bethany Pierpont is GarbageDecember 11, 2012 at 3:33 PM

    Funny to note that Ms. Pierpont's advertises "Leadership" as one of her skills on her LinkedIn profile. She began working for Cooley's admissions office immediately after graduating from the school and has no other employment history or career accomplishments. Where does she get off marketing herself a LEADER? Ridiculous.

    ReplyDelete
    Replies
    1. You appear to be lost (i.e., you're commenting under the wrong post).

      Delete
  18. "Now, there are pre-printed forms at most, if not all, courthouses across the country for child support, visitation, custody, domestic abuse, change of name, adoption, criminal diversionary programs and on and on."

    In my state the Chief Justice of the Supreme Court is on a mission from God to make do it yourself divorce as easy as possible, and we've reached a point where over half the divorces in the state have at least one self-represented party. Meanwhile, a friend of mine who is a clerk in criminal court says lawyers who've been practicing for 12-15 years and never handled even a parking ticket are now filing appearances in serious criminal cases with no clue what they're doing.

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  19. "My husband is 68 and he never made enough to retire."

    What is scary about that is that her husband presumably graduated forty years ago with little or no debt. What chance does someone carrying $100K plus in debt have of planning for retirement?

    ReplyDelete

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