Postmortem on the 2010 Westlaw Professionalism Panel & Thoughts on Attorney Oversupply

You probably don’t know this, but I sat on a Westlaw Professionalism webcast panel on December 30th.  Towards the end, I laid out what the tuition bubble is and remarked how the ratio of attorneys per capita has dropped from 695:1 in 1951 to 264:1 in 2000, and that one projection sighted it at 100:1 by 2050.

IMPORTANT: The oversupply problem is difficult to disaggregate from the Lesser Depression we’re now in, so unemployed lawyers can’t solely blame “The System” for their hardship, though oversupply must contribute.  I’ve written elsewhere on the distribution of lawyers per capita in various states.  For more on the issue of professionalism and attorney oversupply, I highly recommend reading Professor Jason Dolin’s article, “Opportunity Lost,” which I cited in the program.

One of the other panelists, Brian O’Neill, partner at Faegre & Benson in Minneapolis, responded by recommending young attorneys open their own practices, reduce their hourly rates to $100-$150 per hour and serve the middle class, which he described as homeowners with annual incomes of $250,000.  This class, he believes, is underserved by BigLaw, which prefers to charge $500-$600 per hour and won’t stoop to handling property boundary disputes.  I don’t know if Mr. O’Neill thinks there’s enough work here for all new attorneys, or if he thinks this is just a good way for them to weather the economy.

I pointed out that his response is not unusual and that its complement is the “go rural” directive the ABA espouses.  More often though, I run into the bottleneck argument, which claims that there is no oversupply problem and that the tuition bubble is really a faculty bubble.  Fire the faculty, and all will be well.  I’d like to respond more fully to Mr. O’Neill’s thoughts as I’m a better writer than speaker, though others have addressed this clearer than I have in other contexts.

I should say first that I don’t think Mr. O’Neill is a blamer the way some other experienced attorneys are, and I learned a lot from his description of Twin Cities’ practice 40 years ago.  However, I wished he’d commented on the legal education side rather than the oversupply problem, even though I was the one who brought it up.  I do think it’s important for me, certainly, to maintain my preparedness should I don my expert hat again.  Which I hope to.  Here are my thoughts:

(1)  $250,000 per year in annual income is not middle class by any definition[i]97.13% of American households earn less than that.  30% of American households earn more than $75,000 annually.

(2)  That aside, as a practical matter, the BLS says that competition for law jobs (which can be fairly extended to legal work in general) will be “keen” due to the large number of graduates from the law schools.  That should be the first response to anyone claiming there’s legal work out there. To get a handle on its credibility, contrast what the BLS says about lawyers to dentists, another graduate-level profession that has only 57 nationally accredited schools and will experience faster-than-average growth due to retiring practitioners, among other factors.

(3)  What about theory?  In the program, I said that this isn’t an issue of law practice management but one of simple economics: supply & demand.  There are only three ways a “middle-income” family (let’s say a suburbanite family earning between $40,000-$250,000 annually, assuming manageable household debt and some savings) can fail to access legal services: (i) there’s an attorney shortage, (ii) there’s an information/marketing gap: lawyers aren’t good at marketing or potential clients aren’t looking very hard for lawyers willing to work for them, or (iii) price-fixing’s afoot.  We know there’s no attorney shortage, certainly not in Minnesota; I’m incredulous of an information failure—if you’re earning $250,000/year and can’t find a lawyer, you’re not looking very hard, and I doubt lawyers aren’t doing enough to reach out to markets; I’ve seen zero evidence of price-fixing and have even read bar association discussions of clients demanding lawyers unilaterally reduce their fees.

(4)  More broadly, how could this situation happen?  On the one hand, if there’s a massively underserved market that can afford to pay for services at reduced rates, why will no one serve it?  On the other hand, if this underserved market is small, how can it possibly serve the employment needs of tens of thousands of unemployed, indebted attorneys?  I seriously disbelieve there’s a phantom middle here.

In the absence of evidence, we’re making arguments from ignorance.  Consequently, I suspect this is turning into a competing presumptions game: do I have to show that there’s insufficient work for attorneys (beyond the BLS or NALP) or does the “underserved market” proponent have to prove the underserved market’s existence?

I believe it’s the latter unless there’s a point in economic theory I’m missing.  Where there is demand, someone will supply it, even if it means someone can only be a lawyer part-time while working at the local dry cleaner.

As for the oversupply problem itself, as I’ve said, it’s harder to document and multiple factors affect it.

BEWARE: I’m not a lawyer-hater who believes lawyers deliberately manipulate the law to raise procedural hurdles to make more work for themselves.  I bet (and I suspect Brian O’Neill does too) it’s their clients who do that.  This is why my blog isn’t ThereAreTooManyGoddamnLawyers.com.  The oversupply problem has its own arguments that are harder to deal with than ones on the tuition bubble:

  • As the law becomes more complex, demand for lawyers increases.

Professor Ilya Somin argued something like this a while back, though he believes that fewer laws means fewer lawyers.  I don’t buy it as I’ve stated it because for one it disregards the laws limiting work for lawyers, such as tort reform.  A more critical example is bankruptcy: mortgage cramdowns aren’t allowed and student loans are nondischargeable.  Finally, much law is preventative: a few corporate counselors will save a business a lot more money and attorney work than litigating will.

As a result, the theory I propose is the “Law of Conservation of Disputes.”  Take the classic Law & Economics example of the tannery creating externalities on the nearby community.  We have one conflict, but policy gives us multiple responses: public/private nuisance lawsuits, regulation, taxes, or zoning.  All require lawyers—some more than others, but there’s still only one dispute to be resolved.  We can change how it’s resolved, but that doesn’t suddenly create a need for more lawyers, even if the option we choose is highly adversarial like the nuisance option.  To that extent Professor Somin is right, except we should add that fewer laws does not lead to fewer disputes.  Instead, it just leads to fewer lawyers resolving disputes, and the work will shift to mediators or thugs, depending on your opinion of human nature.  For related discussion, consider this recent Times article on illegal rare earth metal mining in China.

So yes, lawyers are necessary to resolve disputes but more laws won’t create more disputes without draining the economy, and inhibitive laws prevent dispute resolution while creating injustice.

  • We’re moving to a service economy or a knowledge economy, so we need more lawyers to handle the workload.

Essentially, this is the same argument as the one above.  Legal services, as a tertiary good, can easily crowd out economic growth through wasteful procedural requirements.  Additionally, there’s an argument that patent and copyright laws actually burden economic growth, especially drug patents that cost American consumers vastly more than generic drugs do.  I have my thoughts on IP law, but that’s for a later post.

The lawyer oversupply problem doesn’t just inhibit the economy and misallocate human capital.  Worse, it distorts the public’s perception of the profession.  The problem isn’t the number of attorneys in practice earning a median salary of $110,590 annually; rather, it’s the growing number of juris doctor holders who will never be able to work in law and earn an income relative to the cost of the degree.  This is an externality the legal profession is dumping on society–a dispute that it must resolve.

Happy 2011.


[i] And this comes from someone who prefers terms like “middle-income” or “working class” because they’re more descriptive.  If you’re looking for a definition of “middle class,” read The Legal Dollar on the subject.

No Bubble, Just ROCK!!! Vol. 3

I wish I could say that I’ve been enjoying Winter Break too much to blog or that I’ve been neglecting it for a week, but truth be told I’ve been working on a small quantitative project I will roll out in 2011.  Until then, I’ll close the year with some Rock ‘n’ Roll.

I dedicate this beauty by the Dirtbombs to all the legal education reformers (young and old) I’ve come into contact with over the past year.

The second one, courtesy of Guided by Voices, is to all you law students.  Here’s what you should do this year, if you’re not snowed in.  You can also see GbV play on New Year’s Eve in Manhattan, if you have $80 to burn.  I don’t.

Third one, by Screaming Trees, is for this blog’s readers.

A happy 2011 to you all!

White Light/White Links—US News Dumped Its Second Tier?

I didn't take Real Analysis in college, but in my universe there's an integer b'ween 1 and 3 called "2".

I think it’s a bug with the website.  See for yourself.

(1) Debra Cassens Weiss, “After a Blogger Questions ‘Rankings Malpractice,’ US News Makes a Secret Change,” The ABA Journal

More importantly (and this is old news I did not know from last May), US News will change its formula for automatically penalizing law schools that decline to report their “employed at graduation” data.  Before, some’d game the rankings by only reporting “employed at 9 months,” which US News would then dock by 30 percentage points to guess at their “employed at graduation.”  Law schools with an employment gap greater than 30% were better off not reporting “employed at graduation” data and benefitted accordingly.

Why is this important, especially when yours truly likes all things statistical yet wearies at US News’ law school rankings?  According to TaxProf, the number of ABA-accredited law schools declining to report their employment stats has doubled over the last half-decade to 74, just shy of 2 in 5.  Given that the labor market value of a juris doctor comprises the bulk of its benefit to the purchaser, law schools’ employment data and compensation matter vastly more than location, class size, and everything else that Angel at But I Did Everything Right! pointed out yesterday.  Even though Law School Transparency successfully lobbied US News to publish all the disaggregated employment data it collects from law schools, especially the crucial “Graduates whose employment status is unknown,” it won’t help if a growing number of law schools simply refuse to submit their data.  As the legal sector employment problem worsens, we can expect employment data nondisclosure to increase despite calls for transparency.

However, contrary to how I thought the rankings worked, it appears US News does qualitatively penalize schools for not supplying sufficient data.  What it means by “RNP,” or “Unranked,” I don’t understand.  Hopefully the changes in the nondisclosure penalty will reverse the trend in opacity.  I doubt it will.

(2) Holly Ragan, “Law School Student Debt Crisis,” in Lexis Hub for New Attorneys

Ragan discusses the law school tuition bubble.  Here, I learned of St. John’s University’s clever ploy of pooling scholarshipped students in the same courses and then forcing them to compete on a curve.

(3) “Columbia University Announces Three-Year JD/MBA Program,” in FindMba

Others have reported on this, but it’s important to note that the student opting for this three-year JD/MBA still pays the same tuition required for the four-year program.  The student saves a year, but what does the university get?  The same money for fewer instructors.

Dialogue with an Affable Law School Dean, Part 2

Read Part I here

When we last left our hero, Dean had just asked him why reputation should be the sole standard for any given law school’s continued existence post-tuition bubble.  LSTB was also moments away from deciding to accept the dean’s offer of the remaining portion of his clementine.  Will Leichter take it??  FIND OUT NOW, IN THE CONCLUSION OF “Dialogue with an affable Law School Dean, Part 2.”

**********

LSTB reaches to accept the last orange segment in Dean’s extended hand:  Why thank you.  The market may be unfair or arbitrary, but what you’re proposing is a contentious internecine debate as to which law schools get to live and which ones don’t.

Dean, mulling:  I see your point, but I still think you’re over-relying on the market.  You know full well that prospective law students are overconfident in their abilities.  Even with transparency, what’s to stop them from applying anyway?

LSTB:  I trust they’ll get the impression of which law schools are risks and which aren’t.

Dean:  An impression?  Based solely on a few years’ statistics?  I see two problems with your argument.  (1) There’s too little information for anyone to make a reasonable call.  Law schools with predicting enrollments and law students in where to go if accepted.  The FDIC prevents bank runs by bailing out the depositors.  When there’s a run on a law school, there is no legal education deposit insurance to protect their investment, unless state governments bail out public schools or alumni shore up the private ones.  Will students be able to transfer and continue elsewhere?  Will they be able to go on IBR and walk away?  What will the Department of Education think?  (2) You’re inviting the legal profession to ask the question, “How many unemployed graduates is the profession willing to tolerate each year?”  10%?  5%?  Zero?

LSTB:  Anything above zero isn’t exactly fair given the nondischargeable tuition investment, nor would it be a stable equilibrium if there’s an oversupply problem due to high unemployment.

Dean:  This is one more reason I support a top-down solution to the problem and feel no need to altruistically participate in the transparency process.  You can imagine that playing records custodian isn’t something that I want our career services personnel to do, and it won’t be free.  Here’s another problem you’re probably not aware of but should be since you’re concerned on the return-on-investment of a legal education.

LSTB, raising an eyebrow:  Oh?

Dean:  Graduate employment data won’t reflect the overall value of a legal education, and it’ll be muddied by the state of the general economy.  Imagine it this way: Say I set myself up along the side of a track.  I promise to take a picture of the track one second after the race begins.  Then I’ll use that to tell the public that this is an accurate estimate of how fast the runners are.  Even if I do this for multiple races with the same runners, I’ll collect a lot of data that can only be useful longitudinally.

LSTB:  Yeah but the purpose of the transparency movement is to give prospective law students a better indicator of how well they’ll be doing when they graduate.  For its part, Law School Transparency proceeds from the first premise that prospective students lack sufficient information to make a rational decision.  Its goals are fairly modest, but just because it’s imperfect doesn’t mean we shouldn’t support it.

Dean:  Hmm…What’s the term legal education reformers use?  “Lost generation”?  How does transparency help them?

LSTB:  Wages.  If salaries, especially starting salaries at the lower modality, begin rising, then we know that the legal market is absorbing people with juris doctors.  Once starting salaries get high enough, JD holders in other fields will move back into law.

Dean:  I hadn’t thought of that.  Again, wouldn’t an independent economic audit of the profession give us the same results more quickly?

LSTB:  I suppose, but wait, we’re discussing a tuition bubble, but aren’t you at all concerned about your job?

Dean:  Not really.  Transparency regulates outputs not inputs.  You might see more law schools allowing higher 1L courses with a harder curve that flunks people out.  The 1Ls then pay for the 3Ls and we maintain our practices.

LSTB:  That’s just wrong.

Dean:  Hey, if they don’t want to flunk out, they don’t have to enroll.  In fact, it gets even better.  As the number of law students decreases nationally, law schools’ leverage over the profession increases, so don’t expect any serious substantive reforms in legal education to make graduates more competitive on the market.

LSTB:  Right, but then people will start keeping track of attrition rates in various rankings, and they’d be easier to measure because law schools can easily monitor those data.

Dean:  That wouldn’t necessarily keep people from applying.  Law schools are already criticized for doing similar things, such as conditioning scholarships on GPA and then placing all students with scholarships in the same sections.  They could just bring this aboveboard.

LSTB, eyes wide:  …

[Dean leans forward avoiding the clementine peels on his desk]

Dean, speaking softly:  Matthew, so long as formal legal education precedes entrance to the legal profession, and the ABA doesn’t strictly regulate law schools and graduate output, these practices will continue.  [Dean gently smiles] Gatekeeper’s privilege.

LSTB:  Oh God.

[Dean leans back, wrapping his clementine peels into a plastic bag and then throwing it into the wire mesh trash can]

Dean:  Matthew, I think we’ve both learned much from this discussion.  I certainly enjoyed it, and maybe we can do it again sometime.

LSTB:  Yes.  Very informative.

[LSTB awkwardly shifts his weight as he sits up and leaves the office.]

LSTB:  Keep your door open or closed?

Dean:  Closed please.

[LSTB quietly shuts the Dean’s office door behind him as he steps out.]

**********

Reflecting on my dialogue with the dean, I have two thoughts.

(1)  I’m reminded of Professor Bainbridge’s response to Mark Greenbaum’s LA Times op-ed from earlier this year:

My suggestion? Assuming we aren’t going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply. Lop off the bottom third of law schools and see if that solves it.

His statement illustrates the problem with transparency as the sole response: it sounds like a free-market solution, but it really isn’t.  Markets require predictability, and the face-off between applicants and law schools concerns me because it might take years to reach a safe equilibrium.  I doubt either group can account for the state of the economy, gauge enrollments, calibrate tuition adjustments, and foresee the future of the profession.  I’d be happy to be wrong, and I’m curious if anyone disagrees.

For some reason I thought of Susie Derkins applying to law school.

(2)  What should we think of Dean’s (and Professor Bainbridge’s) top-down solution?  I apologize to you, reader, for not calling him on this, but superficially Dean’s general argument against transparency is to pass the responsibility and make someone else solve his law school’s problems.  However, though transparency will short the bubble, which we should like, it doesn’t change the reality that the judiciary is the real gatekeeper to the profession–no matter what law schools say.  This I will write on later.  As for the efficacy of top-down solutions: Off the top of my head, I can only think of three calculations for how many law students would have to be sent away or law schools would have to close to reach an equilibrium.  Anyone know of any others?

  1. Prof. Bainbridge: Lop off the bottom 1/3rd (U.S. News’, I’m guessing) of the law schools [UPDATE 1/25/2011: Professor Bainbridge recently revised his number up to the bottom 100 law schools. (!)]
  2. Jerry Kowalski: ½ to 2/3rds reduction for a few years
  3. Frank the Underemployed Professional: 60% reduction to stabilize the system; 75% to help the market absorb the Lost Generation

I’m curious what kind of lawpocalypse transparency advocates predict, or if they see one at all.

Oh, and in case you were wondering, Dean’s clementine was still fresh but tasted a little warm.

Dude needs to keep his lunch in a fridge.

Dialogue with an affable Law School Dean, Part 1

I received the privilege of discussing the state of legal education with a law school dean—the one inhabiting my mind.  He quite congenially accepted me into his office during finals.  Here’s the conversation in dramatic form, with illustrations, naturally.

**********

Like you, I await Down By Lawcast's post-mortem on the ABA Questionnaire Committee's Florida summit.

 

[Sound of door knocks]

Dean: Come in!

[LSTB (I go by that in the legalblogosphere, if you didn’t know.  It’s far easier than writing my full name) peers inside and enters.]

Dean: Sit!  Sit!

LSTB, smiling: Thanks.

[Dean’s office is what you’d expect: Some law books fill the shelves—no reporters, thank God—a generic wooden desk with a computer terminal facing the Dean at an angle occupies most of the room.  Two four-legged metal chairs are there too.  One is next to the door with books and papers piled on it, the other faces the desk.  Dean’s chair is a black leather office chair that looks comfortable, though its user rarely leans against the backrest, preferring to hunch over his desk reading something or typing on the keyboard.  LSTB can tell by the whitish-blue glow from the terminal that the Dean was looking at some word-processing document, though from his angle he can’t tell what kind.  Dean had been on a break since before LSTB walked in.  He is now peeling a savory clementine, part of his lunch.  LSTB sits at the open chair before the desk.  He instantly feels awkward.  Neither knows how to begin the conversation.]

Dean:  Okay…So~ you wanted to~ discuss the future of legal education?

LSTB, flatly:  Yeah.

Dean:  Where to begin?  [He inhales.] Well?

LSTB:  Yeah, um.  So, it’s pretty clear that the American legal education system is facing challenges-  [LSTB can be a little too non-confrontational at times.]

Dean, interrupting:  That’s putting it mildly.

LSTB, pausing and restarting (Seriously folks, don’t interrupt LSTB):  It’s pretty clear there’s a tuition bubble.  Law schools keep raising prices well above inflation while the legal services market is contracting.  Calls for transparency, that is, transforming the legal education system from one of inputs (LSAT, GPA) to outputs (that’s…job outcomes) are growing.  What’re your thoughts?

Dean:  I’d love it if the economy were better.  I also think transparency is something we should move towards.  [Dean clumsily slips a few clementine segments into his mouth at once.]

LSTB, thinking he’s moving in for the kill:  Yet your school supplied no employment data to Law School Transparency.

Dean, masticating juicily:  Nope.  Nor are we obligated to.

LSTB, slightly flummoxed:  Yeah, but- How can you say you’re in favor of transparency and not be transparent.

Dean:  Transparency doesn’t benefit any one law school.  [Dean wipes his mouth] You don’t look surprised, why not?

LSTB:  Any one law school that discloses its poor job numbers would get fewer new applicants, the school would have to restructure but not before there was a run on the law school.

Dean:  Precisely.  The education we sell isn’t just classes, as you well may know.  The school’s name on the diploma signals a quality standard to employers and the public.  If we retrench in any way, whether by reducing enrollment, tuition, and compensation, it tells the market that our school was overreaching all along and ruins its reputation.  You finished law school nearly three years ago; how would you feel—to say nothing of your subsequent employers—about the value of your legal education if your law school reduced its “ecological footprint” as you suggest would happen?  [It didn’t.  It so~ didn’t. –Ed.]

LSTB:  It would still be the right thing to do.

Dean:  I can look at this in terms of morality too, Matthew.  Transparency isn’t fair to law schools—Let me finish!—for a few reasons.  First, law schools aren’t responsible for zero job growth since the Clinton administration, nor did they cause the housing bubble, which then popped.  The reason recent grads aren’t doing well is that for every three hundred jobs lost, theoretically on average one belonged to an attorney.  I can’t change that.  I would if I could, but that’s a problem for your legislators, not me.  What transparency does is punish law schools for circumstances beyond their control[Dean stuffs another clump of clementine segments into his mouth.]

LSTB:  Hold on a second.  I see why a law school would be more willing to report its employment outcomes in times of plenty, but I disagree with your definition of “fairness.”  Fairness requires law schools to take a hit in the economy the same as everyone else.

Dean:  Okay, [Dean swallows] even so, assuming there’s an optimal number of law schools, it stands to reason that the number of unemployed graduates would appear higher during recessions and lower during booms.  We’d expect dissatisfaction with the legal education system in times of need.

LSTB, sharper than usual:  “Optimal number” of law schools?  Are you suggesting the profession somehow regulate the number of lawyers produced per year the way other professions do?

Dean:  You’re clever Matthew.  Let me get to my second point about why transparency isn’t fair to law schools: No one law school is totally responsible for the tuition bubble and the oversupply problem.  The case may be made that some are worse than others though.

LSTB:  So you think you’re trapped in a collective action problem?

Dean:  Exactly.  Even if I accept the facts as you’ve laid them out, transparency creates a free-for-all standard for regulating the number of juris doctors conferred annually.

LSTB:  But it’s market-based.  You said yourself that reputation—the name on the diploma—matters, isn’t that a reasonable standard if what you’re selling is legal education?

Dean:  Why should reputation be the sole standard?  Sure, the oldest law schools that sit in US News’ top tier have the best argument for continued existence, but there are exceptions- I should add that right now we have no idea whether post-bubble law schools would close or consolidate, how many and where, and what the cheapest, barebones ABA-accredited law school would look like, but let’s assume we’re dealing with closures- For instance, New York City has eight law schools within its five boroughs.  Shouldn’t one of those close before a US News third tier law school in a small state does, assuming US News the best standard?  What about public schools?  Shouldn’t they receive special privilege to exist since they’re (or were at one time) state supported?  Should UMass fall because it’s a recent public law school and just because Northeastern graduates can’t find jobs?  Clementine?

**********

WILL DEAN CORNER LSTB IN A GAME OF WITS OVER THE FUTURE OF LEGAL EDUCATION?  WILL LSTB ACCEPT THE CLEMENTINE SEGMENT?

TO BE CONTINUED…

Velvet Underlinks–Pyromaniacs at ‘Wisconsin Lawyer’?

5 topics, behold:

(1) Martha Neil, “Another New Law School Is Proposed: U of Del. Wants to Open State’s First Public Option,” in The ABA Journal

Elie Mystal, “University of Delaware Starts the New Law School Process,” in Above the Law

Wade Malcolm, “Elite University of Delaware Law School in Works,” in Delaware Online

Elie Mystal covers the main points on the next new law school, particularly the university’s goals of more prestige for itself, which Malcolm echoes.  Delaware is well into the second standard deviation above the national average in law student saturation, yet it’s below average in lawyers per capita.  Perhaps they all live in Pennsylvania.

However, the Malcolm piece addresses the issues more accurately than elsewhere.  For example, Widener President Jim Harris actually questions whether a new law school is needed.  His claim was countered with those who questioned Widener’s existence when it was proposed in the mid-70s.  However, back then, student loans were fully dischargeable in bankruptcy and tuition was far lower, making law school a far more attractive investment.

Now could be an extremely challenging time to start a new law school. Law school applications decreased last year, and the recession has led to an excess of underemployed attorneys…

UD would enter a competitive market. Along from Widener in its home state, the new law school would be a short distance from several highly regarded institutions in the Philadelphia area, including the University of Pennsylvania and Villanova. Competition would make attracting quality faculty and students more expensive, experts said.

From Malcolm, we can also infer that there’s no intent to rein in costs:

“$50 million for a full-purpose law building would not shock the conscious at all,” he said. “With classroom and courtrooms and a library and faculty, it could easy be that much.” [Roger Dennis, dean of Drexel University’s law school]

$50 million?  In a state with an unemployment rate of 8.2%?  This is not the stimulus they’re looking for.

What irks me about this, on top of the standard counterarguments, is that the law school Delaware has in mind doesn’t innovate in any way.  It’s still the same 1950s-style model the ABA’s accreditation standards have in mind: big building, big library, and faculty with a low ratio of income per joule expended.  It would be nice to read about a proposed law school that planned on trying something new and bold.  Delaware will not.

(2) David Lat, “Kudos to Maryland Law School for Protecting Its Students from Tuition Increases,” in Above the Law

To cover an equivalent 4% tuition increase, Maryland is paying out of its short-term savings rather than raising tuition.  The stated reasons clearly address employment prospects for students, whose tuition accounts for 60% of the law school’s operating expenses.  Good for students but a temporary solution to the bubble as it affects the law school.

(3) Jon Chesto, “New UMass Law School Defies Naysayers,” in The Patriot Ledger

Really?  What, did it adopt Massachusetts School of Law’s business model?

You had the fiscal-watchdog types, wringing their hands over the potential financial drain that they said an unaccredited law school would cause to the state’s finances.

Then there were a few of the state’s private law schools, a politically-connected bunch who feared the competition that a publicly-funded law school could bring. They waged a fierce battle to discredit SNESL, unfairly depicting it as a luckless money pit off the beaten South Coast path, one undeserving of ever getting accredited by the industry’s largest trade group.

What about those who think that that Massachusetts is one of the most oversaturated states for lawyers?  Or those who think that when there are few jobs for law graduates that $23,500 per year in instate tuition is still too high?

Interestingly, UMass made the state money:

A UMass spokesman says the school will have sent a nearly $450,000 chunk – or about half of its “profit” so far – back to the state’s general fund by the end of the month.

Twice in recent months, state governments have pushed their law schools towards self-sufficiency, Minnesota and Arizona.  Here, the state law school is making the state money.  Maybe Delaware will do the same thing?

(4) Martha Neil, “Paralegal Job Can Make Career Sense, But Document Review Is Dubious, Experts Advise,” in The ABA Journal

The title speaks for itself.

(5) Timothy D. Edwards & Daniel P. McAlvanah, “Spoliation of Electronic Evidence,” in Wisconsin Lawyer

I haven’t read this article yet.  The only reason I bring it up is…the cover!  Oh my God!  I so totally hope the editors didn’t use a stock photo and instead told two of its interns to take pictures of keyboards they set on fire.  I can always dream.

Inequality: Why the Tuition Bubble and Student Debt Matter

 

While drawing this, I realized two things: (1) American Gothic is a beautiful painting, and (2) I'm going to look like the father when I'm old. Creepy.

Knut, “Is Lack of College Education the Cause of Income Inequality in America,” in First Tier Toilet!

Mish Shedlock, “How Student Debt Wrecks Marriages, Inhibits Family Formation, and Delays the Housing Recovery,” in Mish’s Global Economic Trend Analysis

–”Bubble in Law School Tuition and Lawyers?

Timothy Noah, “The United States of Inequality,” in Slate

Dianne Molvig, “After the JD: Careers Seven Years Out of Law School,” in Wisconsin Lawyer

Kelly Field, “Government Vastly Undercounts Defaults,” in The Chronicle of Higher Education

Alan Collinge, “The Argument,” in StudentLoanJustice.Org

[Recently, Knut questioned Fed Chairman Ben Bernanke’s claim that income inequality has grown because of education attainment differences: Better educated Americans are more likely to be employed.  I should say at the outset that I don’t have a high opinion of Ben Bernanke.  For someone who’s an expert on the Great Depression, he’s not much of a New Dealer.  However, thanks to him via Knut, I can serve you my opinion on student debt and income inequality—a ramble I meant to publish a few months ago but didn’t get the chance.]

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This was meant to be the Gini coefficient, if you didn't know.

I find discussions of income inequality fascinating.  I’ve always been a fan of the Gini coefficient, despite its myriad drawbacks.  For example, I think if NALP calculated one for lawyer starting salaries, the bimodality (and unemployment) would be more evident.  So, I enjoyed reading Timothy Noah’s investigation into the topic.  It occurred to me that when we calculate income we use after-tax income (I hope).  Beyond that, it’s up to the individuals to efficiently manage their expenses.

Student debt, because of the undue hardship exception in the bankruptcy code is unlike any other kind of expense.  It cannot be reduced, switched off, or exchanged on a secondary market (e.g. switching cell phone plans or moving from a house to an apartment).  It’s essentially a tax that isn’t considered a tax; it’s regressive, meaning it now afflicts younger people with lower incomes (and increasingly none at all), and it’s a deflationary force in a deflating economy.  As a result, any calculation of income distribution in the United States that excludes student debt will skew in favor of a more equal society than actually exists.  In other words, $850 billion of our inequality is off the books.

To make things worse, student debt, especially for those who’ve completed graduate or professional degrees, is rocketing over the inflation rate.  What are the consequences?  Enter Mish Shedlock:

[T]his is a serious macro issue. Housing typically leads the economy out of recession. If couples put off marriage, or never get engaged in the first place, that obviously hinders family formation.

In turn, that hinders the demand for houses and related goods and services, not to mention the goods and services required to have kids.

Moreover, student debt contributes to the problem of unloading a massive inventory of homes and a massive shadow inventory of homes on top of that. Many students are so deep in debt and without a job that not only have they delayed marriage, they have moved back home and are not even renting apartments.

Banks sitting on foreclosures thinking that a housing recovery is around the corner, have another thing coming. These structural problems, including boomers headed into retirement wanting to downsize their homes (with no one to sell to), puts additional pressure on home prices.

Answer: prolonged stagnation until the political will to restructure or bail out debtors emerges.  Once that happens, though, higher education as we know it, and certainly legal education, will collapse, causing yet more unemployment and contraction.  This time it’ll be among faculty, administrators, and staff.

It was with these issues on my mind that I read Dianne Molvig’s piece on the “After the JD” project (AJD).  Aside from the methodological question of what a study of year 2000 graduates in 2007 (AJD2) can actually tell us about the prospects of law students who paid 30-50% more in tuition and a bleaker job market, the study does tell us what these people thought of their debt.

At seven years out of law school, two-thirds of AJD2 respondents still carried education debt, with a median remaining debt of $50,000…“[W]hile the immediate decision of which job to take is not strongly influenced by debt, respondents nevertheless appear to feel the weight of their debt in a more global way.”… But [Gundersen Lutheran Health System in-house counsel Dave] Adams takes a philosophic view of the situation. “Each of our debts cost more than our house,” he says. “But it’s okay because I get to do the work I like doing, which is great. And they can’t repossess my brain.”

More recent graduates have little hope of paying off their debts within their career spans and they’d be better off if banks could repossess their degrees.  Unlike the AJD participants (hopefully they’re still employed in 2010), their personal lives are stalled.  Worse, the student loan default rates are increasing, and according to the Chronicle of Higher Education and Alan Collinge, the government gets 122¢ on the dollar for every default, but it pays out enough in collection fees that it nets only 50¢ on the dollar.  Taxpayers bear the costs of defaulted loans.

I can see why people didn’t want to bail out the banks in 2008, but the real wall-banger is how everyone wins from bankruptcy reform or a student debt bailout.  Specifically: whenever you bail out a defaulting debtor, you bail out the creditor as well, which is why the bank bailouts were premised on protecting “counterparty risk”.  With student debt, the federal government is the counterparty, so it’d be bailing itself out.  The debtors’ children would be happy to pay off the long term bonds if the alternative is being born into poverty or never being born at all.

They’d also benefit by living in a more equal society.

Dr. Byrds & Mr. Links—Yes, But What Happens if Law School Transparency Succeeds?

The legal web-o-sphere spares me with only four links over the past few weeks.

(1) Betsy Z. Russell, “Labrador Still Saddled with Student Debt,” in The Spokesman-Review

Idaho’s new representatives (the only one, for I think the other’s an incumbent) still has a mountain of law school debt to pay off.  Good thing a 2-year gig in Congress pays over $150,000 with cost of living adjustments that aren’t subject to the 27th amendment.  In the article, it’s speculated that Raul Labrador may be the only representative with student loan debt.

More interestingly, for all you Microsoft haters, the Bill and Melinda Gates Foundation is co-funding The Project on Student Debt, a nonprofit group researching the issue.  I’ll also point out that Bill Gates can’t’ve had that much student debt since he dropped out of Harvard.

(2) Editorial, “A Dearth of Data about Costly Law Degree,” in the Minneapolis Star Tribune

In a minor blip for law school watchers, the Strib catalogues some of the maddening ways in which law schools juke their employment stats.  It then gives a resounding endorsement of Law School Transparency* (it’s an “ahead-of-the-curve organization”), complemented with a rebuke to law schools refusing to reply to LST’s questionnaires because it’s a boat-rocker.

I think I’ve said it elsewhere, but I’ll repeat: transparency is a good thing, but I don’t think LST will get far if law schools believe it’s out to civilly shame them into confessing that they’re nonperforming institutions, especially during a severe contraction in the legal sector.  I suspect law schools think along these lines.

As for Minnesota, the dark horse of oversaturated legal markets, William Mitchell responded by stating it’d decline to provide information.  Hamline and St. Thomas both ignored LST’s request.  My intuition tells me that the legal education establishment is banking on some cosmetic transparency changes until employment picks up.  Then it’ll sigh relief without too many schools closing—much less addressing tuition and faculty composition.

Economic ideologies differing, I think the system will run aground before a recovery.  As for transparency, I don’t want to say it’s an utterly lost cause, but the question isn’t what happens if LST or a complementary effort fails.  We already tasted that when only Ave Maria submitted its outcomes data.

But what happens if it succeeds?

(1) Assuming a high response rate and high law school compliance, the data will show two things:

(a) That many graduates don’t get jobs in the legal sector, and their salaries are significantly lower than their law schools posted on their websites.  In other words, entry-level job opportunities for legal professionals decline as the legal profession contracts.

(b) Employers are more willing to hire graduates from some schools rather than others, and employers prefer graduates who get better grades than their peers, regardless of curriculum.

(2)  Kyle McEntee and Patrick Lynch obtain valuable skills in running a nonprofit.  I include this because it’s true and shouldn’t be belittled.  Founding LST will do much for its principals’ careers, and law students might want to ponder the risks these two have taken as graduation approaches.

The point of this brief thought exercise isn’t to make LST appear pointless, though I doubt law schools will seriously comply with it.  I should also add that the social scientist in me sees other methodological problems, but that’s not on today’s docket.  Instead, I quarrel with those like the Strib’s editors who think LST is “ahead-of-the-curve.”  If at best, LST tells us something we already know, albeit far more accurately, how can it really be ahead of Herwig Schlunk or Brian Tamanaha?

(3) Scammed Hard!, “Subsidized student loans in the crosshairs.  Is IBR far behind?” in Scammed Hard!

Turns out the Deficit Commission, which violated its charter and bylaws by failing to vote on a final plan by December 1 among other sins, thinks that the government shouldn’t subsidize student loans and repeal income-based repayment.  Since a post-2008 law grad could fully fund a law degree with Direct Loans and Grad Plus loans and then go onto IBR (likely, for the legal field is imploding like dying star), repealing the program is a really bad idea.  Doing so would gravely impact law students as opposed to taxpayers.  We should address flaws in the Higher Education Act instead.

(4) Martha Neil, “As 1L Ponders Cost-Benefit Ratio of Dropping Out Now, ATL Survey Says: Do It,” in ABA Journal

I like how Neil steered clear of the law school ROI problem and tuition bubble by quoting a beautiful blaming blog post criticizing law students for greed.  By this point you can probably tell my heart aches whenever law students appear in the legal press.  Those poor law students (and 0Ls): slackers to professors, lemmings to scambloggers, sellouts to The Profession, paydirt to collectors.  Will they ever get there?  Law students are the next generation in a venerable tradition, yet they simultaneously cower behind their laptops, biding their time until their graduation and first fat paychecks.  Graduates, for their part, are whiners, victims of a withering economy, lacking in emotional intelligence, insufficiently entrepreneurial, greedy, and ignorant that “Law is a business.”

I can’t put my finger on it, but I suspect somewhere in here lies a lesson about the future of a profession that holds such schizoid views of its young.

* For more on LST, check out the interview Down by Lawcast conducted with Kyle McEntee.  LST’s website embeds the condensed interview.

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