Income Elasticity: Why The ABA is Not an Apolitical Trade Organization

Writing on lawyer oversupply and demand for legal services Andrea Hable concludes:

[M]aybe we’re framing the question wrong. Maybe there are too many lawyers for the legal profession as it stands today. But maybe there aren’t too many lawyers for society. If we all practiced more efficiently, and if we could have our ideal jobs without the burden of student loan debt, we might find there’s enough legal need to keep us employed and fulfilled.

Aside from the impossibility of increased practice efficiency creating more lawyer jobs, my opinion is that it’s still more column A than B, but getting there requires the elites of the profession to address one issue they’re ignoring (attorney overproduction) and another issue they really, really, really do not want to address: income elasticity of demand for legal services.

When it comes to attorney overproduction, the evidence is clear: universities open and maintain law schools without regard to economic demand, and the assembly-line mentality of legal education—that Rosie-the-Riveter law school professors can manufacture practice-ready attorneys like B-24s—is proving flawed. Experience and judgment cannot be taught, specialized work requires specialized training, and no amount of hands-on skill-building/clinical training/mentorship creates jobs.

The second problem, income elasticity, is much subtler. We can look at the BEA data and conclude that real demand for legal services has largely stagnated since 1990, save for the dotcom and housing bubbles. We also know that in the last few decades Americans’ incomes have diverged. Thus, Americans have less money to spend on lawyers. Why? As people’s incomes change, so do their spending habits. For example, when people make more money, they use less public transportation. It could be that when people aren’t making as much money, one of the first things they stop buying are legal services, and the alternative to hiring a lawyer to resolve a legal problem is making do without one or suffering the adverse consequences. I am persuaded this is the case.

Notice that I didn’t bring up student debt as Hable does because (IBR aside) it isn’t relevant to income elasticity: Your student debt isn’t your clients’ problem any more than your office rent is, and clients can demand a discount or shop for someone who isn’t as heavily indebted or who has better office lease terms. Student debt is a problem for lawyers because it makes their labor inelastic: those making good incomes in biglaw don’t have good alternatives to their current positions. (The high cost of legal services could be due to price signaling, as J-Dog illustrates, but again, that has nothing to do with student debt.) Instead, if there are no jobs for lawyers, they’ll work in other fields that pay better or more consistently, which could very well be food service. There’s no shame in seeking subsistence-level non-legal work instead of opening a doomed practice. That’s more the profession’s failure than yours.

Legal profession elites claim that the solution to income elasticity of demand for legal services is a lawyer glut, supply-side economics at its finest. However, if legal services are a necessary good, then we must conclude that they must be paid for collectively, i.e. by the government, in the same manner as fire protection. The ready solution to both oversupply and income elasticity, then, is to redirect existing subsidies from law schools to a public legal aid system and to promote full employment so clients can be wealthy enough to afford legal services.

However, the profession avoids this idea. Why? Because advocating full employment politicizes the profession. Demanding public funding to serve the poor and demanding poverty alleviation are political demands that coincidentally benefit the legal profession, and trade organizations such as the ABA don’t want to appear to favor some broad public policy measures over others because that would entail admitting that the legal profession has a large stake in the U.S. economy. This is something that a “noble profession” wishes to rise above.

Notice that I used the term “appear” politicized, for in fact, the ABA is already politicized, just not for serving the poor. For example since Hable brings up student debt, the ABA spent late 2009 and mid-2010 crafting and adopting Resolution 301, the executive summary of which states:

This resolution addresses the problem by calling upon Congress, the Executive Branch and/or Commercial Lenders to convert private debt into federal loans, which offer more flexible repayment options; and identify federal funding to cover interest payments for graduates who defer loans because of economic hardship. It also calls for more flexible repayment terms for federal law student loans. [Emphasis LSTB]

Converting private debt into federal loans is a discreet way of requesting the same government that issues subprime student loans to law students to bail out banks that also made bad law school loans outside of the federal lending program. Nowhere in Resolution 301 or its supporting documentation did the ABA use the word “bankruptcy.” It didn’t even bother to mention that the undue hardship exception was only completely extended to private student loans in 2005, implying that it didn’t advocate repealing that reform.

Obviously the ABA does not have an economist-in-residence who might point out that advocating full employment and bankruptcy reform would benefit the legal sector, and we shouldn’t expect the ABA House of Delegates to take on the attorney overproduction problem without saying, “Yup, we done messed up big.” However, we are well within our place to question whether the ABA seriously cares about helping the poor, whether as student debtors or as those who need legal services. Or both.

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One Response

  1. The ABA is a morally-bankrupt organization that serves the interests of corporations and Biglaw. They do not give a damn about the small lawyers. This organization has always been corrupt.

    Hell, the National Bar Association was formed when black attorneys could not gain admission to the ABA’s ranks. The ABA has helped make law a highly-stratified industry. Now, the ABA is willing to allow racial minorities into the law school doors. However, it does so for the purpose of lining the pockets of law schools and “professors.”

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