You can find my latest Am Law Daily article here:
Per the discussion on my first cut at the topic, I added a little bit more on the possibility of limited-licensing programs reducing costs. There’re other changes to the original post.
You can find my latest Am Law Daily article here:
Per the discussion on my first cut at the topic, I added a little bit more on the possibility of limited-licensing programs reducing costs. There’re other changes to the original post.
Debra Cassens Weiss titled her article on the After the JD study’s third wave (2012) survey results as, “24 percent of JDs who passed the bar in 2000 aren’t practicing law, survey finds.” This is a very accurate, descriptive title. However, she could have used, “Study’s Preliminary Findings Pretty Close to Scamblogger’s Calculation,” and it still would’ve been accurate.
Those of you with long memories of all things scamblog will recall that Frank the Underemployed Professional of Fluster Cucked ran a “back-of-the-envelope” calculation that “wasn’t suited for formal publication” of how many recent law school graduates hadn’t found work as lawyers. For 1999-2008, he figured it was 29 percent; for 2003 to 2008, it was 27 percent.
Compare that to the After the JD’s 24 percent for year-2000 bar-passers. You can take issue with Frank’s methodology, but his results align to reality in my opinion.
There are a few points that I think are worth extracting from Cassens Weiss’ article:
1). Even the researcher presenting the results, Ronit Dinovitzer, was surprised by the finding, claiming that 2000 was the golden age for finishing law school.
2). We’re still dying to know how many bar-passers (to say nothing of non-bar-passers) were unemployed or who had never really entered the profession to begin with, or how many left involuntarily. The best we have is this quote:
The careers with the highest percentage of nonpracticing lawyers were the the nonprofit and education sector, where about 75 percent weren’t practicing; and the federal government, where nearly 26 percent were nonpracticing. Nonpracticing careers ranged from law professors to real-estate agents to investment bankers, Dinovitzer said.
This is all pretty vague, but most of these careers do not look like they benefit much from formal legal education.
3). Seriously, signaling matters. Who knew?
There were also pay differences based on schools and grades. Graduates of the top 10 law schools who worked full-time earned median pay that was $73,500 more per year than graduates of Tier 4 schools. And among graduates of Tier 3 schools, grades made a big difference. In that group, those with the highest grade point averages had median pay that was $121,500 more than those with the lowest grades.
4). Rumors of biglaw’s turnover are well founded.
Among graduates of the top 10 law schools, only 16.8 percent were working in large firms of more than 250 lawyers in 2012, compared to 55.3 percent in 2003 and 28.7 percent in 2007.
5). The non-practicing figure is certainly going to be higher for subsequent years, and if the same rate were applied flatly to post-2000 ABA classes only, we’re looking at more than 150,000 out of 630,000 bar passers (with some duplicates) who aren’t working as lawyers today. Also, there were only 38,000-39,000 ABA law school graduates in 1999-2000. Last year there were probably 47,000 fighting for even fewer jobs. I doubt that in 2025, we’ll find so many law grads from last year still practicing.
6). Female year-2000 bar-passers in 2012 earned 80 percent of what male bar-passers did. Different pay for different work probably, but it must be said ex ante that law school is a bigger gamble for women than men.
7). Last but not least, compare the After the JD 2012 survey with “From 1L to 401(k),” discussed many moons ago here, which covered a group of law students in 1975. It found that depending on the school, the percentage of graduates who weren’t practicing 35 years later ranged from 22 to 35 percent. Lawyers licensed in 2000 have already entered that window.
I will close by adding that much of the 24 percent non-practice rate must be attributable to the Lesser Depression and the Great Law Depression rather than law school overbuilding. The 2000s haven’t helped with around 20 new law schools, though, but that just shows how detached law schools are from their consequences.
Still, kudos to Frank the Underemployed Professional.
So I’ve read through the ABA Task Force on the Future of Legal Education’s (final) Report and Recommendations (PDF). Some of its points are good, others baffling. Here’s a list of topics that jumped out at me and my thoughts on them; page numbers are in parentheses, but they’re not necessarily exhaustive.
The good: Wha~?
The baffling: I gave the task force grief last year for misusing the term “public good” when describing the fundamental, irresolvable, competing tension over the alleged good things the legal education system does for society versus what it supposedly does for law students. Reading through the report, I tried to give the task force the benefit of the doubt and determine how “public value” differed from “public good,” but it was pointless for two reasons. One, an “uncorrected” “private good” appears on page 25. Oops. Two, “private good” and “private value” must be synonymous—what other definition could there be?—so by analogy don’t “public good” and “public value” mean the same thing too? The new “value” terminology is undefined (unlike other terms, e.g. on page 5), so I don’t know why the task force bothered switching the words around or keeping the concept at all.
Indeed, for all its careful efforts to craft this private/public distinction, the task force pretty clearly comes down against formal legal education as providing public value. It supports limited licensing of lawyers (3, 14, 24-25), fewer undergraduate requirements (33), fewer law school requirements (28), the uniform bar exam (33), more law school “heterogeneity” (23-24), and substantial accreditation reform allegedly aimed at reducing the cost of legal education (2-3, 12, 24, 31). The task force even implies law schools aren’t providing students with core lawyering competencies (26) and that law schools aren’t benefitting society by absorbing federal loan dollars (22). By contrast, law schools provide public value in the form of … faculty scholarship? (7) Post-baccalaureate law programs aren’t needed for that.
The good: The task force prioritizes reforming the federal student loan program, stating, “The current system of law school education harms both students and society.” I’ll take the task force at its word that it’s unable to give the final word on how the Direct Loan Program should be modified and that another task force should be formed to address it. (30) I doubt that a subsequent task force would defend the Grad PLUS Loan Program as adding educational value.
The baffling: Does anyone benefit from how law-training is financed? If so, who? The loan program is not a negative sum system; the loan dollars go to law professors, universities, and lucky students who receive merit scholarships. Arguably it gives legal employers a steady supply of docile workers who have few alternatives to pay off their loans, but that’s indirect and not universal. The task force is surprisingly uninterested in why a social program doesn’t help society, to say nothing of its intended beneficiaries, i.e. poor people and minorities. The task force apparently misunderstands the implications of its own conclusions.
But the Bennett Hypothesis isn’t just an elegant, analytic explanation for why legal education becomes more expensive when you loan people unlimited money to buy it. It emerges from a social theory of positional goods, which are goods whose benefits to their owners by definition come at equal cost to everyone else who lacks them—and frequently a net social loss through rent-seeking by their sellers. That law schools absorb loan aid strongly indicates a moral problem with what legal education is, not just a miscalibration in the system that requires a kind of technocratic report by another task force.
If the task force doesn’t want to “moralize blame,” (9) then it shouldn’t be adopting frameworks that do so. In for a penny, in for a tuition bubble.
The good: Unlike some of its peers, this task force has actually heard of the law of demand. For example, on page 13 it writes, “The economy of law and related services and the associated employment market have changed sharply in recent years … These changes have had a substantial and adverse impact on employment opportunities for new and recent law school graduates.” It also says that there’s a “low prospective return on investment” for opening a rural practice. Nowhere did it say anything as absurd as, “Law graduates pass their student loans onto clients.” I call this progress.
The baffling: Nevertheless the task force still operates under a frustrating sort of “supply-side-ism” that just can’t be shaken. For instance, the no-rural-lawyers bogey has everything to do with demand for lawyers and absolutely nothing to do with legal education. The task force proposes looser licensing standards because fully trained lawyers aren’t “cost-effective” (2, 13). There’s no reason to believe this. Demand for legal services (and the (over)supply of lawyers) is what sets lawyers’ wages; therefore, it will also set limited-practitioners’ wages. More training does not make lawyers inherently more expensive than less-trained practitioners. At best perhaps people already living in poor or rural communities would be interested in obtaining limited licenses while principally working other jobs. That’s fine, but it’s not evidence that ABA-educated lawyers are “overtrained” and are thus too expensive for rural and poor folks to afford.
Additionally, since we’re on the topic, it’s been nearly seven years since The Wall Street Journal first pointed out that demand for legal services has been flat for many years, yet even in 2014 we have bar authorities saying, “The Great Recession did it.” No it didn’t. It exposed the truth of what had been going on for a long while, and the WSJ’s findings have only been repeatedly corroborated by analysis of BLS and state government data of law graduate and attorney overproduction. After being deregulated in the 1970s, and aided by an expansion of the legal education system, demand for private legal services grew until around 1990. It only slightly recovered during the stock bubble, and it’s been declining for ten years. This information is publicly available (pending BEA data revisions) and largely beyond dispute. Why bar authorities won’t acknowledge it is to me the biggest baffler on this list.
The good: The role that signaling plays in legal education appears in bits throughout the report.
The baffling: …And only in bits. The task force says law schools compete for highly credentialed students (2, 22, 23), but it doesn’t say why. The U.S. News rankings transmit misleading information to law school applicants (10), but the task force doesn’t tell us why the magazine is so popular if its representations are so misleading—or why law schools continue to supply it with information if that’s the case. Likewise, the shift towards the “consumer outlook” (9-10) on the part of applicants apparently occurred out of the blue and has nothing to do with how law schools broker jobs for their graduates based on their pedigree. Law schools’ costs grow because they’re under “pressure to deliver services and engage in functions other than core instructional services,” (11) but we aren’t told where that pressure comes from. There’s absolutely no mention of legal employers relying on any rankings, much less whether they evaluate job applicants based substantially on the law school they attend. If signaling plays any role in legal education, it calls into question whether law school builds any human capital at all, which would suggest that law schools don’t really provide any “public value.” That’s okay, though, because the task force’s recommendations pretty much say that too as noted above.
Signaling pathologies infect the legal profession like a body horror. They cannot be excised either, unfortunately, so long as wealth concentration ensures that some lawyers make very large amounts of money while others never meaningfully enter practice. Legal employers, which the task force says have abandoned their traditional role of training law school graduates (16), have always benefited from a surplus of eager, pre-graded law students willing to fill their openings, so they have no incentive to reform the system.
That said, the task force’s various recommendation of easing licensing requirements would mitigate some of the risk prospective lawyers would take on. However, the odiousness of signaling means that the problem won’t be the marginal law school after the crash but the most elite ones that survive it.
Speaking of which…
The good: Just about all of it. I don’t think it’ll create any jobs or reduce any debts, but it’s definitely a policy I’ve advocated, so the task force deserves credit.
The baffling: I get the sense that these reforms are pushing on a string. Jobs really are the independent variable here, but I’m just nitpicking.
The good: Sure…
The baffling: …But I think decentralization has just enabled various institutions to blame one another for unemployed law grads and reduce the perception that the profession is able to reform itself. Decentralization might be an institutional reality, but I don’t see it as a plus.
The good: Wha~?
The baffling: How do we measure “culture”? How is faculty “culture” not dominated by unaccountability for federal loan dollars? This, along with the “public value” stuff, makes me think that the task force is just throwing a deflated life raft to the law schools.
The good: Um. Okay, my other comments notwithstanding.
The baffling: How do we know when someone’s not acting in good faith? What do we do then? There’s plenty of stuff coming out of law schools that I don’t think is good faith, and I’m not even talking about the employment statistics. I won’t repeat the examples I put down when the task force’s first report came out, but it ain’t risk-averse, conservative faculty culture that caused them. It’s the free money.
The good: None. These things should’ve been mentioned.
The baffling: Here’s my list:
In all, the ABA Task Force on the Future of Legal Education’s (final) Report and Recommendations avoids some of the sloppy mistakes its peers have made, but there are still plenty of inconsistencies and notable omissions to spin some heads.
Okay, it didn’t actually say that, but in its wholesale revision of its GDP-by-Industry data the Bureau of Economic Analysis (BEA) proclaimed this morning:
Overall, 20 of 22 industry groups contributed to the 2.8 percent increase in real GDP. … Professional, scientific, and technical services real value added—a measure of an industry’s contribution to GDP—increased 4.2 percent in 2012, continuing to reflect strong growth in computer systems design and related services.
Fifteen years ago, “computer systems design and related services” (computer services) was a junior partner to “legal services” in the “professional, scientific, and technical services” industry group. The legal sector’s share was a quarter of the total and computer services’ was about a tenth. Since the Great Recession, they’ve switched places: Computer services doubled its share; legal services lost a third.
Computer services grew 12.6 percent in 2012, legal services -0.2 percent. Way to contribute to America’s recovery, lawyers!
However, in the price inflation race, the legal sector is definitely a winner. All services are 4.6 percent more expensive than in 2009, professional, scientific, and technical services grew 4.1 percent, computer services are 3 percent less expensive, and legal services are a whopping 12.7 percent more expensive than five years ago. I see this as more evidence that the most productive strata of legal profession are being wiped out because Americans are too poor to afford them at any price.
Regular readers might be curious why the above chart stops at 1997 and not 1977 as BEA data did in previous years. The reason is that the bureau excluded those years from its revision, and it used the term “superseded” to ensure that government data daredevils like me would think twice before using the older data. Nice try.
To see the impact the revision has had, here’s a rough comparison of demand for legal services (chain-type quantity indexes) between the last two releases and the new revision.
The biggest difference is that the 2014 revision detects a spike in demand for legal services in 2008—probably bankruptcies and foreclosures—whereas in earlier GDP-by-Industry releases peak law was 2005. If you think 2008 is a fluke, a deviation from the general trend, then the “decline of law hypothesis” still holds: Aside from 2008, the year with the largest quantity output for legal services was 2004. (2007 came close though.)
In all three releases the impact of the Great Recession is substantial. The revision posted this morning shows the legal sector contracting 12 percent since 2004, and there are no green shoots in sight.
In my last Am Law Daily article, I discovered that contrary to all expectations, the quantity of private legal services provided per hour worked has stagnated for more than two decades. I think this is one of the most important insights I’ve come across, and I think the macroeconomic data on the legal sector is greatly undervalued in commentary on the future of law and law school. The lack of productivity increases certainly deserves a bit more discussion than I gave it in the article.
So, were lawyers (okay, legal sector workers, but I may use the term interchangeably) more efficient when they used paper reporters than LexisNexis?
Unlikely. I think there are other things going on here.
One, (private) legal services aren’t homogeneous outputs. An hour spent on a criminal defense matter isn’t the same as an hour spent on a landlord-tenant dispute or a corporate merger. It’s possible that many lawyers (and firms) have become more productive over the years, but the composition of the average hour of legal services Americans are buying has changed.
All this observation does, though, is raise the question of how the average hour has changed, and there isn’t much direct evidence on the subject. There are some indirect data. For example, American Bar Foundation (PDF) statistics show that since 1980, large firms have crowded-out smaller ones, though curiously solo practitioners are about as abundant as they ever were.
In 1980, only 7 percent of all private practice lawyers worked in a firm larger than 50 lawyers; in 2005, 20 percent did. But this doesn’t show much because in most circumstances we expect larger firms to be more efficient than smaller ones, so they’d cost less per client. On the other hand, Bill Henderson tells us that the employment composition of biglaw has changed since the 1980s as well, which I think can support the idea that the average hour of legal services has changed.
We also know that in general legal services have become more expensive over the years, even as the number of employed lawyers has grown. Legal services cost twice as much on average in 2011 as they did in 1985 in real terms.
(Source: BEA, author’s calculations)
So how do you square the circle of more lawyers yet costlier legal services? In two ways: First, you can argue that demand for legal services is wealth and income elastic, i.e. the more money one has, the more they like spending it on lawyers and they buy different kinds of legal services too. And wouldn’t you know it, just this morning The National Law Journal reported that $1,000 per hour billable rates for “in-demand partners at the most prestigious firms” aren’t rare anymore. Second, you can argue that as Americans’ incomes and wealth decline, they’re unable to purchase the legal services that they used to, and the lawyers who formerly served them either move to a higher-priced market or go out of business.
The only alternative you’re left with is that there’s an attorney shortage, and all those “excess” law school graduates are really just lazy, greedy, entitled, and unwilling to make the tough sacrifices like abandoning their current lives and moving to rural America to serve the poor. However, this argument requires throwing out rational behavior assumptions and leads us to wonder why the supposedly efficient large firms won’t serve the poor if the greedy grads will not. The “market failure” line is ever wanting for an explanation.
If the composition of the average hour of legal services hasn’t changed, then the only way I can think of where we get the same (or less) output for the same effort despite technological advances and rising prices is by systemic fraud and cartelized behavior on a spectacular scale. Lawyers lie in lockstep about the cost of their services. Then they work fewer hours a week and take Fridays off. New lawyers attempting to enter the market, work more, and charge lower prices face threats and sabotage.
I’m sure plenty of people believe the above is true, but there’s scant evidence of it.
So we have stagnant legal sector labor productivity. I think it reflects wealth concentration rather than fraud.
Incidentally, clever observers might wonder how much it matters. Maybe increases in overall labor productivity have a long way to go to catch up to the legal sector’s, an observation that didn’t make the cut in my Am Law Daily piece. Indeed, most productivity gains over the last few decades have not gone to workers. Here’s a different measure, output per worker (instead of per hour, which is more precise).
(Source: BEA, author’s calculations)
By this measure, the legal sector has become 13.5 percent less productive between 2009 and 2011. This could mean that either all lawyers who didn’t lose their jobs in the Lesser Depression organized a work slowdown, or the Lesser Depression laid-off the most productive legal sector workers. In a variant of the latter, some practice areas might be more productive than others—especially those benefitting poorer clients and not the wealthy—and once poor people become destitute, an otherwise productive chunk of the legal sector goes out of business. Regardless, there may be significant deadweight workers in the legal sector.
What does this mean for the as-yet unmentioned prospective law student? As I wrote in the article, law will only consistently pay off for those who can serve the wealthy, at least in the short term. Also, as the largest purchaser of law graduates’ labor, the legal sector sets their wages. If legal sector productivity has stagnated while other sectors become more productive, there are probably better long-term opportunities than law.
A crucial independent variable here is how long the depression will last. Given the dismal December 2013 Establishment Survey figures (and the Obama administration’s shameful spinning of them), things are bad. Here’s the employment-population ratio for 16 to 54 year-olds and my projection of them based on the positive growth since September 2011.
If the legal sector is sensitive to employment levels and wealth concentration, then it’s going to be a long while until law starts paying off consistently from the demand side. From the supply side, obviously, there are far fewer people going to law school, and I’m hopeful (yes!) that the median graduate in a few years will have less law school debt than in previous years. It’s also obvious that the trivial accounting identity holds true: The first person who doesn’t go to law school is the first not to be unemployed after graduating. The real questions are (a) whether the demand-side factors really are as bad as I think they are, and (b) whether some law schools’ reputations are so insubstantial that legal employers would rather hire an unemployed graduate from a better-regarded school.
…Is an unusual finding I made a while back, and it’s a reason not to go to law school. You can read about it on my most recent Am Law Daily article:
In the meantime, I saw the Breeders last week, the night before my lecture at The Henry George School of Social Science, which went well thanks for asking. The Breeders are probably the only early ’90s band I’ve had any real interest in seeing. (The Pixies were a bit before my time.)
I was standing probably 20 feet east by southeast of the bootlegger of this video. I was behind a tall young man wearing a bright orange tuque, indoors. I think people who do that should be arrested and given the indelible mark of the hipster.
The best part of the video is that it’s titled “Canonball,” meaning it complies with Church doctrine.
(1) “Fewer applicants means schools compete fiercely for decent students.”
So what? Getting into a slightly more reputable school still doesn’t mean that career-spanning legal positions will be there on graduation. Similarly, excessive tuition minus scholarships often still equals excessive tuition. Scholarships are given to the extent they keep a student from matriculating elsewhere, not to ensure students get good deals.
(2) “A lot of law jobs will be opening up over the next five to ten years.”
“The demographics are such that knowledgeable folks like the head of the Washington Bar Association are predicting a market gap. They worry that future demand for legal services cannot be met by a dwindling supply.”
“Knowledgeable folks” should look at their state government’s data. Washington is projected to add 460 new lawyer jobs per year between 2010 and 2020. The state admitted 1,148 lawyers in 2012 alone. Reasonable people can question the accuracy of the projections, but they do estimate a replacement rate based on current occupational demographics and typical retirement rates. A shortfall in projected jobs due to slow growth is plausible, an unprecedented wave of boomer retirements is not.
Since Calo’s is the second report this week to argue that the medium-run situation is improving, let me add a few points:
Because of the large backlog of JDs out there, secure jobs and compensation are a long way off, even if the number of graduates falls below the number of jobs created annually.
(3) “Reports of the death of the legal market are greatly exaggerated.”
This line’s my favorite:
“I simply do not agree with the predictions that the legal market will, uniquely, fail to rebound with the rest of the economy.”
The unique failure of the legal sector to recover along with the economy is not a prediction. It’s an empirical fact.
Calo cites claims of clients’ disenchantment with biglaw and technological advances as driving a shift in demand for legal services. I agree that these phenomena may be exaggerated, but there is no reason to be optimistic about long-term trends, particularly in smalllaw.
Primarily, young Americans aren’t making money, so they aren’t getting married or building wealth (whether genuine or positional assets). Without wealth there’s little need to hire lawyers to draft wills and the like. Without marriages, people aren’t getting divorced (this might be good overall but not necessarily for lawyers, sadly). Without investment, people won’t start new businesses. Wealth concentration benefits a handful of lawyers handsomely, but overall the profession suffers.
In sum, the bad news about law jobs is in fact bad news about law jobs.
The National Law Journal ran an article recently about the low October 2013 LSAT numbers. It quoted Drexel law professor Dan Filler saying, “I think there was a kind of optimism bias among a lot of people in the academy, and maybe a sense of disbelief that the number of applicants could and would continue to decline.” Later he said that some law deans had requested funding from their universities arguing that the nosedive would “reverse or at least level out.” The University of Michigan’s Sarah Zearfoss also opined that “admissions officials” believed the low drop in June LSATs this year indicated a leveling off.
These statements are all hearsay, but that doesn’t mean we must disbelieve them. Nevertheless, the “surprised” response raises the obvious question: Why do law schools and parent universities believe that people will suddenly start taking the LSAT and applying to law school again or that the decline will stop?
To begin with, past experience indicates that law schools should be booming right now as young people are thoroughly jobless. I’ve been sitting on this for a few months, but now I think it’s time to trot it out: The 2001 Official Guide contains the total number of LSATs administered going back to 1963. If you want “past experience,” this is it.
I count five peak-to-trough cycles: 1973-1980, 1981-1985, 1990-1997, 2002-2005, and 2009-2012+.
Here are their average annual rates of decline. (I’m not going to bother compounding them.)
|CYCLE||Average Annual Growth Rate|
So yes, in case you were wondering, the current annual decline is more than twice as steep as any previous one, the only caveat being that the typical composition of first-time and repeat test-takers might be significantly different from previous years because of the rule-change allowing law schools to report applicants’ highest LSAT scores rather than averaging them.
Whether the 2013-14 administration year will be lower than the 1997-98 one (103,991) is disputable, but given that there were fewer total applicants in 2012 than 1985, it’s possible that first-time takers are at an all-time low going back to the 1960s. The last 1L low point was 1986 (40,195), and 2013 might have crossed that line. If it hasn’t, 2014 probably will.
Another observation worth noting from the chart: 2012 was the first year that there were more graduates than 1Ls, a phenomenon that should continue for the next few years until a trough is reached. It further illustrates the steepness of the current nosedive(s).
…Which returns us to the question of why the academy is surprised we’re not there yet. Looking at the older LSAT data demonstrates just how countercyclical demand for legal education was until 2009. Each of the LSAT peaks pretty much coincides with recession years: 1973, 1981, 1990, 2002, and 2009. The troughs coincide with recoveries. I’m recalling that Slate article from a few months back rationalizing the applicant nosedive on what now passes for “economic recovery.” You get the point, though. It would be one thing if the economy had recovered rapidly, but it didn’t at all. This is the first “cyclical” downturn in LSATs.
Part of the academy’s surprise, I guess, is that belief in the human capital hypothesis in a sense cuts both ways. Law schools continue to believe (and argue) that their degrees make people more productive and aren’t at all positional goods. It follows that they would be surprised that LSATs/applicants/1Ls/etc. would decline past the boundaries of the normal cycles in legal education over the last few decades.
I suppose at some point an equilibrium will be reached because some law schools can credibly promise their graduates access to elite law careers, regardless of biglaw’s fortunes. For instance, going by the Current Population Survey and Occupational Outlook Handbook, all levels of government reliably employ roughly 127,000 to 160,000 lawyers, about 16-18 percent of the total. That, and demand for legislators, judges, and corporate honchos of various stripes will keep law a winning career for some. When the alternative is underemployment, elite law schools will always be able to find people willing to graduate with higher debt-to-income ratios than their predecessors.
A lot of other people will continue to attend due to misinformation, believing that the degree will signal more than it does. At some point the damage done to them will be mitigated whenever student loan reform comes along, but you can’t prevent everyone who shouldn’t go from going, especially when they face desperate unemployment as an alternative too.
As a final, philosophizing note, I see the irreparable, generational shift in attitudes toward law school as a limited political victory against Americans’ fetish for positional goods. (I use “positional” rather than “Veblen” because I’ve come to think all Veblen goods are either positional goods or some other explainable exception to the neoclassical theory of demand.) The sequence of events is: see wealthy with positional goods, get angry, legislate subsidy for poor people to access positional goods (student loans, subprime mortgages), watch poor get poorer fighting their way up the ladder, and then spitefully deny them liquidation rights.
I don’t expect admissions officials to agree, but I am interested in what their response will be in the next couple years when the numbers of LSATs, applicants, and 1Ls reach record lows going back as far as most of the profession can remember.
I would, however, like it if people and politicians recognized that subsidizing zero-sum wealth is self-defeating.
If you don’t, I’ll remind you. Back in May when I updated the law graduate overproduction page, the Internet crowded around and poked at Mississippi with a stick, wondering why its ratio of graduates per job openings was so high.
Anyway, the hubbub about Mississippi grew significant because 30 jobs per year is pretty paltry, and it turned out that there was something off about it. At 300 jobs in a decade, the state projected a negative replacement rate, which doesn’t make sense. It really couldn’t be explained except by concluding that the data were suspect.
Well, the Mississippi Department of Employment Security (MDES) finally updated its occupational employment projections (PDF) for 2020, and the situation isn’t any better.
|SOURCE||JOBS IN 2010||JOBS IN 2020||ANNUAL GROWTH RATE|
The number of employed lawyers for both years according to MDES is much lower than CareerOneStop’s estimate. It’s also declining. All 40 jobs per year are due to replacement, not growth, but at least MDES’s numbers make more sense. 400 jobs in ten years > 2,060 – 2,210 = -150 jobs due to growth in ten years.
I am disinclined to correct anything on either the overproduction page or my Am Law Daily article. The MDES numbers aren’t really comparable to CareerOneStop’s, and revising the average annual growth rate won’t knock Mississippi out of the number one position of graduates per job opening.
[This is the second part of my response to the Simkovic and McIntyre article, "The Economic Value of a Law Degree" ("Economic Value") and the authors' response on The Am Law Daily. The first part of this response can be found here.]
“And [Leichter] largely ignores our extensive discussion of ability sorting in Section II.I. of The Economic Value of a Law Degree, while claiming that we did not consider these issues.”
False: I never discussed ability sorting in my article, so I ignored the “extensive discussion” in Section II.I. because it was irrelevant to my argument. Simkovic and McIntyre never demonstrated that legal education causes higher earnings.
It’s a pity none of the few—”though by no means all”—of the misrepresentations Simkovic and McIntyre charged me with were meritorious. Oh well.
“Studies by labor economists have found that increased earnings from education generally extend across multiple occupations.”
False: Simkovic and McIntyre never demonstrated that legal education causes higher earnings.
Also, applying the results of “studies by labor economists” about increased earnings for people with various types of education to legal education is an ecological fallacy. The authors must demonstrate that legal education alone is versatile.
“Any ability biases remaining after our controls may be offset by an equally important source of bias that Harper, Leichter, and many other critics have ignored: less educated, lower income households systematically over-report earnings and more educated, higher income ones under-report. Less-educated survey respondents tend to forget periods of unemployment, while more- educated households tend to forget end-of-year bonuses and SIPP caps maximum reported earnings to preserve confidentiality. This has been documented in SIPP surveys and it biases our results downward, making them too low, since the comparison group of bachelor’s recipients is systematically lower income than the law graduates.”
False: I ignore the bias because it’s not relevant to my argument: Simkovic and McIntyre never demonstrated that legal education causes higher earnings.
(Implied) Criticism 7:
“What does all this say about law school reform? On the one hand, untested reforms should not be rushed through primarily based on a sense of desperation or crisis, or a belief that changes couldn’t possibly make things any worse. On the other hand, the high returns to law school do not suggest that legal education can’t be improved—some reforms may be beneficial, and should be considered on their merits. Our preference, as always, would be to test proffered theories empirically as best as possible and we look forward to future work that does.”
False: “Economic Value” says nothing about law school reform whatsoever. If anything, it gives us a good reason to eliminate the subsidies to legal education because those subsidies make law school more expensive. Without unlimited, nondischargeable government loans law schools would have to reduce their tuition costs to remain solvent, which would increase the “premium” Simkovic and McIntyre believe they’ve discovered.
Bonus! Criticism 8:
“Leicther’s [sic] description of our take on BLS projections is lifted from context, since we note that even BLS economists are skeptical of these sorts of projections.”
The “context” is in footnote 10 where Simkovic and McIntyre write:
“BLS and other labor economists have cautioned against using occupational employment projections to guide educational investment.”
False: I frequently write about BLS employment projections, so these statements raised an eyebrow because the BLS has featured them prominently in its Occupational Outlook Handbook (OOH) for many years. The OOH pretty clearly targets a non-academic audience on the desirability of various careers, and nowhere does it caution readers to not rely on the 10-year projections, e.g. in the FAQs page. Here’s a taste of what the 1996-97 edition said about lawyers:
“Even though jobs for lawyers are expected to increase rapidly, competition for job openings should continue to be keen because of the large numbers graduating from law school each year. During the 1970s, the annual number of law school graduates more than doubled, outpacing the rapid growth of jobs. Growth in the yearly number of law school graduates tapered off during the 1980s, but again increased in the early 1990s. The high number of graduates will strain the economy’s capacity to absorb them. Although graduates with superior academic records from well-regarded law schools will continue to enjoy good opportunities, most graduates will encounter competition for jobs. As in the past, some graduates may have to accept positions in areas outside their field of interest or for which they feel they are overqualified. They may have to enter jobs for which legal training is an asset but not normally a requirement. For example, banks, insurance firms, real estate companies, government agencies, and other organizations seek law graduates to fill many administrative, managerial, and business positions.” [Emphasis added]
It’s curious that the BLS would publicly characterize the job outlook for lawyers with such lucid direness yet be skeptical of such projections. Looking more closely at footnote 10 explains why: Simkovic and McIntyre use a see-cite to two articles to infer a general consensus within labor economics that the employment projections are unreliable. In neither article is that inference reasonable:
At best Simkovic and McIntyre can say that the authors of these two papers alone don’t think people should rely on the employment projections when choosing a career—even that’s a stretch—but there are still a few other problems:
Finally, again the authors demonstrate that they don’t really believe their own theory. They should be saying that the projections don’t matter because law degrees increase human capital for all occupations, not because they’re unreliable.
Wait, I take it back! People shouldn’t rely on the BLS’ lawyer employment projections after all…
(Source: OOH, BLS Monthly Labor Review)
…Because they regularly overestimate the number of lawyer jobs that will be created. Oh, but if law school graduates can’t get professional, demand inelastic jobs, then I guess we can’t say applying to law school is rational.
This isn’t meant to be an exhaustive response to “Economic Value” and its authors’ subsequent comments; it could go on and on and on forever, but I’d really like to stop here. Although through its errors their paper has indirectly taught me much about signaling theory and the factors that influence an occupation’s wages, I hope Simkovic and McIntyre leave legal education to more diligent researchers. It would be a tragedy if someone applied to law school based on “Economic Value,” and shame on anyone who uses the paper to induce anyone to do so. But one reason I’ve extended this topic much longer than it deserved is that I have a degree in the social sciences, and “Economic Value” is an excellent example of how not to conduct social science research. To sum up, here’s a list of the authors’ research offenses both in the paper and subsequently:
(1) Not informing readers of alternative theories discussed in their own citations (“sheepskin effect” – In other papers this one might be minor, but it makes a difference in this case because the audience is not labor economists and readers are unlikely to read the article’s citations as I have.)
(2) Not falsifying the alternative theories discussed in their own citations before conducting their calculations (“sheepskin effect” – Scientific method, shmientific method.)
(3) Failing to acknowledge how limitations in their theory impair their methodology’s applicability to the real world (omitting elasticity of labor demand from their calculations by insisting occupations are not “pretreatment covariates”)
(4) Avoiding discussion of potential intermediate causes (how can human capital theory possibly explain why those 25-year-old law grads in figure 4 go from earning $20,000 to $80,000 in a few years? – This might be attributable to simple oversight and it’s come up late, but given some of the errors here (esp. #5) on balance I think not.)
(5) Not discussing the demographic content of the data they found for readers (who were the 1,382 law grads in the SIPP data? how many were in each age bracket (25-34, 35-44, 45-54, 55-64)? what jobs did the 25-34-year-olds have? what’s the frequency distribution of non-lawyer jobs? – This one is really egregious, even if it doesn’t have a material effect on the study’s outcome. Omitting a discussion of the data is a hallmark of bad social science research.)
(6) Falsely charging critics with misrepresentations (at this point, this one’s minor)
(7) Misrepresenting their critics’ claims (e.g. “distributional data” in Criticism 3)
(8) Evading critics’ meritorious claims (non sequitur, path dependency, credential inflation—and these are just mine)
(9) Misusing see-cites to misrepresent a consensus in a discipline readers may know little about (reliability of BLS employment projections)
(10) Claiming their findings are applicable to real-world policy issues when they are not (legal education reform – Other papers might be able to get away with this, but not “Economic Value.”)
(11) Omitting independent causal variables from their calculations, but conveniently using them to prove other points (elasticity of labor demand isn’t a “pretreatment covariate,” but it is evidence that lawyers aren’t going to suffer reduced earnings or be structurally unemployed in the future due to off-shoring/automation)
Any remaining advocates of the “law degree premium” or the bottleneck/backlog argument are invited to tell us what demand-inelastic, professional jobs law school graduates will eventually obtain. When will they realize their “premia”? Will it pay off their debts? Will they be able to have families, go on vacations, and save for retirement?
Law school optimists need to answer these questions. Unemployed law grads can’t wait.