Most Americans Don’t Want to Live in Rural America

…Which is why rural America is rural. Deep insight, Grasshopper, but the ABA Journal isn’t so easily persuaded, as implied in its recent feature article titled, “In rural America, there are job opportunities and a need for lawyers.”

I largely addressed this topic last year in a bluntly headlined post, “Law Grads Not Responsible for Lack of Rural Lawyers,” and its primary point still stands: If there is so much demand for (retiring) rural lawyers, why weren’t they replaced ages ago? It can’t be because of a quality specific to recent law graduates—including lack of practical training.

Unfortunately, I think the ABA Journal could’ve pursued the specific question of why lawyers won’t open practices in rural communities more analytically. For example, it accepted that there’s unmet demand for legal work in Wishek, N.D., based only on the word of its retiring sole lawyer. For a community of 1,002 people one wonders why it needs any. In fact, the Economic Census I discussed last week doesn’t have 2012 figures for states, but it does provide them for prior years. In 2007, law firm receipts per capita were $726 nationwide; in North Dakota they were only $255, an indicator that law is not in such high demand in North Dakota. As far as “offices of lawyers” goes, North Dakota, it seems, had a flat number of establishments from 1997 to 2007.

Industry Snapshot ND 1 Industry Snapshot ND 2

(Note that the number of law offices in McIntosh County, N.D., in 2011 is unavailable, but the neighboring counties appear very sparsely lawyered as well.)

The mean average population per law office establishment in North Dakota seven years ago was one firm per 1,893 persons—well above Wishek’s size—and I suspect the median firm is in a larger community. Not that I put a lot of stock in lawyer- or law-firm-per-capita estimates, but if there’s anything the LSTB will be remembered for, it’s those.

Nevertheless, aside from using Census data, the article could’ve investigated this unment demand by asking Wishek’s retiring attorney what his income was over the last five years, let’s say. Was it greater after tax, shelter, and transportation costs than what one could get in a college-type job in Bismarck or the Twin Cities, assuming all law graduates make equal student loan payments on IBR? How much of that income came just from serving Wishek clients? Did he regularly have to drive to represent people, and if so how far? What about his clients’ travels to consult with him? How much of his clients’ problems were due to rural poverty rather than lack of access to representation? Which problem should be prioritized?

More broadly, and this applies to the ABA’s immediate-past president’s apparent position that there’s a “paradox” of unment legal needs and too many law school graduates, there’s a difference between a “shortage” in economics and in common parlance. In economics, a shortage occurs when the price of a good or service falls below its equilibrium level, i.e. it’s so cheap that everyone buys it up before its price rises. By contrast, a shortage as commonly understood—the definition the Journal is using—is when poor people can’t afford to buy something but still need or want it.

The difference is important, and while I have my issues with neoclassical economics’ definitions and trivialization of poverty, its point is to distinguish between situations in which people merely want things as opposed to when market failures prevent them from buying them even though they have dollars in hand. One is measurable (usually); the other is not (usually). Maybe the legal profession relishes treating late-stage capitalist urbanization as a sudden problem rather than a long-term phenomenon, but I’ll take a stab: Even when rural Americans have the dollars in hand, the invisible costs of such a significant relocation cannot be ignored. Personally, I believe plenty of lawyers (even new grads) would be happier living in a rural community than they might think, but it’s still a big risk. It essentially means abandoning one’s connections, be they family or friends, and it isn’t any easier to shift jobs or restart careers in a city if things don’t work out.

Thus, the total cost of inducing people to move ends up being more than the community can really afford. Indeed, people are moving away from these communities, so why should lawyers move to them? It’s like encouraging homeless people to move to North Las Vegas because it has so many empty houses. Other forces are at work.

That having been said, like the South Dakota community discussed in my previous take on this topic, Wishek appears to have solved the problem by paying for office space to encourage lawyers to move there. Paying people to work often creates jobs, Grasshopper.

So, good luck to the two people who have taken Wishek up on its offer. The five-year median household income in McIntosh County in 2012 was $36,327 and per capita income was only $24,134 (source: Census Bureau). The averages are much higher indicating that there are some very well-off people in the area, but no one should mind if they have to take a day off and drive 90 miles to talk to a lawyer.

So, again, whenever the “no rural lawyers bogey” pops up, consider whether the claimants are hyping a long-term problem that’s festered for decades or are just equivocating their terminology and saying that the poverty of poor people is a paradox. It’s self-evidently not.

Economic Census Shows Legal Sector Battered by Depression

But first, it appears the link to my American Lawyer article was bad, so here it is correct.

Now, today’s fun.

The Census Bureau is slowly releasing data from its 2012 Economic Census, a survey it produces every five years. In government data years, it’s like waiting for a total solar eclipse. Because the last Economic Census was in 2007, we now get another look at the kind of damage the Lesser Depression has had on the private legal sector’s specific “Offices of Lawyers” category.

Economic Census--Industry Snapshot (2012)

(Source: Economic Census Industry Snapshots 541110)

Generally, it’s bad. There were fewer people employed in offices of lawyers in 2012 than in 2002. Nor does it help that Census doesn’t adjust the dollar amounts by any inflation measure, so while it looks like the revenues and payrolls are rising, in fact they are not.

Economic Census--Industry Snapshot (2012, 2013 $)

(2013 $, author’s calculations)

I have two observations to make: One, given that employees per establishment fell, it appears that larger firms have been the ones paring back. Two, similarly, like the employment projections I frequently write about, the number of firms and employees is a net growth figure that combines gross outflows with gross inflows. In other words, many people ejected from large firms may have started or joined smaller practices. Consider this a downshift in the sector’s performance.

The supply of lawyers and whatever capital they need exists, but the demand does not and it doesn’t look like it’s coming back any time soon.

NALP’s Fuzzy Definition of ‘JD Advantage’…

…Is largely the same as the ABA’s, but that’s not the point, which is that you should read:

NALP’s Fuzzy Definition of ‘JD Advantage’

on The American Lawyer. It’s probably the first time I’ve written on this curious topic.

I don’t have any music for you as I’m beating a virus today that’s hampering my productivity. Since my organs haven’t liquified yet, I’m ruling out Ebola.

Peace.

Florida Legal Sector Peaks Higher, Troughs Lower Than Country’s

The Tampa Bay Times tells us, “Florida’s Swollen Ranks of Lawyers Scrap for Piece of a Shrinking Legal Pie“—a fair assessment.

As to whether there are too many lawyers as the article says, well, obviously there are as many lawyers as the state can employ at any given time. Whether the state (and the country) produces too many law graduates and licenses more attorneys than can be absorbed is a different matter. I sympathize with attorneys trying to make a living, but I am enjoined from complaining if clients are charged less as a result.

Here’s the relevant line:

Almost half of the lawyers who responded to a Florida Bar survey last year cited “too many attorneys” as the most serious problem facing the legal profession today. That exceeded “difficult economic times” and “poor public perception,” which many blamed in part on relentless TV advertising, such as that by big personal injury firms.

Surveys are important sources of information, but just because lawyers believe something doesn’t make it true. It’s difficult to separate the extent to which the “difficult economic times” and the “too many attorneys” cause lawyer underemployment. In fact, Florida’s legal sector peaked higher and troughed harder than the rest of the southeast and the country.

Real Legal Services (Fla. edition)

(Source: BEA, author’s calcs.)

Although, the surveyed lawyers have a point: It’s also true, as the article points out, that the number of law schools in Florida needlessly doubled over the last 15 years or so. Unhelpfully, the article publishes law schools’ unemployment rates rather than my preference: percent employed in bar-passage-required jobs, full-time/long-term excluding law-school-funded jobs. Here’re Florida’s law schools’ 2013 results:

  • Florida State – 69.6%
  • University of Florida – 66.4%
  • Stetson – 62.0%
  • University of Miami – 60.7%
  • Nova Southeastern – 60.5%
  • Florida International – 59.6%
  • Thomas – 47.8%
  • Barry – 39.8%
  • Florida A&M – 38.5%
  • Ave Maria – 34.6%
  • Florida Coastal – 30.8%
  • Average Florida Law School – 51.8%
  • Southeast BEA Region Average Law School (Excl. Fla.) – 57.3%
  • Average U.S.A. Law School (Excl. P.R., Fla.) – 56.1%

In general, Florida’s law schools are doing worse than the regional and national averages. Perhaps you could call it the Florida Coastal effect. I’m sure someone with more time on their hands than I could write a paper on the impact for-profit law schools have on state employment outcomes and state legal industries.

What surprises me, though, are the attorney counts stated in the article: They’re much higher than the number of active and resident attorneys Florida bar authorities report to the ABA.

Since 2000, the number of licensed attorneys has swollen from 60,900 to 96,511. … Florida had 27,000 licensed attorneys in 1980. Within 20 years, the number had more than doubled.

According to the ABA, in 2000, there were 49,139 active and resident lawyers in Florida, and 68,464 in 2013. I don’t have numbers for 1980, but in 1989, Florida had only 33,251 active and resident lawyers. Anyway, I get 39 percent growth since 2000, not the 58 percent the article implies.

Despite these bleak facts, as always we can rely on the deans to tell us to hail the JD Advantage.

So what’s the advice for those considering law school or soon to graduate? Until demand better meets supply, [LeRoy] Pernell of Florida A&M’s law school predicts that many new lawyers will have to use their education in “nontraditional ways.” Among them: working for businesses instead of law firms.

Some could also wind up in jobs that don’t require a law degree. …

[Christopher] Pietruszkiewicz, Stetson’s dean, advises interning, then working in a public defender, state attorney or U.S. Attorney’s Office.

Hopefully the message for applicants is clear: There are better alternatives than law school in Florida.

How I Learned to Stop Worrying and Love the ‘JD Advantage’ Category

…Pretty much sums up my response to the National Association for Law Placement’s analysis of the class of 2013’s employment outcomes.

Quoth Executive Director James Leipold:

As the legal services market continues to change at a rapid pace following the dramatic downsizing during the recession, the variety and diversity of jobs that law grads take now is greater than ever. In general, the picture that emerges is one of slow growth, and growth that is a blend of continued shrinkage and downsizing in some areas offset by growth in other areas.

Although the NALP changed its terminology from “JD Preferred” to “JD Advantage” starting with the class of 2011, this year marks the record percentage of JD Advantage jobs.

Percent Employed by Status (NALP)

The good news is that the percent not working (aka the unemployment rate) has fallen to 12.9 percent. The record was 14.6 percent in 1993. I’m confident that record will not be breached, so there’s some good news. Indeed, I think it’s disturbing that the early ’90s recession mauled law practice so badly.

As for the JD Advantageers (seriously, slap a jetpack on them and shoot them into the sky), though, I did a quick correlation analysis for the 2001-2013 period. JD Advantage has a surprising -0.94 correlation with Bar Passage Required and an unfortunate 0.85 correlation with Not Working. This bodes ill for the merits of JD Advantage generally.

As for the correlation between JD Advantage and employer types, again, private practice correlates at -0.94. (Wow.) Business and Industry weighs in at 0.97, but Public Interest comes in at 0.91, which is either good or means that Public Interest has been watered down with people who couldn’t find work in firms.

(I forgot to mention that Business and Industry hit a record 18.4 percent of employer types this year.)

So yeah, strong positive correlations with unemployment is usually something you don’t want when making sense of employment categories. Thus, when Leipold says that the picture is one of “slow growth that is a blend of continued shrinkage and downsizing in some areas offset by growth in other areas,” I caution against seeing growing proportions of JD Advantage outcomes as plausibly representing a positive future for law school graduates.

Leipold, lamentably, disagrees:

It is not true that there are too many lawyers — indeed even today most Americans do not have adequate access to affordable legal services — but the traditional market for large numbers of law graduates by large law firms seeking equity-track new associates is not likely to ever return to what it was in 2006 or 2007, and thus aggregate earning opportunities for the class as a whole are not likely to return to what they were before the recession.

Not too many lawyers? Tell that to the JD Advantage cadre.

Scalia on Law School Sustainability: Concur and Dissent

…Is up on The American Lawyer.

Law School Salary Outcomes in One Uninfographic

More than three years ago, Frank the Underemployed Professional commented:

It’s too bad that there isn’t a good way to numerically quantify the monetary value of having a law degree. If we could do that and plot it over time, I’m sure it would decrease precipitously as the cost of tuition increases.

I thought of Frank when I put together a time-series chart of law graduate earnings for my last American Lawyer piece. It was really only one step away from being a comparison between law school costs and earnings outcomes. So after a little tinkering I think I can give as close an answer as anyone’s going to get.

Behold, on this day I give unto thee the law school outcomes “uninfographic”:

Law School Uninfographic
(Click to Enlarge)

Why an uninfographic? Because it tells so much yet requires even more explanation. The data come from three sources: the National Association for Law Placement’s (NALP’s) Employment Report and Salary Survey (ERSS) (many older years courtesy of moldy paper editions of the Official Guide), the ABA’s Section of Legal Education and Admissions to the Bar, and the Census Bureau’s Person Income Tables. I’ll go through each of these sources.

NALP

NALP’s ERSS tracks law graduates’ employment status outcomes, their job types, and their median salaries if they work full-time. It’s been doing this for nearly thirty years, but I’ve only managed to find data going back to 1991.

The salary data are not drawn from a random sample, and for most employment statuses only a minority of graduates report salaries. The median salary is very likely well above what the median graduate earns unless non-reporters and those in part-time positions are somehow earning more than grads employed full-time. Assuming this isn’t the case, the overall median figures shown here are roughly in the top 20-25 percent of total graduates between 2007 and 2012. Moreover, as demand for lawyers slackens, the median becomes even less representative of the class, a phenomenon I suspect is true for the 1990s legal sector recession. Oh, and did I mention that the median salary is also smack dab in the middle of a bimodal distribution?

What follows is a breakdown of each employment status by the range of graduates reporting salaries, the range of full-time workers in that status category, and the range of total workers in that employment status. Again, these ranges go from 2007-2012.

Employed Full-Time (black with circles):

  • 18,400-23,300 full-time salaries
  • 31,100-34,800 full-time workers
  • 35,700-37,500 total
  • 43,500-46,400 graduates

Bar Passage Required (blue with diamonds):

  • 16,000-21,300 full-time salaries
  • 24,900-30,000 full-time workers
  • 27,200-31,100 total

JD Advantage (red with squares):

  • 1,100-2,200 full-time salaries
  • 2,500-4,700 full-time workers
  • 3,100-5,900 total

Other Professional (green with triangles):

  • 670-780 full-time salaries
  • 1,700-1,800 full-time workers
  • 2,000-2,300 total

Non-Professional (purple with x’s):

  • 40-80 full-time salaries
  • 280-330 full-time workers
  • 530-810 total

Not Working (FYI):

  • 900-1,200 Advanced Degrees
  • 1,700-4,700 Seeking Employment
  • 700-1,300 Not Seeking Employment

Not Reporting (FYI):

  • 2,000-3,200 Not Reporting

ABA

The ABA Section of Legal Education collects graduate debt data from each law school (black with crosses for public law schools, black with dashes for private law schools), which excludes accrued interest. It then averages these without weighting them by the number of graduates with debt per school. Part of the rapid rise in law school debt is due to some law schools misreporting their 3Ls’ disbursed debts rather than their graduates’ total debts. The larger factor, I believe, is students’ decisions to rely more on Grad PLUS loans, which law students can use for living expenses as well as tuition not covered by Stafford loans.

I thought about using median law school tuition instead of graduate debt but decided against it. On the one hand, tuition data go back further and they show just how much more expensive public law schools have become. On the other hand, mean debt figures include tuition discounts, private loans, and living expenses.

Census Bureau

The Current Population Survey tracks full-time workers by education level attained and age, and it provides specific data on earnings of those who work full time, defined as those working 35 hours or more per week. Shown here is median earnings of full-time workers aged 25 to 34 with a bachelor’s degree (black with x’s). I included it to show a baseline alternative to law school. Unfortunately, it’s an age range and not a starting salary, so it’s not perfectly comparable to the NALP data, but at least it’s a “true” median and not the 75th to 80th percentile due to poor sampling like NALP’s.

Between 1994 and 2012, 73 to 78 percent of 25 to 34 year-olds with bachelor’s degrees who reported earnings worked full-time. Including people in that age range without earnings, it ranges from 65 to 71 percent.

Editorial

1). Strikingly, law graduates in full-time, non-professional positions make less than the median full-time college graduate in the same age range. Even the 75th percentile full-time non-professional salary (not shown) is less than the median full-time college grad. This is a strong indicator that law grads who do not find good jobs quickly do not benefit much from going to law school. In any given year, roughly 20 percent of all graduates are in a non-professional position or less (i.e. unemployed or not reporting, which I don’t take to be a good outcome).

2). Many graduates in better-than-non-professional jobs earn less than the college median nonetheless. Of course, as we’ve learned from the After the JD research, there’s a lot of attrition for law grads in private practice, with some leaving law entirely for positions that don’t really need legal education. Others find themselves in smaller practices with reduced earnings. The turnover factor increases the likelihood that there are better alternatives to law school.

3). I’m sure I say this every other post, but the Grad PLUS Loan Program needs to die. Although some law grads may’ve benefitted from it instead of taking out private loans (or even skipping law school), its primary contribution to humanity is to bail out law schools by providing them with students who would have been unable to attend for want of money for living expenses and excess tuition. Those students now have much higher debt-to-income ratios and no real choice but to go on IBR, which is turning into a policy piñata. Even if you ignore the discussion of whether law schools absorb federal loans, I’m still astonished that to my knowledge no law school has ever discouraged students from taking out giant sums of money for living expenses.

4). Recent graduate full-time starting salaries have fallen to their mid-1990s level. Looking at the ABA data for 2013 grads’ employment outcomes, it doesn’t look like this summer’s edition of the ERSS will show much improvement. Anyone predicting recovery in demand for lawyers is invited to explain what mechanism will bring that about. It certainly won’t be household spending on legal services that’s for sure.

5). Due to the aforementioned bimodality of the NALP data, the 25th percentile full-time employed law graduate reporting a salary (not shown) was only $5,200 higher than the median full-time college grad in 2007.

By 2012, the gap had fallen to $668.

Assuming a hierarchy of earnings with full-time jobs over part-time jobs over non-reports over unemployment, the 25th percentile salary was the ceiling for roughly 60-66 percent of law graduates from 2007 to 2012. Even I don’t want to believe the outcomes can be that bad.

That’s all I’ve got to say on the subject for now.

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