Law Graduate Overproduction by State (aka “The Holy Grail”)

[****THIS IS THE ORIGINAL POST ON LAW GRADUATE OVERPRODUCTION. THE PERMANENT VERSION OF THIS POST CAN BE FOUND ON THIS PAGE. PLEASE LINK TO THAT INSTEAD.****]

Choropleth Map of ABA Graduates per Job Opening by State (Indiana & Iowa are average)

This week’s breakthrough—discovering the national lawyer replacement projection data from 2008 to 2018 (240,400 gross jobs)—led to an even bigger breakthrough: lawyer replacement data by state over the same time period. I never dreamed I’d be able to find this when I started this blog.

Taking 2009 graduate numbers from the LSAC against state lawyer employment projections, we can compare lawyer overproduction state-by-state, telling us where there are too many law students and law schools. There are a few limitations with the data:

(1)  They necessarily exclude non-ABA law schools because no centralized authorities track them. This is unfortunate because non-ABA law schools account for 16.74% of all law schools (I continue to exclude correspondence schools and the JAG school). Mainly this means California’s values are extremely suspect.

(2)  The sum of the state replacement projections does not come close to the federal government’s projection. More below.

(3)  South Dakota does not provide any data, but it can’t have any more than 2,000 employed lawyers in 2008. My guess is its projections should be similar to North Dakota’s and Montana’s.

(4)  Overproduction assumes every graduate works in the state he or she attended law school. This obviously isn’t true. It’s also theoretically possible that some law schools deliberately “underbid” those in other states, i.e. cheaply producing better lawyers and exporting them to undercut local law schools (Widener’s Gambit?). I dismiss this hypothesis as dubious given tuition rates, and ultimately it doesn’t matter. The oversupply problem wouldn’t exist if there were clear attorney shortages to compensate for surplus production in other regions. The following results demonstrate only two states underproducing lawyers: Alaska and Nevada, but those two can’t possibly absorb the tens of thousands of excess law graduates produced per year elsewhere.

On the other hand, there are two pieces of good news:

(a)   the 2008 employment numbers are close enough between the states and the national government that they look like they include self-employed attorneys (solos and partners), and

(b)  The BLS assumes the economy will be at full employment by 2018, so as far as overproduction is concerned, we need not worry about today’s underemployed attorneys whom the BLS predicts will be employed doing something else (though that says nothing about their student debt and whether they’ll be gainfully employed at all).

Here’s a chart of the results, sorted by annual ABA graduate surplus because absolute overproduction more dramatically impacts the legal education system and people’s lives than relative overproduction.

The number in parentheses is the number of ABA-accredited law schools in that state as of 2011. * means the state has one or more non-ABA accredited law schools, and as always D.C. and Puerto Rico are counted as states for the purposes of this analysis.

#	STATE	Average Annual Job Openings	ABA Grads (2009)	Annual Surplus	Grads/ Opening
1	New York (15)	1,700	4,776	3,076	2.81
2	California (20)*	2,360	4,688	2,328	1.99
3	Massachusetts (7)*	430	2,316	1,886	5.39
4	Michigan (5)	470	2,016	1,546	4.29
5	Florida (11)	1,370	2,787	1,417	2.03
6	District of Columbia (6)	970	2,129	1,159	2.19
7	Pennsylvania (8)	640	1,715	1,075	2.68
8	Illinois (9)	1,130	2,166	1,036	1.92
9	Ohio (9)	460	1,495	1,035	3.25
10	Texas (9)	1,500	2,337	837	1.56
11	Virginia (8)	730	1,429	699	1.96
12	Missouri (4)	220	898	678	4.08
13	North Carolina (7)	450	1,055	605	2.34
14	Minnesota (4)	370	962	592	2.60
15	Louisiana (4)	250	811	561	3.24
16	Indiana (4)	340	828	488	2.44
17	Delaware (1)	60	537	477	8.95
18	Puerto Rico (3)	100	554	454	5.54
19	Oregon (3)	160	531	371	3.32
20	Connecticut (3)	190	531	341	2.79
21	Wisconsin (2)	190	487	297	2.56
22	Oklahoma (3)	210	494	284	2.35
23	Maryland (2)	270	548	278	2.03
24	Washington (3)	440	694	254	1.58
25	New Jersey (3)	540	791	251	1.46
26	Tennessee (3)*	210	445	235	2.12
27	South Carolina (2)	190	405	215	2.13
28	Kentucky (3)	180	385	205	2.14
29	Alabama (3)*	200	405	205	2.03
30	Iowa (2)	140	341	201	2.44
31	Mississippi (2)	150	347	197	2.31
32	Colorado (2)	330	518	188	1.57
33	Nebraska (2)	100	280	180	2.80
34	Arkansas (2)	110	249	139	2.26
35	Georgia (5)	760	896	136	1.18
36	Vermont (1)	60	191	131	3.18
37	Kansas (2)	170	297	127	1.75
38	Rhode Island (1)	80	184	104	2.30
39	Arizona (3)	280	378	98	1.35
40	New Hampshire (1)	50	144	94	2.88
41	West Virginia (1)	60	149	89	2.48
42	North Dakota (1)	30	83	53	2.77
43	Maine (1)	50	93	43	1.86
44	New Mexico (1)	70	112	42	1.60
45	Wyoming (1)	30	71	41	2.37
46	Hawaii (1)	60	88	28	1.47
47	Montana (1)	60	77	17	1.28
48	Idaho (1)	90	93	3	1.03
49	Utah (2)	280	281	1	1.00
50	Nevada (1)	150	140	-10	0.93
51	Alaska (0)	30	0	-30	0.00
52	South Dakota (1)	N/A	73	N/A	N/A
	USA (199)	24,040	44,000	19,960	1.83

You’ll note that the USA is supposed to add 24,040 lawyer jobs per year even though adding the individual state entries in the third column equals only 19,470, a deficit of 4,570 lawyer jobs per year that I highly doubt are all in South Dakota. The lower state sum means that the economy will gross only 194,700 lawyer jobs by 2018, and the national graduate to job ratio will be 2.2. The difference between the state sum and the national projection is important because the national number implies a 45.4% reduction in enrollments (~90 law schools) to stabilize the system while the former state number implies a larger 54.5% enrollment reduction equal to about 109 law schools. I don’t know what methodology labor departments use, but kudos go to Frank the Underemployed Professional of Fluster Cucked for subtracting ABA grads from forty years ago and coming up with a surplus similar to the BLS’s projection. For stats wonks, the median state surplus is 235, the mean 485.43, and the standard deviation 630.75.

As for the ratio of graduates to job openings, the median is 2.26, the mean 2.44, and the standard deviation 1.37. Only Idaho, Utah, Nevada, and Alaska are below the first standard deviation; Michigan and Missouri are in the second standard deviation above the average; Massachusetts and Puerto Rico are in the third, and Delaware is in the fifth.

To spare you another table, here’s a chart listing the graduate to job ratio:

For giggles, here’s Widener’s (DE) most recent bar passage rates as reported to the ABA and LSAC:

Of the 193 graduates in 2009 who were employed nine months after graduation, less than one quarter (48) were employed in-state. Graduates flocked to twelve (!) other states, and a clear majority took the Pennsylvania bar. Widener didn’t even bother reporting how many people took the Delaware bar. So the 8.95 graduates to annual job openings ratio isn’t implausible at all.

And for an appendix, here’s a table of the states by employed lawyers, growth rates, net jobs between 2008 and 2018, and the average annual job openings.

STATE	Employed Lawyers(2008)	Projected LawyerEmployment(2018)	Growth Rate	Net Jobs(2018)	Average AnnualJobOpenings
Alabama (3)*	7,910	8,420	6.45%	510	200
Alaska (0)	1,330	1,270	-4.51%	-60	30
Arizona (3)	11,880	12,450	4.80%	570	280
Arkansas (2)	3,430	3,840	11.95%	410	110
California (20)*	94,900	100,800	6.22%	5,900	2,360
Colorado (2)	14,090	14,710	4.40%	620	330
Connecticut (3)	9,940	9,930	-0.10%	-10	190
Delaware (1)	2,900	3,000	3.45%	100	60
District of Columbia (6)	42,410	44,180	4.17%	1,770	970
Florida (11)	52,980	56,820	7.25%	3,840	1,370
Georgia (5)	20,900	24,560	17.51%	3,660	760
Hawaii (1)	2,970	2,950	-0.67%	-20	60
Idaho (1)	2,710	3,080	13.65%	370	90
Illinois (9)	38,080	42,290	11.06%	4,210	1,130
Indiana (4)	9,740	11,310	16.12%	1,570	340
Iowa (2)	4,340	4,910	13.13%	570	140
Kansas (2)	5,210	5,940	14.01%	730	170
Kentucky (3)	6,510	7,070	8.60%	560	180
Louisiana (4)	10,770	11,270	4.64%	500	250
Maine (1)	2,800	2,800	0.00%	0	50
Maryland (2)	14,300	13,570	-5.10%	-730	270
Massachusetts (7)*	21,600	21,900	1.39%	300	430
Michigan (5)	19,030	20,210	6.20%	1,180	470
Minnesota (4)	15,290	16,160	5.69%	870	370
Mississippi (2)	5,260	5,740	9.13%	480	150
Missouri (4)	11,520	11,410	-0.95%	-110	220
Montana (1)	1,870	2,070	10.70%	200	60
Nebraska (2)	3,400	3,750	10.29%	350	100
Nevada (1)	4,840	5,690	17.56%	850	150
New Hampshire (1)	2,350	2,400	2.13%	50	50
New Jersey (3)	28,650	28,650	0.00%	0	540
New Mexico (1)	3,550	3,580	0.85%	30	70
New York (15)	86,140	87,080	1.09%	940	1,700
North Carolina (7)	14,310	16,170	13.00%	1,860	450
North Dakota (1)	1,240	1,300	4.84%	60	30
Ohio (9)	19,860	20,750	4.48%	890	460
Oklahoma (3)	8,100	8,680	7.16%	580	210
Oregon (3)	4,980	5,610	12.65%	630	160
Pennsylvania (8)	28,400	29,400	3.52%	1,000	640
Puerto Rico (3)	4,180	4,350	4.07%	170	100
Rhode Island (1)	2,710	2,980	9.96%	270	80
South Carolina (2)	6,640	7,260	9.34%	620	190
South Dakota (1)	N/A	N/A	N/A	N/A	N/A
Tennessee (3)*	8,720	9,160	5.05%	440	210
Texas (9)	44,680	51,360	14.95%	6,680	1,500
Utah (2)	7,080	8,580	21.19%	1,500	280
Vermont (1)	2,070	2,270	9.66%	200	60
Virginia (8)	19,780	23,390	18.25%	3,610	730
Washington (3)	14,840	16,320	9.97%	1,480	440
West Virginia (1)	2,940	2,970	1.02%	30	60
Wisconsin (2)	10,390	10,230	-1.54%	-160	190
Wyoming (1)	940	1,040	10.64%	100	30
—–	—–	—–	—–	—–	—–
TOTALS	765,460	815,630	6.55%	50,170	19,470
USA AVERAGE (199)	759,200	857,700	12.97%	98,500	24,040
***Difference***	-6,260	42,070		48,330	4,570

I include the “Difference” at the bottom to alert readers to the fact that while the 2008 employment numbers largely correspond between the states and the BLS (which I suspect excludes Puerto Rico), the 2018 employment projections simply do not line up. The federal government predicts 5.2% more employed attorneys than the states do, as well as a much faster growth rate. I’ll bet there’s a state government or two in there that’s not counting self-employed attorneys. If not, let’s hope the BLS is right and state governments aren’t because that’s 45,700 more graduates who will never see the inside of the legal profession.

Legal Profession 1994-2008: 103,200 lawyer jobs for 561,220 ABA grads

“That the current employment rate is not lower [than 88.3%] is further evidence of the resilience and remarkably steady employment market for U.S. law school graduates, even in times of relative economic weakness.” – Selected Findings for the Class of 2009 (NALP)

Reading statements like these, Annie Lowery’s Slate article attributing the law school application drop to the scambloggers and the improving economy, and the Public Interest Institute’s study led me to ponder what government data have to say about overall employment for lawyers. Assuming every ABA law school graduate wants to become an attorney, i.e. highly discounting the “versatile juris doctor” argument, things have been very bad for law students for a long time. True, some people do pursue legal educations for non-attorney career tracks and others pursue second degrees and enter other fields, but this assumption must hold true if law schools are to be taken seriously at all. I culled Bureau of Labor Statistics attorney employment numbers courtesy of Mr. Peabody’s Wayback Machine. Apparently, for at least as long as the Internet has existed, the BLS has been banging the lawyer oversupply gong.

Let’s compare employed attorneys to ABA law school graduate output. I don’t have replacement data for this time period.

While the lines match up somewhat in the early 2000s, the growth in employed attorneys is insufficient to absorb all the graduates. To better illustrate, let’s compare net lawyer job growth to ABA graduate output.

The green line shows the required imputed lawyer attrition rate if we were to employ every graduate. Now, we know not all graduates get jobs (and how), we also know attorneys leave the field voluntarily or otherwise (including recent graduates counted earlier), so the imputed attrition rate is an idealistic calculation. Additionally, unfortunately for this dataset, 2001 and 2003 were bullish hiring years for the profession and the BLS gathers data on even numbered years. Oh well, not my problem. We also know that the quality of jobs has been decreasing: more contract work, deferred start dates, and growth in new solo practitioners trying to make a go of things.

Here’s the table:

YEAR:	Employed Lawyers	Net Growth	ABA Grads	Required Attrition
1994	656,000	N/A	N/A	N/A
~1996	622,000	-34,000	78,981	-112,981
~1998	681,000	59,000	80,034	-21,034
~2000	681,000	0	78,526	-78,526
~2002	695,000	14,000	76,066	-62,066
~2004	735,000	40,000	77,479	-37,479
~2006	761,000	26,000	82,696	-56,696
~2008	759,200	-1,800	87,438	-89,238
Totals:	15.73%	103,200	561,220	-458,020

In sum, the economy added a paltry 103,200 lawyer jobs (barely one percent annual growth) for 561,220 graduates between 1994 and 2008. That’s 5.44 graduates per lawyer position over that time period, sadly excluding the replacement rate. In 2009 and 2010, a total of 87,592 people graduated from an ABA law school, and at the 2010 going forward (44,004), between 2008 and 2018 there will be 439,624 new ABA law graduates to compete for 240,400 lawyer jobs, a rate of 1.83 graduates per job. For an apples-to-apples comparison, it’ll be 439,624 graduates to a net of 98,500 jobs, or 4.46:1, which is better than what we’ve had in the past. Because the system is still growing, the actual ratio will increase. If we want a 1:1 applicant to job ratio, enrollments will have to be reduced by more than 55% as of 2008, and that says nothing graduates from non-ABA law schools. The BLS assumes the economy will be at full employment by 2018, so thankfully we can omit underemployed lawyers.

ABA Awakens?

Which leads me to the ABA Standards Review Committee’s Consumer Information Subcommittee’s proposed change to law school employment disclosure requirements.

Anyone who’s read the chart on page 4 will undoubtedly agree it’s a step-up from today’s law school advertising. Transparency advocates must be licking their lips. My complaints are (a) it idealistically assumes everyone who’s employed has had only one job nine months after graduation, and (b) like all transparency initiatives, it is subject to the whim of the “nine months after graduation” standard, which the ABA collects in place of “employed at graduation” because many employers won’t hire people until they’ve passed a bar exam. Law schools, NALP, and transparentists can’t tell us what will happen to graduates two or more years from graduation, even though it’s critical information applicants need. The data I’ve gathered here are the best proxy we have.

If the standard is adopted, expect law schools to lean hard on the bottleneck and versatile JD arguments, convincing applicants that they’ll be employed in the future because the economy is improving just for them. They’ll essentially sell out recent graduates, but law schools will say that students take on the market risk and that they aren’t responsible for the economy, which is true. However, it’s safe to say that if scambloggers can convince people not to go, the law schools’ own shocking employment data will do quite a bit of damage to their own credibility. 0Ls’ reasonableness will be put to the test, though I personally believe many people will still go to law school out of perceived financial desperation. I doubt transparency will be sufficient to save the legal education system.

Adoption of the ABA proposal is also a subtle moral test of the transparency movement, which I’ve felt has been opaque about the lawyer oversupply problem. I hope transparency advocates (to say nothing of the incredible NALP) aren’t surprised at the results that logically follow from what the government has been saying since I was in middle school: A long-term career as a lawyer is a fantasy for the majority of law students and for the federal government that unquestioningly finances the legal education system.

Quick Link–Iowa Limited Government Advocates Call Law School “A Great Devourer”

Deborah Thornton, “Law School: A Great Devourer,” in the Iowa Press-Citizen

Here’s the The Public Interest Institute’s full Policy Study

I normally don’t agree with limited government advocates, but it looks like they’ve done their research on the law schools. Interestingly, on page 7, the Policy Study produces BLS data showing that the economy will add 98,500 jobs AND that replacement needs will create 141,900 lawyer positions for a total of 240,400 lawyer jobs between 2008 and 2018, which I didn’t know how to find until now.

Adding to Thornton’s analysis, in that time period the ABA schools will have produced at least 439,624 new juris doctor holders (43,588 in 2008 + 44,0004 x 9 years). Excluding underemployed attorneys and non-ABA grads, the ratio will be one graduate for every 1.83 lawyer jobs, implying a minimum 55% reduction in graduates to lower the ratio to 1:1. The law school equivalent would be 90 out of 199 schools (I exclude the JAG school).

After addressing Iowa’s situation, Thornton provides four alternatives for prospective law students (32-34):

1. Become a paralegal and see if law school is worthwhile given the low number of new jobs
2. “Read” the law in a state that allows it (California, Maine, New York,Vermont, Virginia, Washington, Wyoming)
3. Attend law school part time
4. Law school transparency

I don’t have time to read the full study, but I would think limited government proponents would consider student lending reform as a policy solution to say nothing of shutting down scores of law schools. Iowans considering law school should definitely give the study a look.

But I Deflated the Economy Right!

Enter the BIDER

Via Nicole Battles in JDs Rising, we have Andrea Hable’s, “Law School Debt Survey Results,” in the Minnesota State Bar Association’s Practice Blawg. Ms. Hable conducted an unofficial and admittedly unrepresentative sample of Minnesota lawyers’ debt situations. Minnesota (my home state) as I frequently point out, is one of the most attorney oversaturated states in the country. Expecting 100 responses, Hable received more than 300, and the survey is still open, so if you’re a Minnesota lawyer (all are welcome actually), fill it out. Interestingly, it separates “new lawyers” (licensed 0-5 years) from all lawyers, with older practitioners experiencing many of the same problems the new lawyers do. We should expect as much since the national legal sector has been in an intra-economic recession since 2005.

Hable’s research verifies the BIDER sentiment out there:

One-third of respondents left comments. The overwhelming sense from the comments is that many new lawyers feel like they are out of options, not just with money but with life. Their language shows frustration, worry, lack of control, and a feeling that the loans will never be paid off. All of this on top of an already stressful profession. With or without regret, new lawyers are scared…

Many felt taken advantage of, either by their law school or the system. People are terrified of losing their jobs. One person moved out of state for better job prospects and was not admitted due to “irresponsible” loans (amounting to about the average student loan debt).

…

There was also a sense of frustration from several people who felt like they “did everything right” and were still falling on hard times (and being unfairly blamed for being irresponsible): top of the class, law review, moot court, working during school, etc.

I don’t know where to begin with this. Like almost everyone else, I’m aghast at the idea of legal educators charging so much tuition that graduates would be unable to obtain a law license due to “irresponsible” debt levels. Beyond that, nothing ruins democracy quite like a government that alienates its own people by delivering them to permanent poverty. As the government loses credibility and inclusiveness, expect willful defaults and tax evasion to increase.

Law School = Disinflation

The survey results don’t bode well for law schools’ contributions to our economy. Without criticizing Hable’s work, allow me to translate some of the terms into pidgin macroeconomicese.

Many commented on the impact of their debt on family. Most of them talked about:

• significantly (or indefinitely) pushing back plans to get married, have children, buy a house/condo, or even a car…

Pushing back family planning means these lawyers are spending money on debt service rather than houses, cars, and toys from FAO Schwarz in the Mall of America. That retards any economic recovery and clearly demonstrates a decline in living standards.

• moving from government or non-profit to private practice when they started a family
• wanting to move to non-profit or pro bono work but can’t afford to
• wanting to go solo but can’t afford to leave their jobs

Hmm.  I thought public service and nonprofit work was supposed to be a noble endeavor, yet it appears open only to the wealthy few.

The people who are managing thanked income-based repayment programs, LRAP, scholarships, using savings instead of taking out loans, and being “lucky.”  I especially liked the commenter who said they were doing relatively well at staying on top of his debt, but that “at the end of the day, that is a lot like being the skinniest kid at a fat camp.”

Ouch.

A few people re-enrolled in school because it was the only option to further defer their loans or stand a chance at getting a better paying job. Others are considering starting nonprofits so they may be eligible for debt forgiveness in the future.

Doubling-down on an LL.M or taking on more student debt in another field to delay loan repayment isn’t good for the economy. It’s the educational equivalent to taking out a second mortgage on your house to maintain your standard of living. Both activities increase the country’s debt-to-GDP ratio rather than actually promote sustainable growth. Choosing more education out of desperation also smacks the people-go-into-law-for-the-wrong-reasons-and-don’t-do-the-math.-Don’t-they-realize-law-is-hard! blamers in the face.

Income-contingent repayment forgives student debt for those in the public or non-profit sector after ten years. I wonder how many people will see their loans forgiven ten years from now.

The actual survey asked:

35.41% of the new lawyers now live more frugally. Translation: people aren’t buying stuff. When stuff doesn’t get bought, businesses lose revenue. When businesses lose revenue, they cut prices, reduce their labor costs, and when those don’t work they then fail. Government loses revenue. Lather, rinse, repeat. Welcome to economic depression. Obviously we’re only talking about a few hundred lawyers, but given the high levels of youth unemployment, I don’t think it’s too far a stretch to assume this is a problem happening economy-wide. Nevertheless, if there’s any lesson we can take from the survey it’s that America’s law schools are hampering economic growth.

The surveys and the analysis are good reads. Check ‘em out.

Stirrings of U.S. Student Debt Activism to Begin in April

The skeleton of a student movement forms as student debt clocks approach $900 billion.

Here’s the quick ‘n’ dirty:

(1) April 1, 2011 will be the “We Are Not Fools” day in which people can show solidarity against student debt and excessive tuition by either wearing red or by turning their Facebook profiles red. As I understand it, the goal was to have boots on the ground, but that didn’t materialize.

However~

(2) On April 5, 2011, the Fight Back USA! national teach-in will occur in the Judson Memorial Church, New York City, 2:00-3:30 PM EDT. However, unlike the teach-ins of the 60s and 70s, it will be streamed live on the Internet for global participation. The topic is broader than student debt, but it will be discussed. The moderators will be democratic socialists Dr. Frances Fox Piven and Dr. Cornell West. I’m curious how the participants will characterize the student debt crisis and what they think can be done.

Quick Link–Slate Writer Credits Scambloggers with Law School Applications Decline

Annie Lowrey, “Law of Averages,” in Slate

Lowery credits scambloggers for the drop in law school applications. That’s impressive. She makes some points I disagree with:

[F]alling demand for legal services is the ultimate root of the problem.

Actually, the legal sector matured in the early 1990s, and while it contracted by about 20% from 2005 to 2009, the employment outlook is permanently crippled. At some point, I’d like to figure out how that 20% translates to employed lawyers. Anyway, Lowery is right to point to automation and inefficient business models as another factor.

Once the conventional wisdom has spotted a bubble—whether in housing or gold or anything else—it tends to burst. That will come as cold comfort to the thousands of young lawyers struggling to pay their debts. But it may be something to consider for anyone willing to pay the law school of her choice six figures to extend her academic career for another three years. Maybe by then the recovery will actually be genuine.

This quote reminds me of Stephen M’s account of a law school dean who gave a lecture on the existence of a “law school bubble,” and it amused me that the dean didn’t believe it was a problem. Lowrey, for her part, missed that tuition is still rising at most law schools. A 10% decline in applications is only a drop in the bucket. I get the impression she thinks only a few bad apple law schools will have to close and all the others will have to cut enrollments by, like, 20%. When there’ll only be 98,500 new jobs for lawyers between 2008 and 2018, it’s going to look a whole lot worse for the law schools.

Legal Academy Approaching an “Endgame” Predict Bill Henderson and Andrew Morriss

First of all, because I’ve spent a good portion of my adulthood in Japan, my thoughts go to the victims of the recent earthquake near Sendai. As far as I know, all of my friends are safe; I hope they continue to be.

Now, to the topic.

U.S. News’s Bob Morse chafes at shilling law schools’ gamed employment data because it makes his publication look like nonsense, so he pleads the law schools to stop making him look bad. He then ups the ante:

In an effort to make our law school employment data more reflective of the current state of legal employment, U.S. News has modified how we calculate the employment rates that are used in the new law school rankings. We will also be publishing more detailed law school employment data on our website as part of the new rankings.

Professors Bill Henderson and Andrew Morriss predict this will come about not by increasing the weighting on employed-at-graduation numbers—which more and more law schools mutinously decline to submit—but by one of two ways:

1. “[Heavily penalizing] schools that withhold the employed at graduation data,” or by
2. “[Formulating] a way to quantify how many jobs at graduation map onto full-time professional jobs that require a law degree…Unknown may also be treated as 100% unemployed rather than the current 25% presumption of employment. Such changes would have the law schools scrambling to report better numbers in higher weighted categories rather than just finding ways to goose up the employed-at-graduation and employed-at-9 months figures.  Remember that Bob Morse explicitly endorsed the Law School Transparency movement.”

Are you convinced?

I’m not, but I won’t cry if proven wrong. When Morse says “modification,” I don’t think he means “significant punitive reweighting.” I believe as ever that U.S. News picks winners and not losers. In other words, it will never give a law school a vote of no confidence, nor will it allow its fourth tier to bulge.

Readers, take note: The flipside to “cynical” is “strategic,” and that’s the motivation I attribute to U.S. News and the law schools (sounds like I have a name for my next garage band), and hey, if law school professors can speculate, why can’t I?

http://www.abajournal.com/news/article/us_news_to_law_deans_please_dont_fudge_your_numbers/

U.S. News is caught in a rare and beautiful thing: a trilemma. It wants to sell magazines and maintain its credibility. To that end, it can’t let the law schools game its rankings lest it publish numbers the public won’t take seriously; it can’t ask law schools questions they’ll refuse to answer; at the same time it wants the law schools to take its rankings seriously enough that they’ll compete over them. While it’s reasonable to believe Bob Morse wants transparency for moral reasons, he doesn’t want to take up the spear himself lest he alienate more law schools into employment data noncompliance. Recently, he said he wants the ABA to make transparency happen and won’t directly ask for more from the law schools. His support of LST is similarly strategic because it can take the rejection that U.S. News prefers not to shoulder. Nor did he flippantly title a blog post, “LSAT Will Still Be Weighed Heavily in Law School Rankings.” For these reasons, I doubt that any law schools will find themselves in the “Unemployment Factory” tier on the Ides of March.

Indeed, the letter U.S. News editor Brian Kelly sent to the law schools that Morse reproduced for our entertainment stated quite clearly:

The main responsibility to gather data and implement quality standards lies with the ABA, which also accredits law schools. For whatever reason, it appears that some schools do not treat the ABA reporting rules with the seriousness one would assume. We understand that the ABA is working toward the creation of tighter, more meaningful standards, which seem promising.

“For whatever reason”? Mr. Kelly, there is one reason the Villanova Scandal happened: Law schools know full well your magazine’s ranking is their bond rating, and they’re willing to lie to the ABA to preserve it. I cynically—not strategically—believe other law schools are doing the same.

Kelly doesn’t issue an ultimatum. Instead he begs the law schools fall on their swords and maintain the status quo so his publication doesn’t publish more nonsense.

But the ABA can’t do it alone. Whatever the ABA’s ultimate decision, we would urge you to make sure that the information your school is reporting is as accurate as possible, and to consider going beyond the current industry standards. Perhaps we need metrics besides total employment rates to evaluate a successful law program. More data—on employment or other topics—is a positive factor for our readers and your students. We stand ready to work with you to find ways of publishing it.

Funny, I thought the ABA was in charge here. Law schools know that what makes U.S. News happy won’t necessarily make them look good.

Yet why is yours truly showing a sliver of optimism? Because if ever there was a time to leave the law schools holding the bag, it is now. Bill Henderson, and last week Bill Chamberlain, a dean at Northwestern, have both publicly alluded to the attorney oversupply problem and the likelihood of law schools closing. No one seriously believes that (private) law school tuition increases are anything other than rent-seeking by the schools. Consequently, in the medium term tuition and enrollments will drop, and for our viewing pleasure, U.S. News is deservedly caught in the middle. Profit from another year of one-size-fits-all rankings or purify itself for the new legal education order?

Henderson and Morriss, for their part, believe that law schools must submit to transparency or suffer decisive judicial or executive intervention:

At some point, all our lawyerly rationalizations will come to a bad end because a governmental agency or a court is going to challenge our right to self-regulation, thus ushering in a truly disgraceful chapter in the history of American legal education.

Now is one of the very few moments in our careers as academics where we have to make hard choices and demonstrate that we warrant the trust and respect of our tenured positions.   Through our governance organizations (ABA, LSAC, NALP, AALS), we need to implement a system of complete transparency on employment outcomes.  If the system has real teeth, it will force us all to work very hard to ensure we are delivering value commensurate with the tuition dollars we collect.

It’s the end of the road.  We likely have one last chance to get it right.

My bet’s on intervention.

Quick Link—February LSATs down 7.5% from 2010

I credit the scambloggers for a Pyrrhic victory.

2,093 fewer people than last year sat for the February LSAT. The 2010-2011 testing year saw a drop from 171,514 to 155,050—16,464 drop equaling 9.6%. Despite the drop, 2010-2011 was the second highest LSAT year on record. The number of LSAT takers is the best measure of demand for juris doctors, and because legal education is highly countercyclical, a drop in LSAT takers is unprecedented.

Oddly, tuition is still increasing.

See for yourself.

Legal Sector 2018: 500,000 Law Grads vs. 100,000 Lawyer Jobs

[****THIS RESEARCH IN THIS POST HAS BEEN CONSOLIDATED ON THIS PAGE. PLEASE LINK TO THAT INSTEAD.****]

[UPDATE: Through more recent research, I discovered that the BLS does calculate job growth due to replacement needs, projecting that 141,900 lawyers will retire or pass away. Adding that to the net growth figure cited below gives us a total of 240,400 lawyer job openings between 2008 and 2018. Read the Law Graduate Overproduction page for more information.]

Introduction: Harvard Says We Need More Lawyers

Recently, the ABA teamed up with Indiana-Bloomington Professor Bill Henderson to produce a chart of attorney salaries county-by-county. Now, I’m the type who’s wont to read blog comments (and here readers give the ABA a good whoopin’), and one attorney going by the moniker, Joel, said he crunched some of the numbers of attorneys in the U.S. based on 2009 BLS data on his own blog, Legally Sociable, where goes by Sagescape. Now, I use the 2008 data because it includes self-employed lawyers (partners and solos) and it predicts future attorney employment (very bad, more on that below), but I appreciate a more recent number. Sagescape directs us to Harvard’s “Analysis of the Legal Profession and Law Firms,” where we read the following:

The ratio of lawyers/jobs was flat for most of the 20th century and then rose dramatically after 1970, roughly doubling between 1970 and 2000. That increase (of 100% over 35 years) is similar to increases in the share of service and knowledge-based jobs in the US economy since 1970. (Wyatt and Hecker 2007)

The growth of lawyers is constrained by the output of US law schools. [!!]

The number of law schools has grown, but more slowly than the ratio of lawyers/jobs.  In 2007, there were 196 ABA-accredited law schools, compared to 144 in 1970, an increase of 36% (ABA).

The number of law school graduates has grown, faster than the number of law schools, but again, more slowly than the ratio of lawyers/jobs.  There were roughly 44,000 graduates of accredited law schools in 2005, compared to 30,000 in 1975 and 36,000 graduates in 198 [sic], an increase of roughly 50% over 30 years (ABA).  (Numbers for the early 1970s were depressed by Vietnam.)

Wow Harvard, the sting of your lash! Who thought universities were cruelly denying the public affordable legal services by declining to open more law schools!

Harvard bases its research on Wyatt and Hecker, who give us a similar analysis, though in their defense they use data going to 2000.

Lawyers and judges increased one-and-a-half times as a proportion of total employment between 1910 and 2000, with almost all growth coming since 1970. (See chart 5…) Between 1910 and 1970, lawyers and judges grew from 0.29 percent to 0.35 percent of employment (reaching a peak of 0.36 percent in 1940), after which they jumped to 0.71 percent by 2000. Employment grew from 112,000 in 1910 to 272,000 in 1970 and 927,000 in 2000. Stiff licensing requirements (for both individuals and law schools) and other restrictions on supply limited growth through 1970, but as these restrictions weakened or disappeared, the number of law graduates grew. At the same time, demand for lawyers increased, as many more laws were enacted, business activities became more complex, and society became more litigious. Civil rights legislation for minorities, women, and older and disabled persons; laws regarding the environment, employer-employee relations, product safety, and consumer protection; and higher crime and divorce rates all contributed to the growth of lawyers and judges. Several Supreme Court decisions expanded the right to a court-appointed counsel for criminal defendants, which in turn led to increased funds for public-defenders’ offices and a sharp increase in the number of court-appointed defense attorneys. [Page 43]

Here’s Wyatt and Hecker’s “Chart 5”:

So I guess law jobs are growing faster than society is making new lawyers. Well folks, that’s it for the Law School Tuition Bubble. I suppose I’ll just blog about music (I’m still listening to the Softies; help me stop!) or just post my crazy doodles on the Internet.

What’s that you say? My dozen or so consistent readers want a pro forma challenge? A rear-guard action, if you will?

Fine, but only because I like you.

Legal Sector Reality

Intuition tells me to return to Amir Efrati’s 2007 Wall Street Journal article, “Hard Case: Market Wanes for Lawyers.” Efrati’s article is better than David Segal’s 2011 NYT piece because he does more empirical research. This graphic always entrances me, like dangling string in front of a housecat:

A slack in demand appears to be part of the problem. The legal sector, after more than tripling in inflation-adjusted growth between 1970 and 1987, has grown at an average annual inflation-adjusted rate of 1.2% since 1988, or less than half as fast as the broader economy, according to Commerce Department data.

A while back, I tried to find the Commerce Department data Efrati refers to and couldn’t, but after my recent ABA→Legally Sociable→Harvard→Wyatt and Hecker sojourn, I did. I don’t know where Efrati gets the 1970 numbers, but I can get the 1977 to 2009 ones and I’ve adjusted everything to inflation using 2005 chained indexes.

Here’s the legal sector’s nominal size in billions of dollars:

As my favorite BigLaw partner, Phil Ken Sebben would say, “Rising profits, enlarging revenue, lots of good firm growth, we’re turgid with cash!”

Are we? Not quite. Here’s the size of the legal sector relative to the economy:

Wait a minute. Efrati’s “tripling” between 1970 and 1987 isn’t even that descriptive. Things were flat from 1977 until 1981, and after 1992, the legal sector’s proportion of the economy fluctuates between 1.44% and 1.55% of the U.S. economy. That’s certainly not the impression Wyatt and Hecker give us.

Let’s expand, update, animate, and interpret from Efrati:

DUUUUUUUUUDE. It would appear the legal sector of 2009 is no larger than it was in 2000, and in the twenty years between 1989 and 2009, the legal sector grew just under ten percent.

This is a very, very different story from the one Harvard told us. Taste the whip Harvard, now bleeeeeeed fo~~r me~.

Let’s say there was fantastic growth from the 1970s to the late 1980s. Obviously it wasn’t continuous. The legal sector went into a deep intra-economic recession during Paul Volcker’s infamous years at the Fed. In 1983 though, fantastic growth resumed. From 1983 to 1990, what I call, “Seven Years of Plenty,” the legal services sector grew at an annualized rate of 5.29% from 58.265 to 83.591 (original). Much of that occurred in 1988 when the sector saw a tremendous 13% surge. Savings & Loan litigation perhaps?

Even though the legal sector resumed growth along with our recent bubbles, the growth rates between the two tell us that the legal sector didn’t really keep up with the economy.

What’s going on here?

Two things happened in “Seven Years of Stagnation.” One, while the rest of the economy grew, the legal sector fell into recession twice. Two, the legal sector stopped growing past 1.44% of the economy. Efrati called this a “slack in demand,” but I see it as something else: Maturity, which the Economic Glossary defines as:

The third stage in the product life cycle, characterized by flattening of sales and decreasing profit margins. Advertising and promotion are used to maintain market share and to prevent the erosion of sales and profits. During this stage, the initial decline of a product begins and many businesses try to “re-invent” their products to prevent the upcoming decline stage. Many times the company finds new uses for an existing product (baking soda as a deodorizer), totally new markets (foreign countries), or a way to enhance the existing product to make it better and to re-start the life cycle. The television has gone through at least two life cycles, first from black and white to color and then from color to high definition (HD) and plasma. Along the way there were enhancements such as remote control, VCRs to complement them, and cable to help with reception.

Unlike some products (VCRs), legal services will always be in demand, but 1.2%-1.5% of the economy is the most it will ever get because legal services are an intermediate good: they’re a catalyst for economic activity and never an engine for growth. The best firms can do is increase advertising, to the extent they’re allowed, and I think this includes an even greater emphasis on credentials. This is something else Bill Henderson writes about. Once the pond stops growing the issue turns to how its resources are distributed. For law firms, demand for those who are perceived to be the very best attorneys increases. I suspect this also explains the birth of the bi-modal starting salary distribution, which also occurred at the time, but BigLaw is not my bailiwick, so read Steve Harper and Jerry Kowalski as a supplement. I recall Stephen Bainbridge coming to this conclusion.

Ironically, the fact that the number of law students per capita declined during the 1990s actually mitigated some of this, though the 2000’s growth towards the 1980 record doesn’t help.

Maturity also implies that legal education’s then tolerable inefficiencies hit a wall, and normally market forces would’ve required adaptation. The financing system and accreditation monopoly prevents that, and we can see the rising tuition as a result of increased competition for high quality students. Perhaps maturity even explains the prevalence of the U.S. News rankings.

Another thing that happens in this stage of the product cycle is a shift from providing new services to increasing productivity in existing ones. Fewer inputs for the same output saves money, attracting clients. For example, I redirect you to the recent coverage on the development of super-effective document review software. What caught my eye there was this line:

[The five CBS studios sued by the Justice Department] examined six million documents at a cost of more than $2.2 million (~$7.4 million in 2011), much of it to pay for a platoon of lawyers and paralegals who worked for months at high hourly rates. But that was in 1978. Now, thanks to advances in artificial intelligence, “e-discovery” software can analyze documents in a fraction of the time for a fraction of the cost. In January, for example, Blackstone Discovery of Palo Alto, Calif., helped analyze 1.5 million documents for less than $100,000.

6.7¢ per document versus $1.23 per document. Which would your client rather pay?

One could argue that with cheaper discovery litigation will come into greater vogue, especially between small plaintiffs against large entities, but any technological advancements will likely reduce the legal sector’s size within the economy and it certainly won’t employ all the lawyers it offsets.

Conclusion: Law Graduates Dashed Upon the Rocks

In fact, we’re not going to need nearly as many lawyers as our law schools are producing. The smoking gun, which sadly was under my nose all this time, is in the erstwhile 2008 BLS data, which linked to a PDF projecting job growth for lawyers. Between 2008 and 2018 net lawyer job growth will be…98,500.

Of this, 50,300 will be legal sector employees (non-equity attorneys); 29,400 will be in government, and a whopping 9,800 will be self-employed, i.e. partners and solos. Obviously we’re talking about net job growth, so we must account for retirees, advancers (e.g. judges, legislators, presidents and governors, law professors (which will decline at some point regardless of what the BLS thinks), etc.), walk-aways, lay-offs, failed practices, and ousted partners. Nevertheless, given that the ABA-accredited law schools produce 44,000 juris doctors per year, to say nothing of the roughly forty non-ABA schools, it should be clear that no sector of the economy will gainfully absorb half a million new lawyers by 2018.

It looks like the LSTB will continue its traditional programming.

Exile on Link Street–Krugman Also Sees College-Educated Luddites & SLM Hides Default Rates

(1) Paul Krugman, “Falling Demand for Brains,” and, “Degrees and Dollars,” in the New York Times

[T]he Luddites weren’t the poorest of the poor, they were skilled artisans whose skills had suddenly been devalued by new technology.

It appears I wasn’t alone in connecting e-discovery software with the Luddite fallacy. Dr. Krugman also explains legal process outsourcing:

[Research] by my Princeton colleagues Alan Blinder and Alan Krueger suggests that high-wage jobs performed by highly educated workers are, if anything, more “offshorable” than jobs done by low-paid, less-educated workers. If they’re right, growing international trade in services will further hollow out the U.S. job market.

Now if only Dean Baker would figure this out.

[If] we want a society of broadly shared prosperity, education isn’t the answer — we’ll have to go about building that society directly. We need to restore the bargaining power that labor has lost over the last 30 years, so that ordinary workers as well as superstars have the power to bargain for good wages. We need to guarantee the essentials, above all health care, to every citizen.

What we can’t do is get where we need to go just by giving workers college degrees, which may be no more than tickets to jobs that don’t exist or don’t pay middle-class wages.

Now if only Dr. Krugman connected this with the $850 billion of non-dischargeable student loan debt. It’s a good start though.

Speaking of student loans…

Courtesy of the Default: The Student Loan Documentary

(2) “Securities claims against Sallie Mae and CEO adequately alleged,” in AllBuisness.com

A group of shareholders won a summary judgment motion against SLM and Albert Lord regarding underreported default rates misleading the investors into investing in SLM. It also appears that Mr. Lord (what an apt name for his position) prospered to the tune of $225 million.

I wonder what the long-term default rates really are.