GUEST POST—Lawyer Oversupply: Does producing more and more Attorneys result in better prices for average consumers? Does it Actually help the new Lawyers themselves? (Part II)

(While I’m out, Connecticut attorney Samuel Browning is contributing a two-part series on attorney oversupply. -LSTB)

Lawyer Oversupply: Does producing more and more Attorneys result in better prices for average consumers? Does it Actually help the new Lawyers themselves?

Link here for Part I.

We are graduating thousands more ABA-accredited law school students each year than there are attorney jobs. This oversupply is at least a third of the total number of graduates each year, it may actually be higher.

Fortunately this oversupply is not leading to increased frivolous litigation, probably because of fixed costs required to litigate, and other inhibitors and constraints within the present legal system.

The increased supply of attorneys, while initially serving to keep some legal fees lower for the consumer, will probably not lead to any more increased savings for the consumer because there are set expenses needed to litigate certain cases, for which the client will generally have to pay.

Part II

Where the glut of lawyers does help consumers, is for legal services that are transactional, involve no court appearances, and can be wrapped up quickly. For example a simple will, with a trust, in Connecticut may run approximately $250 to $350. Registering a LLC might go for $250, as long as organizational papers do not have to be drafted. A power of attorney will go for under $100, and a simple closing done for a seller of a residential property might cost $500 to $600. However for banging heads with another party in court, legal fees rise dramatically. Therefore there appears to be a ceiling in terms of the number of paying, garden variety cases for private attorneys serving private clients to work on. If you graduated from a law school which was not in the top 20, and were not in the top 20% of your class, you will most likely not be hired by “big law” and will most likely work for yourself, or in a very small firm. You also may take court appointed cases for which you will provide services to indigent clients at anywhere between $10 and $50 an hour, with a yearly cap. Most attorneys use such cases to meet expenses and pay bills as versus their full-time work.

Any law school dean who argues that simply increasing the supply of lawyers will allow more poor people or under-represented people to receive counsel either does not understand the legal market (which is possible since many do not actually practice law) or alternately indicates dishonesty on their part. Instead of increasing the number of lawyers, by guaranteeing access to federally subsidized loans for law school, society would be better off if it diverted some of those funds to pay legal aid societies enough money to hire enough lawyers to represent the poor in legal proceedings. In Connecticut, legal aid is mostly funded through interest received from client escrow accounts called IOLTA accounts. Every time interest rates substantially dip, some legal aid lawyers get laid off. See this Connecticut Law Tribune article for a description of the latest meltdown in legal aid funding.

Curious about the number of local legal aid attorneys, I contacted Steven Eppler-Epstein, Director of Connecticut Legal Services, which serves as an umbrella group for the multiple legal aid societies working in Connecticut. Eppler-Epstein told me that presently his organization and other legal aid organizations in Connecticut have approximately 120 lawyers on staff and funding of about $18 million. At their height in Connecticut, such organizations were employing 180 to 200 attorneys. Presently they can only serve one in five people who request, and would be eligible, for services. But funding legal aid is not a priority in our society. Instead, it is my observation that it is more important to fund law school loans and legal education when we already have a glut of lawyers.

Let me provide a hypothetical. Let’s admit we do not know the percentage of law school graduates who are presently defaulting on their loans. But we’ll adopt the conservative figure of 1%. The second assumption will be that each will be carrying approximately $100,000 in law school loans upon graduation We’ll also limit ourselves to a cohort of one year of lawyers since employment prospects were brighter in the not-so-distant past. 1% of 44,000 law school graduates is 440 who default on their loans owing $100,000 for $44 million in wasted educational money. This is relevant to you, the taxpayer, because most of those individuals had some sort of federally guaranteed student loan which the taxpayer pays for upon default.

Recommendation

If our government had a clue, what they would be doing is the following. A) Only agreeing to loan federal money, or make federally guaranteed loans to a limited number of law students a year, a number that reflects the reality of how many jobs there actually are available for graduates. B) Those who could not access such subsidized loan money would have to obtain private loans, which would dissuade many such people from becoming lawyers, even if the law was changed to allow for them to be discharged by bankruptcy. C) Some horrible fourth tier law schools would not have enough paying students and would go out of business, shutting law schools the ABA should have closed long ago. D) With the surviving law school graduates having more economic opportunity we would have fewer defaults of federally loaned, or federally guaranteed money, so we could transfer some of the money that was never loaned out, and defaulted upon, to pay for legal aid, and public defender services for the poor, which will help society and create a more stable market for law graduates.

Notes

1). The precise amount of debt law school students are carrying has been the subject of disagreement. In 2003 the ABA said that the typical student graduated with debts of “around $80,000”. See page 6, note 15 which cites Lifting the Burden: Law Student Debt as a Barrier to Public Service, the final report of the ABA Commission on Loan Repayment and Forgiveness, 2003, at 14. In 2009 Forbes Magazine said that the average law school graduate owed $100,000 in educational loan debt. Given the passage of eight years, I now believe the higher figure to be more accurate. These figures do not appear to include the outstanding loans incurred during the law student’s undergraduate years, which will also typically run in the tens of thousands of dollars.

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