Day: 2011/07/18

A Reading List for the “Conversation about Employment in the Law and Legal Occupations”

Expressing relief at not being named in Cooley’s lawsuit against four John Doe bloggers, BIDER’s Angel includes the e-mail by Cooley’s president, Don LeDuc, to his students assuaging their possible concerns that their law degrees may not be very marketable. He writes:

The entire conversation about employment in the law and legal occupations is almost entirely wrong [eyebrow rises]:

1. According to the Bureau of Labor Statistics (BLS), the unemployment rate among lawyers in 2010 was 1.5%, for those in all legal occupations it was 2.7%, and for all occupations it was 9.6%, which drops to 8.9% when those who have never been in the labor market or are returning from military service are excluded.

2. The 2.7% unemployment rate for legal occupations, including lawyers, was better than the rate for all other occupations in the BLS category of management, professional, and related occupations except for health care practitioners and technician occupations (2.5%). This data shows that becoming a lawyer is a better choice for those considering a career, not a worse choice.

(I omitted the third and fourth points about NALP and Cooley’s unemployment rates because they aren’t germane to this post.)

I spent more time than I wanted to verifying President LeDuc’s facts, not because I thought he was making them up but because I wanted to know where in the BLS they came from. I mostly succeeded; most of what LeDuc is discussing can be found here, but the only place I found the 1.5% lawyer unemployment number is at the Wall Street Journal. The non-seasonally adjusted legal sector unemployment rate jumped to 4.2% by June of 2011, so much of what President LeDuc says loses whatever force it had.

The lawyer unemployment rate, of course, is not the appropriate measure of a law degree’s value for at least two reasons: (1) Only the BLS’s Occupational Outlook Handbook includes self-employed attorneys in its data, so anything else about unemployed attorneys is probably excluding ousted partners and failed practices. (2) Measuring unemployed attorneys assumes the legal profession is a closed system, that is, everyone who finished law school before 2008 had gainful employment in the legal profession if they wanted it. Not so. There are far more JD-holders in the economy than are needed to staff the legal profession, and we are producing more than are necessary going forward.

By the way, this is what employment in the U.S. legal sector has looked like:

Notice how there was almost no job growth until dotcom bubble and how its current employment has both fallen to 2003ish levels and stagnated since late 2009.

As far as law schools are concerned, LeDuc’s “conversation about employment in the law and legal occupations” is only now starting to take graduate output seriously, a development I welcome. A good example of the conversation is between Professor Theodore Seto of Loyola, Los Angeles and Professor Brian Tamanaha of Washington University. TaxProf Blog served as the forum. I think the two viewpoints are important because they introduce readers to many themes I’ve written about before, making it a good reintroduction to the LSTB. Tamanaha sees the drop in applicants (what I called “Scam Blogger Victory (V-SB Day)” a while ago—an interregnum until some kind of formal reform is enacted), and Seto stands by the “bottleneck” and “versatile juris doctor” arguments to show there is no long-term employment problem. Here’s a summary:

  • Tamanaha, “The Coming Crunch for Law Schools,” showing that law schools are continuing to over-enroll relative to available lawyer jobs due to overexpansion of faculty. The declining number of applicants will force them to adjust or fail.
  • Seto, “Is The Sky Really Falling in Legal Education?” focusing on Tamanaha’s over-enrollment point by giving us the bottleneck argument (graduates per capita is the same as 20 years ago) and the versatile JD argument as well as a novel one that faculty spending isn’t growing relative to other law school expenses so faculty expansion is irrelevant.
  • Tamanaha, “The Crunch Is Coming for Law Schools,” pointing out that tuition has increased over inflation and over the perceived ROI of a law degree, which is leading to the applicant decline.
  • Seto, “The Law School Pricing Problem,” restating that graduates per capita is unchanged and that faculty expansion is not causing law schools’ problems, while conceding that he doesn’t know whether tuition has increased past the point of equilibrium.
  • Tamanaha (comment), reiterating that he’s writing about the number of applicants dropping and that graduates per capita isn’t relevant to projected job openings.

For extra credit you can read Stephen Bainbridge’s, “Consolidation in the Law School Industry,” pessimistically arguing that law schools and their alumni will not go quietly into the night, resisting closure and consolidation for many years to come.

The two professors’ discussion advanced my thinking in some ways.

(1)  Bottleneck-believing law school faculty appear to have contradictory views of legal ed. reformers and scambloggers. On the one hand these are disgruntled graduates, among others, who are fomenting a “bank run” on the law schools, depriving the legal profession and the public of the high caliber attorneys they need. On the other hand, they see the drop in applications as a response to the business cycle, making reformers a “natural” economic outcome.

(2)  When discussions of ROI lean on noneconomic benefits for persuasiveness, the utility of government loan programs becomes dubious. For example, Seto writes, “Many parents would prefer to be able to say ‘my child is a lawyer’ rather than ‘my child is a plumber’ even if plumbers, on average, make significantly more than lawyers.” Government loan programs don’t exist to make people’s parents happy; they exist to provide the economy with human capital. Once we start selling degrees as status symbols, the loans cease to be necessary.

(3)  Tamanaha asserts that structural forces require law schools to over-enroll to maintain their faculty while Seto says faculty aren’t taking as much out of the budget as before. This isn’t a conundrum. Law schools spend the increased tuition on something, and lower faculty/student ratios combined with salary increases above inflation should verify Tamanaha’s claim.

(4)  How do we reconcile Tamanaha’s prediction that law schools are structurally constrained against Seto’s students per capita argument? Here’s a new graph for you:

While the ABA law schools aren’t enrolling more people per capita than they did in the past, fall 2010 was the second highest year for students per law school. The record year, starting fall 2004, was merely 0.2% higher. 1991 comes in third. To give you a better perspective, the decade average students per law school was highest in the 2000s. This translates to a record decade of revenue for the existing law schools, especially since tuition is higher than ever before.

1970s 684.2
1980s 708.4
1990s 712.2
2000s 726.1

Thus, an applicant decline will hit the law schools relatively harder today than if it occurred in the past.

Circling back to the Thomas M. Cooley Law School, which began today’s discussion: Cooley built three branch campuses in Michigan (the ABA still counts it as one law school), the Lansing baseball stadium is named after it (the school, not the jurist!), and it has been a significant driver of the 2000s enrollment increase. From the Official Guide:

2004 2,868 N/A N/A
2005 3,252 384 13.4%
2006 3,606 354 25.7%
2007 3,664 58 27.8%
2008 3,678 14 28.2%
2009 3,727 49 30.0%
2010 3,931 204 37.1%

In 2010, Cooley’s enrollment accounted for roughly 2.7% of all ABA JD candidates (147,525), or roughly one law student in 38 (I should add that the majority of Cooley’s students are part-time, which distorts its 1L class sizes from its matriculation rate). That’s up from 2% in 2004. Seeing the unusual growth in 2010, Cooley’s 204 students account for 8.9% of the 2010 ABA enrollment increase (2,286), leading me to speculate that either this growth is wholly attributable to its Ann Arbor campus (opened in 2009 at Ave Maria’s old building), or it is “saving up” enrollments in preparation for law school applicant winter.

As Tamanaha points out in his first post, Cooley accepted more of its applicants than any other law school, 83.3% in 2010, up from 79.1% in 2009, and 61.3% in 2008. Contrary to what President LeDuc says, the entire conversation about employment in the law and legal occupations is almost entirely right, college students—law schools’ target demographic—distrust the sellers’ representations about their employment prospects and they’re voting with their feet. The crunch is coming, and for Cooley, it may have already begun.