Day: 2012/01/11

Not Your Parents’ (or Grandparents’) Profession

In a post a few weeks ago, I teased the BEA for a clear typo on its Web site.

For my previous Am Law Daily post, which was based on that, I called the BEA to find out what was what. Turns out my guess of 1,277,000 persons engaged in industry was close (coincidentally), it was really 1,269,000. However, the BEA told me that the correct numbers were in the NIPA tables, and the person I was talking to said, “Oh, they go back to 1948.”

She was mistaken. They actually go back to 1929.

You can see it all in “Section 6 – Income and Employment by Industry.” Here’s the number of “persons engaged in industry” and “full-time equivalent” (FTE) employees in the legal sector. “Persons engaged” adds self-employed workers to FTE employees. (Why it’s not self-employed workers plus “full-time and part-time workers,” a separate BEA series, is beyond me.) The BEA changes its methodology periodically, explaining the breaks.

By dividing these two series by the population (pre-1952 is from averages of this Census Bureau page), we can actually learn quite a bit about the legal sector’s vitality through most of the last century, which is especially useful because the BEA’s data on the legal sector’s real value added only go back to 1977. Think about it: whenever the number of persons engaged and FTE employees per capita grows, that means the sector is absorbing workers from other industries and that demand for legal services is growing faster than the economy. (The opposite isn’t always true, for when it declines, either the whole economy is going down or just the legal sector is.)

This is an interesting example of where precision matters more than accuracy. It’s not so much the exact number of FTE employees or persons engaged per capita that’s important but their growth rates. For the gap years between the datasets, I took the averages of the end years. Here’s the five-year moving average to give the general pattern.

Any year above zero is one in which the legal sector’s “population” grew faster than the nation’s. These graphs should really land home my point about the legal sector. It did fantastically well from about 1960 to 1990 (and the 1970s, wow), and then … Yeah. Here’re the unsmoothed growth rates:

I put this up to show exactly how badly the legal sector has been doing recently. It generally went negative starting in 2004. That was eight years ago.

The other point to take from this is the gravity of the disappointing generational divide between those in leadership positions in the professions and those entering it. I haven’t yet opined on the new ABA President’s ill-advised comments on recent graduates; I may do so in greater detail later, but when William T. (Bill) Robinson III says that “[Law students] are, in my opinion, making very wise decisions about their future,” readers have to realize that as a 1971 grad, Robinson’s career began at the dawn of the profession’s golden age.

In the average year during the 1970s, FTE employees grew seven percent, the number of law school graduates per capita was lower, tuition was lower, and the 1970s was the frontend of the boom in legal education. Today’s law students would be thrilled to graduate under these circumstances. The fundamentals today couldn’t be more different, and the profession will pay dearly if it is led by individuals who refuse to acknowledge (and therefore represent) the growing constituency of lawyers who never had a realistic chance of joining it.

Earlier, I pointed out that the BEA defines “persons engaged in industry” as FTE employees plus self-employed workers, implying that we can isolate the number of self-employed workers in the legal sector by subtracting FTE employees from persons engaged. This can be useful because the vast majority of self-employed workers in the legal sector are lawyers, in contrast to the paralegals, clerks, secretaries, and janitors that can’t be separated from associate attorneys in the FTE employee data. At a per capita rate, it looks like this.

The number of self-employed workers alone better helps us measure long-term success in the profession. Assumedly, starting one’s own practice, or buying into an existing one represents an achievement in terms of professional competence. Not all associates stay with the profession, whether voluntarily or not, and while the number of self-employed workers per capita doubled between about 1950 and 1995, it took a rocky path to get there. Nearly a quarter of self-employed workers per capita in the legal sector have vanished in the last 15 or so years. Don’t expect them to come back.

Why is this important? A self-employed lawyer is by definition a “marginal attorney” in economics terms, i.e. the last person who can make a living as an attorney. That doesn’t need to be a “good” living, but the marginal attorney is someone who in theory can earn more lawyering than doing something else. (Emphasis on the “in theory.”) Unless and until I get the number of self-employed lawyers from the directly from the BLS, this (along with FTE employee growth) is as good a proxy for the long-term career outlooks of current law school graduates. The fact that the number of self-employed workers per capita in 2005–before the Great Recession–was about what it was in 1985 tells us we don’t need to train so many lawyers, i.e. it’s time to shut down law schools.

“Very wise decisions about their futures” indeed.