But the Jobs Weren’t There to Begin With

There’s been a lot of coverage recently on this year’s contribution to the law school applicant nosedive that began in 2011. Even The New York Times has jumped aboard. None of the coverage says a whole lot you don’t already know, but there are moments when I think it’s inaccurate.

The drop in applications is widely viewed as directly linked to perceptions of the declining job market. Many of the reasons that law jobs are disappearing are similar to those for disruptions in other knowledge-based professions, namely the growth of the Internet. Research is faster and easier, requiring fewer lawyers, and is being outsourced to less expensive locales, including West Virginia and overseas.

In addition, legal forms are now available online and require training well below a lawyer’s to fill them out.

…

In recent years there has also been publicity about the debt load and declining job prospects for law graduates, especially of schools that do not generally provide employees to elite firms in major cities. [Emphasis LSTB]

Okay, we can argue over perceptions, but there’s a distinction between people not applying because the jobs are declining due to productivity and people not applying because the jobs were never there to begin with because of a flawed system. The article implies that all law schools, including those that “do not generally provide employees to elite firms in major cities,” lived in a golden age until only recently, and all their graduates were able to find work at least as solo practitioners hauling in “middle class” incomes until WebPleader 2.0 came along. Perhaps I’m exaggerating the Times‘ perspective, but I doubt this was ever true. More importantly, the Bureau of Labor Statistics doesn’t either.

Even though jobs for lawyers are expected to increase rapidly, competition for job openings should continue to be keen because of the large numbers graduating from law school each year. During the 1970s, the annual number of law school graduates more than doubled, outpacing the rapid growth of jobs. Growth in the yearly number of law school graduates tapered off during the 1980s, but again increased in the early 1990s. The high number of graduates will strain the economy’s capacity to absorb them. Although graduates with superior academic records from well-regarded law schools will continue to enjoy good opportunities, most graduates will encounter competition for jobs. As in the past, some graduates may have to accept positions in areas outside their field of interest or for which they feel they are overqualified. They may have to enter jobs for which legal training is an asset but not normally a requirement. For example, banks, insurance firms, real estate companies, government agencies, and other organizations seek law graduates to fill many administrative, managerial, and business positions.

From last year’s Occupational Outlook Handbook? More like 1996-97’s. I don’t claim to read the minds of people who don’t apply to law school (there’s a koan for you), but the link to David Segal’s previous work notwithstanding, the Times appears to believe that no university frivolously expanded by building a law school. In short, it’s avoiding a discussion on the over-expansion of legal education generally by claiming applicants read about legal sector outsoucing on The Wall Street Journal rather than a scamblog or Above the Law.

Instead, “Some argue that the drop is an indictment of the legal training itself — a failure to keep up with the profession’s needs.” I don’t think anyone complained about the substance of legal education when it was cheap and Americans’ incomes were sufficient to afford legal services, so this strikes me as corporate opportunism. No one wants to pay to train their workers, and demanding law schools open expensive clinics to train tens of thousands of people for only thousands of jobs only places an impossible burden on the schools and shifts the training costs onto the students. Although the one-year and two-year specialist training discussed in the article are better than the existing system, supply still does not create demand.

The closest the Times goes to criticizing higher education expansionism is at the very end:

Whether or not such changes occur, for now the decline is creating what many see as a cultural shift.

By “cultural shift,” the Times refers to a statement that Bill Henderson makes about how law school is no longer the last refuge of the liberal arts major. Of course the Times doesn’t ponder why colleges sell degrees that don’t lead to relevant jobs. That’s just a “cultural” given. The fact that the government enthusiastically endorses mass higher education in the face of such poor outcomes doesn’t raise any eyebrows either.

For your edification, here’re the updates to the LSAC’s data over the last few weeks. We are now on week 4 of 2013.

In short, there’s been no real change since I wrote on this three weeks ago.

University of Idaho Law Dean Covets Real Tax Dollars to Prevent Fake Ones

Betsy Z. Russell, “Law School Dean: Idahoans Pay ‘Hidden Tax’ on Lawyers,” The Spokesman-Review.

Kevin Richert, “U of I Seeks to Expand Boise Law School,” Idaho Education News.

Small western public law schools seldom make the news, but I think Richert’s title reflects a more accurate assessment of the situation. He writes:

University of Idaho administrators found themselves in a tough position Wednesday. They were lobbying for an additional chunk of state dollars – to graduate more lawyers.

The U of I is seeking $400,000 to expand its Boise law school. The money would expand the satellite campus, now serving about 30 third-year law students, to serve 40 second-year students and 40 third-year students.

Why does the law school need more money? Does Idaho have an attorney shortage?

According to the Idaho Commerce & Labor, Research & Analysis Bureau…

It’s like Idaho dares you to read its lawyer projections…

…Idaho will add 69 lawyer jobs per year between 2010 and 2020 (690 total), and the Official Guide tells us that 198 people graduated from the University of Idaho in 2010 and 2011. Obviously not all of Idaho’s law grads take or pass the state’s bar (more below), but usually at least 75 percent who take it do so on the first try. Thus, there’re still enough graduates to cover the annual number of jobs. Also if grads from the newish law school, Boise’s Concordia University, start adding to the mix, the number will increase.

But University of Idaho president Duane Nellis is resolute:

We actually import lawyers from other states, because we’re not supplying enough.

Only 26 percent of Idaho’s new lawyers graduate from the U of I, law school Dean Don Burnett told JFAC.

So much for the free movement of labor.

The Idaho Legislature might want to ask President Nellis why Idaho needs more law grads if so many of his university’s regularly leave the state. The Official Guide also tells us that a few dozen of U of I’s grads take the bar in other states each year (there might be some overlap with Idaho). If there is lawyer work needed to be done in Idaho, one would think the law school’s graduates would want to stick around. If not, firms should charge more for legal services to pay associates to stay. Alternatively, someone could convince the Legislature to fund legal services for people who need them but can’t afford them rather than handing money to the state university to train more lawyers who will leave the state.

U of I grads also have an unemployment problem. For the last two years, at least 20 graduates have been out of the workforce or didn’t respond to the school’s employment survey. Doesn’t sound like a shortage to me.

[T]he rest [of Idaho’s lawyers] come from out-of-state institutions — and if they return to Idaho, after paying three years of out-of-state tuition, they may go to work with student loan debts exceeding $100,000. If Idahoans can take law school classes in Boise, perhaps while a spouse works in [Treasure Valley], a student can graduate with a smaller loan debt.

And that, Burnett argued, makes law school funding an economic development issue. He called student loan debt a “hidden tax” on anyone who seeks legal counsel — including small businesses.

IBR aside (God, I say that a lot), the “tax” incidence of student loans falls on the debtors unless they form a labor cartel and fix prices. Otherwise, their labor is traded on the free market and they eat the student loan burden with lower living standards. Just as you’ve never heard of a business that was forced to pay a worker a higher salary because the worker chose to live in an expensive house, so too do businesses not eat the cost of student loans. Notably, the people protesting student loan debts aren’t businesses but debtors.

Since there’s no shortage of lawyers in Idaho, contrary to President Nellis’ assertions, we can suspect that this is really just about rationalizing university expansionism.

Not being fooled, legislators tighten the vice (Switching to Russell).

Rep. Shirley Ringo, D-Moscow, asked Burnett about national reports that new lawyers are having trouble finding jobs.

This is when sweat would form on my brow, but I’m not particularly good at spinning. Burnett is so good that he doesn’t discuss his graduates’ job prospects, just debt.

“It’s true that applications to law schools are down this year, they have been the last two years,” Burnett replied. But he said that’s because private law school graduates now average more than $125,000 in debt when they graduate, which on top of their undergrad student loan debt, doesn’t fit well with the pay at entry-level lawyer jobs, particularly in Idaho.

“That’s why public legal education continues to be very important,” he said. “Our students come out with five-figure debts not six-figure debts, and they can manage them and they can stay in Idaho. … They can represent communities, they can be public defenders, they can be prosecutors.”

Someone should teach Dean Burnett about IBR/ICR, etc. It’s really sad to see these people selling degrees without knowing how their students are supposed to pay for them. Also, Idaho is one of the cheaper ABA law schools outside of Puerto Rico, if what Dean Burnett is saying were true, then no one would hire grads from expensive law schools, but even if Columbia law grads come with an average law school student debt load of $132,000, employers are still more enthusiastic about hiring them than those with significantly less debt.

He also noted that law degrees can lead to successful careers for many outside of practicing law, with examples ranging from top corporate CEO’s to the current investment manager of Idaho’s state pension system.

Did I mention that 20 of Idaho’s 2011 grads were either not in the workforce or didn’t respond to the graduate employment survey? When do they get to run the state’s pension system?

Idaho ranks 49thin the nation for its number of lawyers per capita, Burnett said.

I really hope Dean Burnett isn’t citing the LSTB’s enormously popular if lamentably out-of-date research on the number of lawyers per capita by state without acknowledging the context within which I posted it. That would mean I’d have to add him to the list of deans working in bad faith.

Gotta give credit to the University of Idaho. It takes a lot of gall to claim that the state should pay it to home-grow something it can essentially import for free by saying importing it actually costs the state money.

Joseph Stiglitz Goes Soft on Higher Ed.

Joseph Stiglitz “Inequality Is Holding Back the Recovery,” New York Times’ Opinionator.

(For the record, I regularly confuse economist Joseph Stiglitz with photographer Alfred Stieglitz.)

The solution to inequality, Stiglitz opines, is:

[A] comprehensive response that should include, at least, significant investments in education, a more progressive tax system and a tax on financial speculation.

Unusually for a liberal economist, labor unions are not part of the solution, even though Germany and Sweden survived the financial crisis with them, he writes. I say it’s unusual because “significant investments in education” don’t do much good when the government predicts that most new jobs won’t require much education even without the depression.

And yes, we are talking about higher education, for the post includes this photo…

…of California public college students protesting cuts to their programs. They should be demanding jobs and higher wages instead of a graft-fueled rat-race, and as much as I empathize with students’ anger, I think their parochialism misdirects it from issues that will actually help them in the current and long run.

Instead, Stiglitz disagrees and really does think we need to double-down on higher education:

Meanwhile, as incomes have stagnated or fallen, tuition has soared. In the United States now, the principal way to get education — the only sure way to move up — is to borrow. In 2010, student debt, now $1 trillion, exceeded credit-card debt for the first time.

The “only sure way to move up”? More Eloi lawyers versus Morlock material movers with law degrees, even though we need people to move our material and it’s a waste of their time and our savings and tax dollars to lend them money for degrees they aren’t using.

As for tuition inflation, it’s a mixed bag due to superficial data collection on the BLS’ part, as I pointed out last month.

Concededly, the trillion-dollar figure is substantial growth in the last decade plus relative to earnings/GDP/whatever, but much of it is IBR-able or serviceable. Repeating what I said earlier, I’m not afraid of a large number of student loan debtors taking to the streets demanding justice. Rather, I’m afraid that some good reforms will occur but leaves those who need it most out in the cold.

Student debt can almost never be wiped out, even in bankruptcy. A parent who co-signs a loan can’t necessarily have the debt discharged even if his child dies.

Aside from IBR, student debt can be eliminated in bankruptcy, but it isn’t often tried (’cause it doesn’t work very often). For federal debtors, hardship discharges are also possible for the disabled, which the Obama administration made easier last year, to its credit. I’m pretty sure co-signers of federal debts can get a release if the principal debtor dies. Not so for private student loan co-signers, but they’re fewer in number. Again, not as big a problem, but it also means acute cases might not get the relief they justly deserve.

The debt can’t be discharged even if the school — operated for profit and owned by exploitative financiers — provided an inadequate education, enticed the student with misleading promises, and failed to get her a decent job.

I’m not sure how bad the educations for-profits sell are. I certainly believe they admit many students whom they should know aren’t ready for college-level coursework, but they enthusiastically take their (debt) money anyway. Yet the same goes for the rest of higher education. Private nonprofits engage in all kinds of self-dealing, such as six-figure and higher forgivable loans to deans. Public schools enroll all kinds of people just for their money. It really is season six of The Wire: grade inflation and dumbed-down standards ensure everyone passes, including foreigners who don’t know English but pay non-resident tuition. Stats are juked just the same (and rapes disappear at college campuses too).

As for the “misleading promises” and “failing to get them decent jobs,” shouldn’t Stiglitz think ABA law schools are guilty of the same thing?

NYT Op-Ed Provides Mostly Irrelevant, Unsubstantiated Reasons for Two-Year Legal Education

Daniel B. Rodriguez and Samuel Estreicher, “Make Law Schools Earn a Third Year,” New York Times, January 17, 2013.

Right off the bat, Rodriguez and Estreicher mean well when praising New York’s discussion about reducing its legal education requirement from three years to two. Unlike others who’ve written op-eds for the Grey Lady in the past, I believe they are working in good faith, and make no mistake I’m fine with reducing the number of credits people need for law school.

…But I’m not fine with doing it for irrelevant or incorrect reasons because it doesn’t solve the underlying problems. For instance, the op-ed’s banner (the text in the tab at the top of your browser) reads:

Practicing Law Should Not Mean Living in Bankruptcy

Clearly the authors have never heard of Income-Based Repayment or Income-Contingent Repayment. These policies make it quite easy to practice law (or do anything else for that matter) if one has excessive student loan debt.

The piece, unfortunately, sprawls around, but here’s a list of claims as they appear:

(1)  Law school will be more accessible to low-income students

Law school is already over-accessible. People can finance their degrees plus living expenses with unlimited federal loan dollars. The problem is their low-incomes after they graduate (to the extent they’re not caused by the depression), their non-lawyer jobs (ditto), and the law school debt the government will write-off in twenty years.

(2)  Two-year legal ed. will help the next generation of law students avoid a heavy debt burden.

The solution to the problem must address the paramaters of the problem. Between 1999 and 2011, four of New York’s 13 private law schools joined the buy-two-get-one-free club because their tuitions grew by fifty percent in constant dollars. Another two probably crested the line this year, but I ain’t checking. Hacking off a year of law school (scholarship redistribution aside) only sets most of them back to the late 1990s. There’s no reason to believe it’ll halt future tuition increases because it doesn’t address their cause.

(3)  Legal education in the United States will improve.

Yay! I get to agree with someone! Y-A-Y!

Students would have the option to forgo that third year, save the high cost of tuition and, ideally, find a job right away that puts their legal training to work.

Yes, but less time in law school does not create jobs.

Myriad services are now being outsourced (often abroad) to nonlawyers, and the number of positions with large firms is dwindling, making it harder for graduating students — many of whom are saddled with six-figure student-loan debts — to find work at the outset of their careers that can even begin to pay off their obligations.

Such prospects are discouraging many young people from pursuing law degrees, and pushing away lower-income students the most.

I’ve never seen any evidence whatsoever that poor people are being “discouraged” from law school due to the fear of outsourcing and low pay. I suspect that it’s mostly wealthier people who have gotten the message and that the people enrolling today aren’t from the class that reads The New York Times.

Then again, I barely read The New York Times, except the international section, the addictive obits, and Krugman’s blog.

Law schools must do a better job of containing these costs. We also need more financial aid for students.

But the financial aid is already over-generous. That’s why law schools don’t feel the need to contain costs: So long as there’s a core of people willing to pay whatever absurd amount of money the marginal law school is willing to charge, nominal tuition will continue to increase.

As of today, there is no marginal law school because they’re still viable despite the applicant nosedive. That may change, but even if law schools close the first one left standing won’t slash its tuition, move into a smaller building, cancel its profs’ tenure, or force academics to teach full course loads.

While this wouldn’t increase the number of available jobs…

Yes, because less time in law school does not create jobs.

…A two-year option would allow many newly minted lawyers to pursue careers in the public interest or to work at smaller firms that serve lower- or average-income Americans, thereby fulfilling a largely unmet need. As it is now, many young lawyers say they would love to follow this path but cannot afford to because of their onerous debts.

But new grads have IBR and ICR. Their debts are not an issue (for the majority). The problem is that poor people are poor, not that lawyers’ debts are preventing them from charging $1.77 per hour.

Many law students can, with the appropriate course work, learn in the first two years of law school what they need to get started in their legal careers.

Most people who attend elite law schools can probably pass a bar exam with one year of self-study.

With this reform, law schools would have an obvious financial incentive to design creative curriculums that law students would want to pursue — a third-year program of advanced training that would allow those who wished it to become more effective litigators, specialize or better prepare for the real-world legal challenges that lie ahead.

Maybe, but creative curricula do not create jobs.

Those who graduate from rigorous three-year programs will not only emerge with sharper legal skills, but also be more essential to employers, raising the rate of job placement out of law school.

Sharper education will not create jobs. (Come on guys, you’re making me lose readers!)

A handful of states, including New York, allow individuals to take the bar after working for a law office for a number of years, in lieu of going to law school, though this approach is seldom used.

I’m glad Rodriguez and Estreicher brought this up because it raises a very important question: Why is this route seldom used? What does law school offer that law office preparation does not? What are the law students paying for? In theory (there is a theory behind mandatory legal education, right?), law school improves the likelihood of bar passage for those who might otherwise fail, but given the LSAT-bar passage correlation, it probably doesn’t. If people need some formal education to pass a bar exam, why not let the evil grubby free market provide it (without unlimited student loans)? Maybe people go to law school because they (rightly) think no decent-paying legal employer will hire them if they don’t buy the degree from a prestigious institution. If signaling value is all that law schools sell, then why do we need the ABA to regulate them, lend their students unlimited sums, and let them operate tax free?

Some will argue that the two-year option would only create unequal classes of lawyers and glut the marketplace with attorneys who don’t have the skills and training that generations of law school graduates before them have had.

We doubt this will occur. And in any case, the risk ought to be balanced with the varied needs of the American people for legal services.

Count me out of this “some,” for as I said at the beginning, a two-year law school is better than a three-year because it saves law students’ time and money, though it will throw recent grads under the bus by glutting the market even more (bet they can’t wait to send those employment data to U.S. News). I just think that legal educators need to come up with better reasons for why people should have to attend law school before becoming lawyers. I certainly don’t see how a two-year lawyer balances the needs of the American people. The beneficiaries are the students and taxpayers, but comprehensive reform would serve them better.

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Wait, I take it all back. These are flawless arguments. I’m willing to sell out for these irrelevant justifications for shortening law school because maybe in another 15 years when tuition grows by another fifty percent, some law professors will write another op-ed for the Times rationalizing one-year law schools.

NYT Obituaries Are a Time-Suck

Stay clear, whatever you do. While searching for Japanese filmmaker Nagisa Oshima’s obit, I ran into this one today, “Jeffrey O’Connell, Legal Scholar of No-Fault Coverage, Dies at 84“:

In 1965 Mr. O’Connell joined with Robert E. Keeton, another law professor, to write “Basic Protection for the Traffic Victim: A Blueprint for Reforming Automobile Insurance,” a book in which they proposed to do away with a system in which an accident victim had to sue another driver to collect damages, in most cases from the second driver’s insurer.

The authors proposed that the victim’s own insurance company would pay the damages instead, regardless of who was at fault. The other driver would recover damages from his own insurance company.

Except for cases of extreme loss, in which lawsuits would be permitted, suits to get greater sums would be prohibited, depriving personal-injury lawyers of a ready supply of clients.

As a result, the authors contended, everyone could be quickly compensated, and administrative costs, particularly legal ones, would be curbed. Logically, insurance payouts would drop, meaning car owners’ premiums could be reduced.

Everyone who’s taken the New York bar knows about the no-fault system, which at least was simpler to understand than the elective share statute. If I recall, accident victims can only sue other drivers if their injuries are over $50,000 and they are “catastrophic” in character, or something like that.

Does the system work? Legendary scamblogger L4L of Big Debt, Small Law says “No.”

Okay, he didn’t just say no, he wrote a delightfully satirical post in March of 2010 on the subject that I will reprint. I cannot vouch for the veracity of any of L4L’s claims, but his point that no-fault can be easily defrauded is plausible.

If anything, the insurance defense sweatshops were latecomers to outsourcing’s bandwagon. We speak from experience here, having launched our legal “career” from a $40 K a year downtown no-fault mill (no kids, that number’s not missing a digit) back in 2006. Sweet Jesus, the memories. King’s Civil Court, 141 Livingston Street, Brooklyn. The infamous 9th floor “no-fault” part.

How fondly we recall the motions being wheeled into chambers via a rusted Pathmark shopping cart, its wheels buckling under the weight of so much legal toilet paper. John, the grouchy but loveable court clerk, had Stage IV throat cancer and would hack blood while rasping at us losers to “shut the Fuck up and listen for your case” during calendar call.

He wasn’t kidding. John kept a .38 special, sans holster, tucked in the waistband of his trousers. Sometimes he’d hammer a stapler inside a steel wastebasket to get the attention of us barristers when the din of no-fault bickering crossed a certain decibel level. Hell, even a chainsaw operator would cringe at how loud that place could get. We still awake at night with ears ringing, recalling the nightmare of $347 neck-brace negotiations. Those old “dollar collars.”

That said, John was one of the few good guys you’ll meet in the miserable sewer of ShitLaw practice. He realized full well what a pathetic waste of time the entire charade was, and how poorly paid we were paid to boot. Your humble narrator’s constant complaining once led him to announce: “if you monkeys ever form a union, you’ve found your shop steward.” They just don’t make ‘em like John anymore. Blue-collar Brooklyn all the way. A Mets fan. God bless the old bastard. Cancer long since carried him away to that big courtroom in the sky.

For those unfamiliar with no-fault practice, a brief primer: It’s the legal equivalent of stamping license plates in a prison metalshop, only at lower wages and more authoritarian working conditions. In NY State, a driver’s own insurance company pays medical expenses and lost wages regardless of accident fault. This moronic idea, hatched by “policy” wonks in the NY legislature, naturally resulted in systemic and wholesale disaster. To wit:

Mobsters get two junkyard cars, register & insure them, and then recruit homeless dudes and illegal immigrants to stage minor accidents. The police are summoned, an accident report prepared, and the scammers then begin “treating” at bogus outer-borough medical mills operated by the crime syndicate. The insurance carrier is then billed for the phony “treatments” plus a truckload of phantom medical supplies like canes, neck braces, massage units, and so on. NY even allows billing for quack “medicine” like aromatherapy, acupuncture and other witch-doctor nonsense.

Like the Lilliputians in Gulliver’s Travels, these parasites teamed up to hamstring the insurance carriers. Remember kids: a cloud of mosquitoes tops a tiger’s death toll any day. The rules & caselaw all favor this infectious swamp of scammers, and billions have been stolen from NY drivers as a result of this ongoing heist. Shady collections law firms “buy” collections files from the clinics at 50 cents on the dollar, file Summary Judgment motions, and then just wait for the case to come up on calendar. For every victory, the medical mill gets an additional cash kickback. The byzantine rules and massive deluge of cases (150+ a day in Brooklyn alone) make it death by a thousand cuts for the carriers, who simply raise rates rather than pay a living wage for the cases to be properly litigated.

That doesn’t stop the occasional IDH (Insurance Defense Hero) from slipping thru now and then. All veterans of ShitLaw know the type. These barristers make up for their abysmal salaries in bare-knuckle belligerence and “fighting the good fight.” Unlike the usual hung-over, half-asleep J.C. Penney clad schlubs of ShitLaw, the IDH struts into court like Clint Eastwood entering a saloon. For their 40 K a year they’d take a bullet for Geico or Allstate, and take it with pride. Every case is like “High Noon.” One almost expects an IDH to come flying into depositions wearing tights and a Superman cape. We’ve often thought of pitching this character as an action-hero cartoon. Just imagine:

“Slower on the LSAT than a lobotomy victim, more powerless than a day-old fart, able to cut n’ paste huge motions with a single click- what’s that flying into court?

It’s a BIRD-it’s a PLANE- no, it’s the INSURANCE DEFENDER !”

Hell, we’d watch it. So would you.

Today it’s not uncommon for no-fault associates (or what’s left of them) to earn as little as 25 K a year,with turnover measured in hours opposed to months. After just 6 weeks at my first no-fault gig, I’d already risen 7 seniority notches on the letterhead. But wait: this “firm” gets even funnier:

Too stingy to buy motion-exhibit tabs, they’d instead have us cannibalize incoming papers for their office-supply content.

“Just pry apart the Velotex binding and yank the fuckers out”, said the partner. He even had a custom-bent screwdriver designed just for that purpose. We associates swapped these exhibit tabs like inmates trade smokes. An “Exhibit A” and other high-alphabet letters were always in short supply, whereas a “Q” was common as cabbage. Whenever someone quit we’d quickly plunder his desk to “stock up” on these much-needed supplies. One nasty, rodent-like guy who’d lasted 10 months had a real motherlode: eight “A’s” and eleven “B’s” stashed in his drawer. Or should I say “under his drawer.” Well hidden-the prick. For what motion he was saving them I have no idea. We called him “the squirrel.”

This dump also printed us our own cheesy business cards on that perforated cardstock you can buy at Staples. For laughs I’d bring the whole sheet into court and just rip them off as needed, like a dispenser. Once I gave this hot Wilson Elser chick a whole uncut page of them, but she never called me.

Sadly, my once-rising star was an elevator to nowhere. Insurance defense work is so boilerplate and mindless that many firms “dump” experienced associates once a certain salary threshold is reached (roughly 60-65 K). Five year’s experience isn’t worth much more than five minutes, and it’s simply more cost effective to “keep the line moving” with freshly minted suckers from Car’Bozo, Brooklyn, NYLS and other gutter schools than pay experienced associates a living wage. Now that Bangalore &Co. are handling all the paper-churning, these insurance “firms” can simply troll craigslist for per-diem clowns to show up in court and bicker over the cases for as little as $25 a file. Like the Joads in The Grapes of Wrath, these migrant barristers wander the court system like fruit pickers.

The work was beyond mindless. Like the A-Team, if you’ve seen one episode, you’ve seen ‘em all. The characters changed while the script stayed the same. Day after day, year after year, squads of TTT grads trekked off to court, got yelled at/berated by court personnel, and limped back to the office to cut n’ paste the next day’s sad mountain of paperwork together. “Lateral” options from this practice area included can & bottle scrounging, panhandling on the 7 train, or becoming assistant fry cook at Burger King.

You can read the rest here (17-20).

On the Am Law Daily: ‘Case Western Dean Cagey on Unsustainability of Law School Tuition in Interview’

“Case Western Dean Cagey on Unsustainability of Law School Tuition in Interview“

Aside from that, I’ve got nothing.

Annals of LSAT Tea-Leaf Reading: December 2012 Edition

The dive continues:

Still not at 1990s levels, but I’m still impressed.

The LSAC has also updated its applicant and application counts:

The projections are largely where they were since the last LSAC update. It’s still the hugest drop recorded.

This is still only week 1 of 2013, so there’s a while until any application deadlines, and frankly, outside of the cream-of-the-cream-of-the-cream law schools, most people can probably apply whenever they want. Here’s the chart from the Official Guide that I’ve been pondering for the last month:

March 1 is week 9 this year, and March 15 is roughly when the applicant and application plateaus begin.

Nevertheless, it still looks like there’ll be over 50,000 applicants this year (I know that’s unheard of in, like, my lifetime but it’s still too high). Law schools will find fewer and fewer reasons to turn people away whom they would have only a few years ago, and they’ll probably make them pay full freight just to pay for scholarships to keep their U.S. News rankings up. Fewer applicants is good, but this won’t end prettily. I really don’t envy the dean who’s going to be called to the carpet to explain to piqued legislators how it came about that a handful of students took out gargantuan student loans to pay for their classmates’ educations.

Dean Lawrence Mitchell Does Not Know Why Case Western’s Tuition Has Gone Up

…Or he deliberately misled Bloomberg‘s Lee Pacchia in an interview you can view courtesy of TaxProf Blog‘s “Case Western Dean: There Is No Oversupply of Lawyers.”

Dean Mitchell wishes to continue discussing law schools despite the poor reception of his November 2012 New York Times op-ed. Although early on he jokes that people accused him of kidnapping the Lindbergh baby, I think a line he gives at 13:33 reveals more about his perception of the debate:

One of the things the ‘Attack on Law Schools’—if I may call it that—disregards, or doesn’t assume, is that we’re working hard in good faith. You’re talking about people who, all of whom have significant opportunity costs that have gone into this business for the sake of trying to do something good.

In my opinion, bad faith doesn’t require cynically lying to make money, but defending the legal education system by raising discredited arguments, ignoring contradictory evidence, and filling knowledge gaps with conjecture qualify. Reasonable people might disagree with that definition, but I think what Dean Mitchell said in the interview, to say nothing of his selective use of Occupational Outlook Handbook information in his op-ed, suffices.

For example, Dean Mitchell peppers the interview with characterizations of law school graduates as lazy, greedy, and entitled. Thirty-eight percent of Case Western’s graduates are underemployed? It’s because they left Ohio for other cities. It’s because they won’t take lower-paying government jobs. It’s because they refuse to start small practices in the sticks. It’s because they aren’t interested in serving the poor. Then Dean Mitchell whirls around and says everything is fine: Data nine months from graduation don’t tell us of all the success stories one-year or a year-and-a-half out; law is a 40-to-50-year career so it’s premature to say the system is failing; hearsay from the admissions staff says we should be “confident” about graduates’ outcomes.

Instead of spending this post on the oversupply problem (to which I’ll only add that Pacchia discussed only new jobs and didn’t include replacements, which makes the ratio 400,000 to 212,000, not 74,000), I’m more interested in the dean’s discussion of why tuition has gone up, which I’ll present reverse-chronologically from the interview. Pacchia asks (4:35):

When we talk to people about these issues, we keep going back to the fact that tuition growth has outstripped job growth, or wage growth over the past almost two decades at a torrid pace. Why does the cost of law school tuition keep going up?

And Dean Mitchell answers:

That’s a question that any responsible law school administrator thinks about all the time. First, I point out that at my school, 20 percent of my revenue comes from our endowment, so- and believe me when I’ve spent my budget there’s nothing left. So it’s not even that our students are paying the full amount of their education. In fact, every student is subsidized to the tune of at least 20 percent simply from the income on endowment.

Where does the high price come from? Well, you know, I was looking- thinking about the ’85 to 2011 increase is often cited as being the number to look at. And medical school at 63 percent, for example. In 1985 medical school cost four times what law school cost. Also in 1985—or within a couple of years thereafter—you have a tremendous growth in starting salaries of law firms on Wall Street. Now almost anybody who teaches law could or did have one of those law jobs. I pay my faculty probably median about what the starting salary on Wall Street is. You’ve got to pay talented people to be professors, so that’s certainly one reason for the increase.

Additionally, we pay the bills like everybody else. We’ve got to pay for heating, we’ve got to pay for lighting, and we’ve developed programs for example: clinics and experiential education have exploded. That’s a very expensive form of education. You have a highly paid teacher, or a relatively highly paid teacher, teaching very small numbers of students. So when people talk about law schools as traditional cash cows, they’re imagining a time when you teach 150 kids in a class. You have a relatively small faculty doing it. You are able to charge whatever the market bore of course, but you turn a big chunk of it over to the university. I don’t turn a big chunk to the university, and I’m not teaching 150 kids in each class. So as the demands for higher quality education have increased, and as we’ve responded to that with smaller class sizes, with more skills programs, with more- other kinds of experiential endeavors, with more externships, we increase the costs.

I’m willing to grant Dean Mitchell the third paragraph, but the first paragraph is a non-sequitur. Debt is debt; underemployment is underemployment. The endowment isn’t relevant to either. The second paragraph, however, is just plain inaccurate—and not just because Pacchia said wages haven’t kept up while the dean says they grew tremendously. From the Digest of Education Statistics Table 348, we find that medical school didn’t cost quadruple law school, and law school’s costs have increased more rapidly since 1988 (close enough to 1985).

Moreover, the effective hourly wage for law professors is significantly higher than it is for first-year associates, and there are always plenty of people applying for law professor jobs who would gladly work for less pay and more classes. This is the weak link in Dean Mitchell’s response: Why does a law school need “talented people” to be professors? Can’t mediocrity get students past a bar exam?

Yes, but it won’t help Case Western win the zero-sum rankings dog-pile, and Dean Mitchell neglected to point out how tuition dollars also go to scholarships to attract high-caliber applicants, even though he acknowledges scholarships in the previous exchange (2:30):

Pacchia:

That said, the economics of the situation are troubling. Case Western, like many schools charges over $40,000 a year in tuition—I think it’s 42—yet six months after graduation, your institution had 38 percent of the class of 2011 that were either unemployed, underemployed—that is in short-term jobs or part-time jobs—or going on to get another degree. Aren’t too many of your graduates finding themselves in a position where they’re leaving school with enormous debts yet no real means to pay them off?

Dean Mitchell:

This is certainly a- debt is a problem, high tuition is a problem. I should point out that 90 percent of my class receives financial aid at a mean financial aid offer of $25,000 a year. So, people talk about the sticker prices of law schools, but we discount fairly heavily. Now, that’s not to say there aren’t students paying full freight, or there are students paying most of the way, and it’s very, very expensive. And of course, it’s important that they get jobs that they can ultimately pay that debt back, with the proceeds from, the income from.

At the same time, when you look at that 38 percent, you’re looking at a nine month picture out. Now first place, the ABA has been refining reporting statistics, along with NALP. We are- we have from the very first tried our very best to be as transparent as we can. And if you look at some of the situations of some of those students, many of them are in- you say “underemployed.” They’re in volunteer positions; they’re in positions where they receive small stipends. A school like ours, about 65 percent of our students leave the state of Ohio and go to major cities where because they’re not in law school there, it takes them more time to find jobs. I haven’t myself taken a snapshot a year out, but from- I’ve talked to my admissions staff a lot, and I suspect if you look a year out, things would change dramatically. I’m really confident if you looked a year-and-a-half out, they would.

Notice how Dean Mitchell abruptly switches from people paying full freight to minimizing the underemployment problem? Pacchia lacks my awesome powers of time travel (maybe he should drop acid before his interviews?), but the follow-up question is, where does the law school get the money to pay for scholarships for 90 percent of the students? Who is paying full freight?

Using 12 years’ worth of Official Guide data—which Pacchia definitely wouldn’t have no matter how much acid he dropped—here’s how Case Western’s scholarship structure has transformed since 1999 for full-time students (it only has a few part-timers):

According to Dean Mitchell, the red “No Grant” blob has now contracted to 10 percent, one-third what it was even in 2010-11. Unless the law school received either a massive grant or an enormous bequest (and they didn’t blow it on a swank building), all these <50 percent tuition scholarships had to come from tuition:

Note how the median grant is now actually less in both nominal dollars and percent of total tuition than it was in 1999. The good news for the 15 percent of students who received at least the median grant back then is that their Stafford loans more than covered the shortfall. Today that’s not possible, meaning that even those who receive the median grant will have to take out a Grad PLUS loan, a private loan, or get the money from somewhere else. If we look at the glass-half-empty version, i.e. the percent of full-time Case Western students who receive the median grant or less, we find that they pay an increasing portion of whatever’s left:

Sixty-five percent of its 2010-11 full-time students had to cover 25-50 percent of their tuition with something other than Staffords. Thirty percent had to cover half their tuition outside of Staffords when in 1999 they were only down five percent. I wish the Official Guide were more forthcoming about how many 1Ls receive scholarships out of the total, but common sense tells us that it’s a high proportion, and even those who retain their scholarships after their first year will have to eat the next tuition increase to pay for … more scholarships for 1Ls. The system has evolved from one in which a handful of students receive generous portions to one in which most students get a few thousand bucks thrown their way, but it’s spread more thinly each year. Case Western does not have a tuition guarantee program.

This absurdity is only sustainable so long as there are students willing to pay ever increasing amounts of money to entice handsomer applicants than themselves to Case Western. Dean Mitchell doesn’t know or withheld that the students who pay full freight, near full freight, and every tuition increase in between are the law school’s bulwark against a rankings slide, even if there’s a high probability those graduates won’t be able to repay their loans without IBR/ICR or miracling high-paying jobs. These students’ continued access to unlimited federal students loans is the sine qua non of Case Western’s financial model.

Pacchia didn’t pursue this line of questioning, but file it away for the next time a law school dean wants to have a “good faith” dialogue about the non-crisis entitled law graduates face.

But I Thought There Were No Cheap Lawyers…

If you did, then I recommend Daniel Fisher’s article in Forbes, “Class-Action Firms Capitalize on Wretched Market for Law-School Grads.”

Fisher managed to find a lawyer (or two with the same name) who went from charging $500 for a fixed-fee case a few years ago to $1.5 million for 2,711 hours of “legal” work in a class action lawsuit against Citigroup—except there’s no evidence he received anything close to that kind of compensation because he was contract attorney. He was billed out at $550 per hour when according to an anonymous source on the same job the contractors were paid a $35 rate at most. If the case lasted two years, that’s about $47,500 annually. That’s not the worst salary to have in the city, but it’s one-fifteenth what he was billed at, which might vex clients and the class action lawsuit activists mentioned at the end of the piece.

I liked Fisher’s article, especially the well-deserved mention of Tom the Temp’s Temporary Attorney: The Sweatshop Edition, which might be the earliest scamblog, starting in late 2005. What’s surprising though is that Fisher added the law school tack at all because it wasn’t really necessary. The story’s really about the very large multiplier between the contracting rate and the billing rate. I suspect that if this piece came out three years ago, it would’ve noted the contractors’ student loans only in passing. Instead, in 2013 we get:

Many of the temp attorneys on the Citigroup case graduated from law school in the past five years, some of them from prestigious schools like NYU and Georgetown.

Whoa.

I can’t say I expected Forbes to present the legal contracting world through the eyes of Big Debt Small Law.

A Bitter Boxing Day Op-Ed for Private Student Loan Debtors

John Hupalo, “Discharging Private Student Loans Is Counterproductive,” U.S. News & World Report.

Tagline: “For an overwhelming majority, it will impair their future ability to borrow.”

Hupalo is the CEO of Invite Education, LLC, which appears to be a college planning resource for prospective applicants and parents, but his cred comes from decades of experience in education finance.

Unfortunately, the arguments he makes in his op-ed do not benefit from his experience. He even contradicts himself within the same sentence early on:

Turning bankruptcy courts into turnstiles for the discharge of the least common form of student loan debt may temporarily assist some distressed borrowers, but the overwhelming majority will not be helped.

How does benefiting “some distressed borrowers” with the least common form of student loan debt who are not in the overwhelming majority of student debtors turn bankruptcy courts into “turnstiles”? Also, bankruptcy is not “temporary,” a discharge order is permanent.

Hupalo’s piece is concise, but I’m going to summarize the arguments and provide brief responses:

(1)  Bankruptcy appears on your credit report for 10 years and ruins your creditworthiness.

Defaulting on a loan is much worse for your creditworthiness (and sometimes job eligibility) than bankruptcy, and plenty of banks love lending money to people who can’t obtain another discharge for eight more years. They also know how to collateralize cars and houses for auto loans and mortgages. The credit hit from bankruptcy is a factor to weigh, but (a) it does recover, and (b) if the loan is large and unpayable, bankruptcy does more good than harm.

Also, I’ll add right now that debtors aren’t stupid, and moral hazard arguments are always overblown. People use the bankruptcy system as a last resort. Most of the time they file because they’ve lost their jobs, gotten divorced, or aren’t insured so they have to pay for their own radiation therapy. Included in the 2005 law that extended the “undue hardship” exception to dischargeability of private student loans was a provision that required Chapter 7 petitioners to show that their incomes were below their state’s median household income. If it’s above the median, they have to file in Chapter 13, which will require them to repay some of the debt in a 3-5-year repayment plan. With bankruptcy protections on their side, debtors can negotiate with their lenders and avoid using the courts, and bankruptcy fraud is very, very rare.

Now that we’ve got that out of the way, we continue:

(2)  Bankruptcy protections increase interest rates for private student loans.

Good.

Seriously, this is how lending works: Those who make large unsecured loans to people who can’t repay them should charge higher interest rates, demand co-signers, and not offer in-school deferments. If the loan is too risky, don’t make it. The alternative is a human capital contract, which may or may not work, but it’s a compromise option.

(3)  It’s not fair for the government to shield its loans from bankruptcy while not doing so for private loans. It’s also confusing to borrowers.

(a) Borrowers will always be confused. The federal lending system alone is very complicated, much less the bankruptcy code. (b) Aside from people who take out Parent PLUS loans, to my knowledge all other federal loans are IBR-eligible. Debtors who are on Social Security Disability can also petition the Department of Education for a hardship discharge, which the “Pay-As-You-Earn” rule-change made easier. Private loans don’t offer these options. (c) Honestly, I have slight sympathy for the fairness argument: Yes, the government is unfairly undercutting the private sector (and not even doing a good job of it). However, I think bankruptcy protections should be returned for federal loans too, and I won’t lose any sleep if the Direct Loan Program is repealed. I just don’t find Hupalo’s argument that incrementalism is unfair to be persuasive.

(4)  The seven percent private loans of all student loans are underwritten; the other 93 percent of federal loans aren’t. This is unfair.

It sure is. That’s a problem with the Direct Loan Program, but how is it relevant to private loans in bankruptcy?

(5)  Private student loan debtors can discharge their debts via the “undue hardship” exception, which is reasonably high to protect from moral hazard.

(a) The “undue hardship” standard is not defined in the bankruptcy code, leaving the statutory interpretation up to the federal appellate courts and the factual application to the caprice of bankruptcy judges. If you were worried about “confusion” before, how many people do you think know off the top of their heads if their federal circuit uses the Brunner test, the “totality of the circumstances” test, or some other one? How many people even know anything about the federal circuit they’re in? (b) Admittedly, many people who might have a shot at discharging their student loans don’t even bother trying to file an adversary proceeding against their student loan creditors, which leads the public into believing the loans are as nondischargeable as child support payments, but again, it comes down to the bankruptcy judge’s opinion. (c) When the “undue hardship” exception was first inserted into the bankruptcy code, it coincided with a five-year time limit on dischargeability, so the urgency for legislative clarity didn’t exist. With the time limit removed for federal loans in 1998, the law pretty much put debtors’ fates in bankruptcy judges’ hands. Hupalo doesn’t appear interested in discussing whether that’s a good idea.