71 Percent of Lawyers Work in the Legal Services Sector

71 percent of employed lawyers, that is. We’re not talking about people who are on the rolls but aren’t working.

I haven’t carefully read through all of Michael Simkovic’s and Frank McIntyre’s most recent analysis in law graduate earnings, but it looks like they’re still uninterested in exploring the possibility that law grads’ earnings are attributable to demand-side factors, like price or income elasticity of demand for lawyers’ services. Because they don’t show us that law students who complete all the required law school course work without graduating have the same earnings as law graduates, anything they say about a JD premium is premature. Such an analysis is crucial because one of their own citations, David Card’s 1999, “The Causal Effect of Education on Earnings,” indicates that law grads earn substantially more than the trend would suggest. This finding screams for testing, but Simkovic and McIntyre aren’t careful enough researchers to do that.

Thus, it follows that their comparisons between law grads and college grads in “Timing Law School” are equally inadmissible. Indeed, I may not bother commenting on “Timing” at length at all.

However, I did decide that a little procrastination is good for the human spirit (and entertaining to the reader), so I poked around “Timing” to see what errors I could find. I’ll showcase one.

On page 17 Simkovic and McIntyre write:

Based on initial outcomes for recent graduates and qualitative factors, Henderson and Zahorsky argue that the legal profession is experiencing a “structural shift” due to globalization and technological change.34 Others point to a decline in the size of “legal services” (law firms) relative to GDP.35 What this means for law school graduates is uncertain, since most legal services workers are not lawyers,36 and many law graduates work in fields other than legal services.37

Footnote 36 uses the Bureau of Labor Statistics’ Occupational Employment Statistics (OES) database to show that “out of more than 1.1 million legal services workers, only 375 thousand were lawyers. Other occupations include paralegals, secretaries, bookkeepers and computer support and business specialists.”

And footnote 37 says:

Around 60 percent of law graduates practice law. Simkovic and McIntyre, supra [“Economic Value of a Law Degree”] at 252. Of those working as lawyers, around 65 percent work in “legal services.” United States Department of Labor, Bureau of Labor Statistics, supra note 36. Some of the non-lawyers working in legal services have law degrees.

In other words, the authors bury in a footnote the fact that 65 percent of lawyers work in legal services, so they can claim that it’s unclear how economic swings affecting the legal services sector would in turn affect law grads because most workers there aren’t lawyers. Being mindful of the distinction between law grads and lawyers, it’s nevertheless pretty bizarre to believe that the one industry law school prepares people for most would have a trivial impact on their earnings. The only alternative interpretation is for Simkovic and McIntyre to show that the legal sector is laying off everyone but its lawyers—and admittedly (again, in a footnote) malemployed law grads.

The foregoing aside, their math is still incorrect. It’s true that 375,000 legal sector lawyers out of the 592,670 total in the OES equals 63 percent, but that’s not the full number of lawyers. Why? Because the OES omits self-employed workers, which feature prominently in the legal profession. This is an pitfall that I either first noticed or was pointed out to me when I started writing on law schools nearly five years ago, so it’s amusing to see Simkovic and McIntyre make it.

In 2012, the BLS’s Employment Projections program found 759,800 employed lawyers, of which 374,900 were legal sector wage-and-salary employees. According to the BLS’s estimate of the distribution of lawyers among industries (xls), 165,700 lawyers were self-employed workers. It’s just about impossible for these folks to not be working in the legal sector, and indeed, if one looks at the Bureau of Economic Analysis’ National Income and Product Accounts tables, one finds that self-employed workers are included in the category “Persons Engaged in Production by Industry” (Table 6.8D).

As a result, 540,600 lawyers out of 759,800 lawyers—71 percent—work in the legal services sector, not 63 percent. These scant 8 percentage points sure make it look more persuasive to me that what goes on in the legal sector influences law grads’ earnings. (Oh, and I add that another 17 percent of all lawyers work in government. Is that sector robustly hiring lawyers?)

I don’t expect those 8 percentage points to persuade Simkovic and McIntyre, though. They’ve gotten plenty of mileage asking the legal profession to accept on an untested, pure human capital hypothesis that law school pays off even if the legal sector implodes. They can at least include self-employed lawyers in their adverse footnotes.

8 comments

  1. What I find amusing is that their contention – JD earnings basically aren’t impacted by economic conditions at graduation – is contradicted by literally every other study I have seen about the effects of graduating into a recession on lifetime earnings (generally the much less severe recessions of the 1980’s and 1990’s). Here’s a list of the ones I am aware of and have read/skimmed in the past:

    – Paul Oyer, Stanford Business School, The Making of an Investment Banker: Stock Market Shocks, Career Choice, and Lifetime Earnings. (surprise! A MBA from SBS, which any rational reader will agree is both more versatile and stalwart than the normative JD, has a $6 million lifetime earnings difference between graduates of bear markets and graduates of bull markets).

    – Lisa Kahn, Yale, The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy.

    – Philip Oreopoulos, University of Toronto and NBER, The Short and Long-Term Career Effects of Graduating into a Recession: Hysteresis and Heterogeneity in the Market for College Graduates.

    – Brian Clark, Duke University, The Career Prospects of Overeducated Americans.

    – Joni Hersch, Vanderbilt Law School, Catching Up is Hard to Do: Undergraduate Prestige, Elite Graduate Programs, and the Earnings Premium (even among graduates of the same elite law schools, people with elite undergrad credentials earn considerably more than their law school classmates).

    – Till von Wachter, Columbia University, Long-Term Earnings Losses due to Mass Layoffs During the 1982 Recession: An Analysis Using U.S. Administrative Data from 1974 to 2004.

    I guess all of these studies are wrong…

    1. But they measured a premium!

      Thanks for the list. I’ve read a couple of them. The only one I have to add is:

      Joseph G. Altonji, Lisa B. Kahn, Jamin D. Speer, “Cashier of Consultant? Entry Labor Market Conditions, Field of Study, and Career Success,” NBER Working Paper No. 20531, September 2014.

      I think these studies compare college graduates from recession years to college grads to boom years, which makes sense. Simkovic and McIntyre are again comparing law grads to college grads in recession and boom years. I don’t think anyone could care less if there’s an average JD premium over college grads when they happen to earning less than the average. And that’s before talking about debt and the death of the legal sector.

  2. What’s absolutely clear is that a country of 310-odd-million can barely employ 800,000 lawyers, so we need to be adding 250,000 new entrants about every 5 years at the taxpayer’s expense.

    1. *sigh*

      Oh Blue on Black, clearly you’re just a hysterical cyber-ranter who’s unwilling to accept the logic that the JD premium exists irrespective occupation. Or, as Simkovic and McIntyre put it so eloquently, “Occupation is an outcome variable, not a pretreatment covariate.”

      1. You forgot to list my other faults. For instance, has seen too damn much unjust and unjustifiable suffering to have a sense of humor any longer.

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