Original Research

Speaking of Grad PLUS Loans…

This weekend, the Times both accepted the Bennett hypothesis and chose not to condescend to us about the “paradox” of how underemployed law grads can refuse to work for people who can’t afford to pay them. That’s really remarkable. What more can I say?

Okay, one point, an emphasis. When I wrote that applying the gainful employment rule to all law schools would cause fifty to close in short order, I was clearly being conservative. $50,000 in discretionary income is a lot of money, even for law school graduates.

And since we’re on the topic of student lending, the Department of Education updated its student loan data through the 2014-2015 academic year. I’ve updated the Student Debt Data page accordingly.

The big findings are that (a) people are borrowing less money from the federal government:

Amount of Federal Loans Disbursed

…But (b), Grad PLUS borrowing hasn’t changed much in the last year.

In the last two years though, the number of Grad PLUS borrowers has grown (+2,540) while the total amount borrowed has fallen (-$140 million). It only amounts to about $500 per borrower, but who knows, maybe it’s due to fewer law students? I wouldn’t be surprised.

Finally, in the same week that I bought my first car I realized after years of listening that Galaxie 500’s “Blue Thunder” is about a man’s love for his car, and the Route 128 reference indicates it’s an homage to the Modern Lovers’ “Roadrunner.” (I’m terrible at discerning lyrics; it’s usually not what I listen for in music.) I really dig how “Blue Thunder” denies the listener the chorus until the very end.

I prefer the album version, but how could I not post an ’80s video?


Class of 2014 NALP Data: Unemployment, Small Firm Jobs Down

A few weeks back, the National Association for Law Placement (NALP) uploaded its national summary chart that’s the basis for its Employment Report and Salary Survey (ERSS). It’s here (pdf). Two things worth noting: One, this year’s version doesn’t include the total number of graduates or the number who responded to the survey, making it impossible to determine non-responses. I have no idea why the NALP did this.

Since the class of 2013 ERSS appeared to use the same total number of grads as the ABA did that year, I’ll assume it’s 43,832 this year, which includes graduates from the three Puerto Rico law schools. Also, this year the ERSS changed 2-10-lawyer firms to 1-10-lawyer firms. I’m not sure if this is a typo or if it’s meant to separate graduates who work under solo practitioners as non-lawyers from graduates who start their own solo practices.

Okay, some analysis. Obviously this year’s ERSS confirms what’s been widely reported since the ABA’s version of the same data came out several months ago: Unemployment is down, as is the number of grads in bar-passage-required jobs, and with fewer graduates, the percentage of employed grads rose.

Here are charts of the number of graduates by employment status and the percent employed. (These exclude non-responses.)

No. Grads Employed by Status (NALP)

Percent Employed by Status (NALP)

These charts also illustrate the remarkable growth in J.D. advantage jobs over the years.

Here’s a detailed version graduate employment but with full-time and part-time status and only going back to 2007.

No. Grads Employed by Status (Incl. FT-PT) (NALP)

The question that I don’t think has been addressed is what kind of bar-passage-required jobs are responsible for the drop in that category. I won’t show all the math, but the answer is overwhelmingly private-practice, small-law firm jobs: 1/2-10-lawyer practices and solos.

No. Graduates Employed by Size of Firm (NALP)

Interestingly, the number and proportion of grads reported as starting their own practices did not change much since 2013 (-175 from 1,378). I draw two conclusions from this: One, small firms looking for new lawyers will need to look harder. I have no idea if that will push up wages in the future (there’s trivial evidence it has this year for full-time, wage-and-salary jobs). On the other hand, these could be eat-what-you-kill arrangements, which wouldn’t cost these firms much. Nominal wages for 1/2-10-lawyer practices are still way down from 2007, but the proportion of grads reporting wages is up, so this is a phenomenon to look for. The better these jobs pay, the better grads do overall: It’s the marginal graduate who matters most.

Speaking of whom, and this is my second thought, grads appear to prefer J.D.-advantage jobs and unemployment to small firm work. Given the definition of J.D. advantage, which is so broad that it likely includes graduates returning to their prior jobs, graduates’ employment “choices” don’t speak highly of small-firm work.

Thus, there is still much slack in the legal labor market, but it is improving. Big law isn’t hiring the way it used to, but fewer grads are working in smaller practices:


Cumulative Percent Change in Grads Employed in Law Firm Jobs by Firm Size (Index 2007=100) (NALP)

(Sorry this one is a little unclear.)

To conclude, this ERSS verifies the odd accounting identity explaining law graduate employment: The first people who don’t go to law school are the first ones to not be underemployed after graduating. Small beans for the thousands of unemployed grads though.

Household Consumption of Legal Services Grew (Trivially) in 2014

Behold, the Bureau of Economic Analysis reports that real household demand for legal services grew 0.31 percent in 2014.

Percent Change Real Personal Consumption Expenditures by Function

(Table National Income and Product Accounts, Table 2.5.3, my calculations)

Wowie zowie.

The amount of growth is worth about $270 million 2009 dollars, which doesn’t sound trivial, but it’s still $13.8 billion less than in 2003. I’m willing to bet that on a per household basis, it’s going nowhere, or, rather, even more nowhere to the extent that’s intelligible.

As the above chart suggests, household consumption of legal services grew less rapidly than overall household spending. In 2014, legal services amounted to 0.85 percent of all household expenditures, a record low going back to the mid-1980s and mid-1970s. In 2003, the peak was 1.05 percent, equivalent today to $121.2 billion in today’s dollars or a $23.1 billion deficit.

Legal Services Share of Household Consumption Expenditures

(Source: NIPA Table 2.5.5, my calculations)

Prior reporting on this topic can be found here.

Office of Management and Budget: +$1.4 Trillion in Direct Loans by 2025

Projected Direct Loan Balances (OMB, Billions Current $)

(Source: OMB FY2016 Mid-Session Review (pdf))

…But we all knew it was going to say that. Also, that number includes other loan programs that aren’t student loans, but those aren’t nearly as big.

The good news, though, is that the actual amount of direct loans keeps coming in below the projections. Here’re the estimates from the mid-session reviews since FY2010 against the actual.

Direct Loan Balance Projections (OMB Billions Current $)

The FY2010 estimate was $161 billion more for 2014 than turned out to be the case. This variance implies that the government is overestimating future direct lending. It isn’t much, but it’s something to keep track of.

I should add that in general the OMB predicts that direct loan debt will even out at about 9 percent of GDP.

Site Update 2015-06-01: Law School Cost Data Page

If you want to know why I haven’t been posting so often, it’s that I’ve been procrastinating! Woo!

I did, however, find time to update the comprehensive Law School Cost Data (1996-) page. Most of the effort is just revisiting law schools’ Web sites to ensure I have their full names correctly. As usual I forgot that law schools have a tendency to place images of attractive women on their main pages, so that wasn’t a total exercise in tediousness.

One thing to note that readers might not know is that even though Lincoln Memorial was accredited after the data submission deadline for 2014, it does have a 509 Information Report (pdf). However, its data are not included in the ABA’s required disclosures Web site, so if you’re into law school data, you’ll need to get that file separately and incorporate it into your spreadsheets.



The ABA released the class of 2014’s employment information last week, and there are enough differences to warrant an update to this post, namely that I’d forgotten that the ABA accredited Lincoln Memorial University late last fall. Most of the figures remain the same, but to keep Web traffic to one post, I’m retaining the original “leaked” version at the bottom but striking it out. I’ve also changed the title.

We have 43,195 people who graduated from an ABA-accredited law school outside of Puerto Rico between September 1, 2013, and August 31, 2014. The employment information is good as of March 15, 2015. Readers likely know that the ABA now collects data as of ten months from the typical graduation date rather than nine. I don’t think there’s too much of an impact by the change except to applicants this year who might have wanted to rely on the data.

The tables are below the fold to conserve blog space.


Lawyer Employment Grows in 2014, Wages Flat

…Which is unsurprising.

Last week, the Bureau of Labor Statistics (BLS) updated its Occupational Employment Statistics (OES) program data for 2014, and since the topic of what the BLS programs are actually measuring came up in the context of the latest analysis on the alleged J.D. premium, now is a good time to report on the data. Here is what lawyer employment looks like over time based on various BLS measures.

Lawyer Employment by BLS Measure

Aside from some growth in 2014, of interest is the discrepancy between the Current Population Survey’s (CPS’s) and the Employment Projection program’s (EP program’s) lawyer estimates. It’s been there for a while. Technically, the CPS is considered more reliable, but when discussing lawyer projections, the EP program’s numbers are appropriate. The CPS measures people in an occupation, not the number of job positions, which can be held by multiple persons. I think the CPS overstates the number of employed lawyers. Both measures include part-time lawyers and self-employed lawyers in all industries.

The CPS’s full-time wage and salary lawyer measure is similar to the OES program’s measure as they both exclude self-employed attorneys, but the OES program includes part-time workers. Finally, the number of legal sector attorneys is the subset of the OES lawyers working in the legal sector, and according to the link above, 71 percent of all lawyer positions are in the legal sector.

As for lawyers’ wages, they’re largely flat, but the median has fallen since 2009.

W&S Lawyer & Paralegal Hourly Wages (Constant $)

It’s useful to compare lawyers’ wages to paralegals’. This year, the top 10 percent of paralegals earned more than the bottom 25 percent of wage and salaried lawyers, but some of that is probably a comparison between full-time and part-time workers.

Detailed information on what the BLS programs measure can be found on the lawyer overproduction page, which I strongly recommend for anyone who is unfamiliar on the materials (*cough* law profs *cough*–Sorry, allergies). Although, it has not been updated regarding the BLS’s proposal to alter the replacement estimate used in the lawyer projections. That will come later. Lawyer employment in and of itself is not a bellwether for the future of the legal profession; it’s just worth tracking. Aside from the lawyer overproduction page, readers are advised to look at my criteria for predicting improvements in law graduate outcomes.

That’s all for now. Peace.