Bottleneck Argument

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.

Site Update 2015-02-09: Law Graduate Overproduction Page

The update can be found here. (The 2011 edition has been moved here.)

To keep the analysis consistent with previous years, I used the class of 2013 even though data for the class on 2014 are available (and logged by moi). It’s a little problematic given that 2013 was the law graduate high tide, but that’s what happens when law schools enroll people without regard to employment outcomes.

I do not discussed the BLS’s proposed changes to its methodology for measuring occupational replacements. Assuming it’s approved, then for future versions, if the BLS separates annual replacement openings between those created by workers who leave the labor force and workers who move to different occupations, then I’ll use the labor force rate as the measure for “sustainable jobs.” It’s imperfect, but the same can be said of the current methodology.

I’ve also updated the site’s highly popular lawyers per capita by state page to include employed lawyers per capita and idle attorneys using the 2012 employment data. I am waiting on the ABA to update its national lawyer counts for 2014 and 2015. (They do plan on doing that right?)

At this time, I will brag that the Census Bureau’s press relations department cited my work on this topic last August.

BLS: One in Four Lawyers to Switch Occupations by 2022

…And if you know what that means, great, because there’re plenty of caveats I have to lay out for everyone else.

Steven Harper inspires me to check up on how things are going with the BLS’s proposed rule-change for estimating occupational replacement rates; there was an update on January 2nd. Apparently, the Employment Projections program released a spreadsheet with experimental 2012-2022 replacement and separations data alongside the numbers from the current methodology. I don’t think it was there before, but the BLS says it was. If so I wish I’d noticed it earlier as it’s quite interesting.

For one, my hunch in my American Lawyer article was correct: Under the new methodology between 2012 and 2022, 339,800 out of 759,800 lawyers would be replaced, and the growth rate, which is what we should be caring about because it’s not zero sum, doesn’t get changed. I like getting the numbers right. (Okay, I was off by a thousand.)

For another, the BLS goes further than I expected by separating the total occupational replacement rate into “labor force exits” and “occupational transfers,” which mean as they sound. Labor force exits are certainly going to include most retirements but also people exiting for parental leave and other, less common personal reasons. The labor force exit rate for lawyers is 17.1 percent, which compares strikingly well with the current methodology’s 16 percent replacement rate.

As for occupational transfers, as this post’s title states, it’s 25.5 percent. That’s the concept I’ve been most concerned about all along. These are lawyers who are leaving the profession for different types of jobs. To be clear, some of these transfers are preferable and some not. It includes lawyers who become judges with lawyers who become retail sales clerks. The interesting comparison—and the best I can give you—is with other occupations that require doctoral or professional degrees, sorted by size and occupational transfer rate.

Animal scientists 19-1011 33.3% 54.3% 22.2% 76.4%
Biochemists and biophysicists 19-1021 28.5% 54.1% 18.0% 72.1%
Medical scientists, except epidemiologists 19-1042 21.1% 51.3% 14.5% 65.9%
Computer and information research scientists 15-1111 15.7% 44.9% 11.2% 56.1%
Clinical, counseling, and school psychologists 19-3031 27.2% 42.1% 24.1% 66.3%
Physicists 19-2012 24.5% 38.8% 19.1% 57.9%
Astronomers 19-2011 24.5% 38.8% 19.1% 57.9%
Judicial law clerks 23-1012 16.2% 35.4% 27.5% 62.9%
Postsecondary teachers, all other 25-1199 15.0% 34.1% 32.9% 67.0%
Health specialties teachers, postsecondary 25-1071 15.0% 34.1% 32.9% 67.0%
Business teachers, postsecondary 25-1011 15.0% 34.1% 32.9% 67.0%
English language and literature teachers, postsecondary 25-1123 15.0% 34.1% 32.9% 67.0%
Education teachers, postsecondary 25-1081 15.0% 34.1% 32.9% 67.0%
Biological science teachers, postsecondary 25-1042 15.0% 34.1% 32.9% 67.0%
Mathematical science teachers, postsecondary 25-1022 15.0% 34.1% 32.9% 67.0%
Psychology teachers, postsecondary 25-1066 15.0% 34.1% 32.9% 67.0%
Engineering teachers, postsecondary 25-1032 15.0% 34.1% 32.9% 67.0%
Computer science teachers, postsecondary 25-1021 15.0% 34.1% 32.9% 67.0%
Communications teachers, postsecondary 25-1122 15.0% 34.1% 32.9% 67.0%
Foreign language and literature teachers, postsecondary 25-1124 15.0% 34.1% 32.9% 67.0%
Philosophy and religion teachers, postsecondary 25-1126 15.0% 34.1% 32.9% 67.0%
History teachers, postsecondary 25-1125 15.0% 34.1% 32.9% 67.0%
Chemistry teachers, postsecondary 25-1052 15.0% 34.1% 32.9% 67.0%
Recreation and fitness studies teachers, postsecondary 25-1193 15.0% 34.1% 32.9% 67.0%
Political science teachers, postsecondary 25-1065 15.0% 34.1% 32.9% 67.0%
Sociology teachers, postsecondary 25-1067 15.0% 34.1% 32.9% 67.0%
Law teachers, postsecondary 25-1112 15.0% 34.1% 32.9% 67.0%
Physics teachers, postsecondary 25-1054 15.0% 34.1% 32.9% 67.0%
Economics teachers, postsecondary 25-1063 15.0% 34.1% 32.9% 67.0%
Criminal justice and law enforcement teachers, postsecondary 25-1111 15.0% 34.1% 32.9% 67.0%
Atmospheric, earth, marine, and space sciences teachers, postsecondary 25-1051 15.0% 34.1% 32.9% 67.0%
Agricultural sciences teachers, postsecondary 25-1041 15.0% 34.1% 32.9% 67.0%
Area, ethnic, and cultural studies teachers, postsecondary 25-1062 15.0% 34.1% 32.9% 67.0%
Social sciences teachers, postsecondary, all other 25-1069 15.0% 34.1% 32.9% 67.0%
Social work teachers, postsecondary 25-1113 15.0% 34.1% 32.9% 67.0%
Architecture teachers, postsecondary 25-1031 15.0% 34.1% 32.9% 67.0%
Anthropology and archeology teachers, postsecondary 25-1061 15.0% 34.1% 32.9% 67.0%
Environmental science teachers, postsecondary 25-1053 15.0% 34.1% 32.9% 67.0%
Geography teachers, postsecondary 25-1064 15.0% 34.1% 32.9% 67.0%
Library science teachers, postsecondary 25-1082 15.0% 34.1% 32.9% 67.0%
Forestry and conservation science teachers, postsecondary 25-1043 15.0% 34.1% 32.9% 67.0%
Lawyers 23-1011 16.0% 25.5% 17.1% 42.6%
Judges, magistrate judges, and magistrates 23-1023 16.0% 25.5% 17.1% 42.6%
Administrative law judges, adjudicators, and hearing officers 23-1021 16.0% 25.5% 17.1% 42.6%
Physical therapists 29-1123 24.6% 23.6% 15.2% 38.8%
Pharmacists 29-1051 23.9% 20.5% 16.8% 37.4%
Audiologists 29-1181 20.7% 20.0% 14.5% 34.5%
Veterinarians 29-1131 32.1% 16.6% 14.5% 31.1%
Physicians and surgeons, all other 29-1069 25.0% 14.4% 14.6% 29.0%
Family and general practitioners 29-1062 25.0% 14.4% 14.6% 29.0%
Internists, general 29-1063 25.0% 14.4% 14.6% 29.0%
Surgeons 29-1067 25.0% 14.4% 14.6% 29.0%
Anesthesiologists 29-1061 25.0% 14.4% 14.6% 29.0%
Pediatricians, general 29-1065 25.0% 14.4% 14.6% 29.0%
Psychiatrists 29-1066 25.0% 14.4% 14.6% 29.0%
Obstetricians and gynecologists 29-1064 25.0% 14.4% 14.6% 29.0%
Optometrists 29-1041 29.0% 14.0% 19.6% 33.6%
Chiropractors 29-1011 19.6% 13.6% 13.1% 26.8%
Dentists, general 29-1021 24.4% 12.7% 15.6% 28.3%
Orthodontists 29-1023 24.4% 12.7% 15.6% 28.3%
Oral and maxillofacial surgeons 29-1022 24.4% 12.7% 15.6% 28.3%
Dentists, all other specialists 29-1029 24.4% 12.7% 15.6% 28.3%
Prosthodontists 29-1024 24.4% 12.7% 15.6% 28.3%
Podiatrists 29-1081 20.7% 12.1% 11.1% 23.3%

I didn’t include it, but some of the occupations at the top with high turnover are quite tiny. There are only 2,700 animal scientists, for example, so my guess is there are still problems with the data. You’ll also note that many of the stats tend to clump together by occupation types, e.g. the 33 postsecondary instructor classes, which all have the same replacement rates, for both the new and old methodologies.

But the real money is in comparisons among the professional occupations, which are generally doctors, dentists, and lawyers. Lawyers’ occupational transfer rate is double doctors’ and dentists’. The medical occupations’ replacement rates under the current methodology are only a few percentage points lower than the total occupational separation rate under the new one, but the same can’t be said for attorneys’.

I’m not sure how reliable these experimental data are, but they do tend to show that there’s more turnover for lawyers than the other professions they’re most often compared to. (Ironically there’s even more turnover for postsecondary law instructors.) And I’m not even getting into job quality. I wouldn’t say this is especially strong evidence of a high turnover rate for lawyers, but it’s another piece that fits in that puzzle.

The BLS (still) says it’ll give us another update early this year, but I hope to write on other topics.

10 Ways to Falsify Law Graduate Employment Doomsayers

I begin 2015’s first substantive post by invoking the right of listicle clickbait.

A loose end from December is Loyola Law School, Los Angeles professor Theodore Seto’s response to my American Lawyer article on the Bureau of Labor Statistics’ proposed change to how it measures the replacement rate for lawyers. For Professor Seto, I have good news and better news.

The good news is that when he writes that he’s flattered that I’d respond to his article, he need not be. Of course I was going to write on the topic for The American Lawyer anyway, but his first article usefully illustrated the kind of thinking I cautioned against when I broke the story in early November.

The better news is that his closing line raises an interesting question worthy of further consideration. He writes:

But we should all remember (myself included) that the best legal counselors, when faced with new evidence, adjust their advice accordingly. They do not simply attack the evidence.

Let’s not discuss whether I was attacking new evidence. Readers can compare my article to Seto’s for themselves. Instead, if I interpret Seto fairly here (and he says I didn’t do that for his other article, so I tread lightly), he’s implying that I or perhaps others make unfalsifiable claims about the future of law graduate employment—that we unfairly dismiss any favorable news about graduates’ prospects because it contradicts our dogmatic positions that law school is a poor decision in probably most circumstances.

If so, he’s incorrect. My beliefs are falsifiable, and because the topic of falsifiability arose on this blog two more times in the last month, I’m inspired to write on it. So, here’s a list of events one could point to (and would probably need to) to predict that things will be better for grads in 2016.

(1)  The absolute number of graduates in the classes of 2014 and 2015 employed in full-time, long-term, bar-passage-required, non-school-funded jobs rises. No one disputes that employment percentages will improve on account of there being fewer graduates, but the best way to show that graduates are finding jobs is … showing that graduates are finding jobs. Similarly, I’d like to see evidence that grads are finding better jobs. That could be the NALP reporting that grads are shifting into lawyer jobs at law firms larger than the 2-10 bracket, though 2013 toed in the right direction.

No. Graduates Employed by Size of Firm (NALP)

You can slag biglaw all you want, but it tends to pay better. Likewise, wage growth in the 25th percentile for law grads is absolutely necessary if anyone wants to convince me that law school is better than going back to college for a more lucrative bachelor’s degree, but technically that’s a slightly different issue.

* Note: At this time I’m not too concerned that the ABA’s decision to give law schools a tenth month to report their graduate employment data will substantially impair any comparisons to previous years.


2016 Grads Shouldn’t Take Comfort in New Jobs Projection Approach

…Is up on The American Lawyer.

That should sate your law school bug until I compile the data from the ABA’s 509 reports and see what’s there. Gotta give the ABA credit for putting this info up so much sooner than before.

[Update: One thing that’s popped out: WMU Cooley Law School had only 38 full-time matriculants this fall, down from 387 a decade ago.]

How the Transparency Movement Reinflated the Law School Bubble

Of course I’m click-baiting you! But in place of the vicious criticism you were expecting, you shall receive bitter irony instead. Frankly, I think you’re coming out ahead, so be thankful, you ingrate!

So why did I flag you down?

It appears the Bureau of Labor Statistics is changing its employment projections methodology, specifically its measure of how many workers will be replaced in occupations in its 10-year projection periods—as opposed to the number of positions that the economy will create. Apparently this is a project the BLS has been engaged in for a while, and the comment period is over, so why I didn’t know about it before now escapes and saddens me.

The BLS’s employment projections have long been a go-to source for law school critics. The ~24,000 projected annual lawyer job growth rates they showed every two years contrasted excellently with the ~40,000 law graduates each year (and the even greater number of bar admits). No longer.

Background: Developed in the early 1990s, the BLS’s occupational replacement methodology uses a simple age cohort analysis. For instance if there are fewer employed lawyers in the 55-59 cohort today than there were in the 50-54 cohort five years ago, then you have a rough number of how many people in that age group left the occupation. Do that for all the adjacent cohorts and add together all the negative net changes, and you have the replacement rate. The math behind it is a little bit more complicated and there are some exceptions, like if the occupation is projected to decline overall, but that’s the basic concept.

But the BLS isn’t satisfied with this methodology any more. It suffers from sample bias for occupations with small numbers, and it leans on the assumption that it’s mostly young workers who replace older ones. The bureau is interested in finding the “actual” replacement rate, i.e. one that includes workers transferring to other occupations or leaving the workforce altogether who are concurrently replaced, not just retirees, whom the current methodology tends to capture. This way the projections will include everyone who switches jobs, e.g. fast-food workers for retailer clerks and vice versa, when such changes would otherwise net out under the current methodology. The new methodology is based on Current Population Survey data and regression analysis (which always turns out well) rather than historical trends.

As evidence that the new methodology achieves its purpose of finding more replaced workers where the current one does not, the BLS points to … lawyers because there are external data on employment rates. I’m totally not kidding. It writes (and I editorialize in brackets):

Not all law school graduates become lawyers, but the American Bar Association (ABA) conducts a census of employment outcomes for all law school graduates in order to count the number who find employment in positions that require bar passage (effectively, lawyers). Since ABA began collecting this data in 2011 [Not correct, see below], the number of graduates finding employment in such positions has averaged 29,000 per year. Because some graduates who don’t immediately find such positions may become lawyers later in their career (for example, many graduate become law clerks, a position that does not require bar passage, for a few years before becoming lawyers) [Citation please?], this number [the 29,000 graduates—it’s unclear] should be less than the total number of new entrants into the occupation.

Under the current method, BLS projects an average of 19,650 job openings per year, while the new method projects 41,460 openings per year [!!!!]. Again, no direct comparison between the ABA number and the BLS numbers is possible due to conceptual differences [which, of course, does not rule out indirect comparisons], but the results under the current method are significantly below the actual number of new graduates finding work in the occupation [!]. The new method projects a higher number of openings, which allows for additional entrants not immediately after completion of a law degree.

Okay, data on law graduate unemployment has actually been around for many years, e.g. the NALP and the Official Guide, crude though it was. I’ve written about the strong correlation between falling proportions of graduates finding bar-passage-required jobs and graduates taking JD-advantage jobs or not finding any work. This is evidence of a saturated lawyer market, even if it’s caused in part by slack aggregate demand.

Percent Employed by Status (NALP)

The BLS could also look at lawyer-licensing rates courtesy of the National Conference of Bar Examiners, which it probably should be doing instead of law graduates. So when the BLS says the data are only now available, it’s not doing its homework.

However, the irony—and this is really incredible—is that all those demands for transparency in the employment data, after accusations of misrepresentation and deceit, have perversely led the government to (indirectly) compare the number of graduates in bar-passage-required jobs to its current estimates and use it as evidence that those graduates must be finding bar-passage-required jobs long after graduation.

As arguments from incredulity go, this is a pretty good one. As usual, there are other fallacies.

For one, the BLS is assuming that all occupation changes are positive sum. Everyone who leaves law practice is making the best choice among alternatives (ultimately), so too does everyone who chooses to become lawyers. Thus, departing lawyers need to be replaced. The new methodology automatically rejects the possibility that new entrants force out existing ones and that if more people chose better alternative occupations to law, then fewer lawyers would exit, and everyone would benefit. (Except law professors.) Now, whenever someone leaves the law, there is by definition a shortage, a misallocation of human capital that can only be met by sending more people to law school.

…Especially in light of the eye-exploding 41,460 annual job growth rate, courtesy of the BLS’s new, inscrutable regression approach. It’s certain that some number of lawyers enter practice long after graduation, but assuming 29,000 grads get bar-passage-required jobs, that leaves another 12,500 lawyer jobs each year that must go to earlier graduates despite the swelling numbers of JD-advantaged, unemployed, and other grads who aren’t absorbed earlier.

This leads to an unbelievable replacement rate under the new methodology: If 834,700 projected lawyer jobs in 2022 less 759,800 lawyer positions in 2012 yields 74,900 jobs due to growth, then the cumulative replacement rate (74,900 – (41,460*10 years)) is 339,700 lawyer positions that will “need” replacement over the next decade. If the legal profession has been going through a 44 percent 10-year replacement, then there should never have been a backlog to begin with, and it’s something we should have heard about by now. By contrast the current model shows only a 16 percent 10-year replacement rate.

There’re a few other reasons why the methodology change isn’t a good idea, like aging lawyers, but this post isn’t about that. Rather, it’s a rebuke to everyone who crusaded for transparent employment data based on the rational, debt-guzzling law student assumption. Thanks to them the law schools will soon be saying that the graduate-to-annual-job ratio is (indirectly) in equilibrium right now. The demand for lawyers is there, they’ll say, just after an undetermined period of crippling malemployment … and at a time in their careers when no one is measuring it … except for those After the JD people who found that 24 percent of bar-passers weren’t practicing after 12 years.

Cheekiness aside, it’s likely the BLS (and state governments) will change their projections methodologies accordingly despite law being an unrepresentative occupation with substantial early-career turnover. Be prepared for the dark age of lawyer employment projections.

The Legal Recessions That Weren’t

I don’t read The New Yorker regularly, but I’m of the demographic that does, so it pained me to read the first two sentences of its article, “The Legal One Percent.”

After every recession since the Second World War, the legal profession swiftly and robustly recovered. Not this time.

This is not what the data say. The legal sector (which isn’t the same as the legal profession, but given that the article goes on to cite profits-per-partner data I think that’s what The New Yorker means) has done terribly after recessions since the late 1970s. Although the BEA still hasn’t updated its industry data for the period between 1977 and 1997 per its comprehensive revision, the older data show the overall stagnation.

Legal Sector Real Value Added

It took five years for the legal sector to recover to its 1979 high, and then eight years to get back to where it was in 1990. This is supported by data on household consumption expenditures on legal services, as well as the Labor Department’s measure of employees in legal services.

Household Consumption of Legal Services

Per capita spending on legal services probably peaked in 1990, and it’s probably fallen to its 1960s’ level.

The legal sector and the legal profession have been ailing for quite a while. It’s surprising that their stagnation is still misreported.