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.

OCCUPATION SOC CODE CURRENT METHOD NEW METHOD
REPLACEMENT RATE, 2012-22 OCCUPATIONAL TRANSFER RATE, 2012-22 LABOR FORCE EXIT RATE, 2012-22 OCCUPATIONAL SEPARATION RATE, 2012-22
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.

Continue reading

Marketplace Has No Idea Why Law School Enrollment Is Down

In, “Why Law School Enrollment Is Way Down,” Marketplace teaches us:

While law school was once seen as a golden ticket [Ugh, so lazy.] to a financially stable future, the profession is becoming less popular. New technology is helping lawyers work more efficiently, allowing them to handle a bigger workload. But it also cuts down on a firm’s need to hire more lawyers, which means fewer graduates nab full-time permanent jobs.

Tell that to the productivity data. In terms of output per hour, the legal sector is 8 percent less productive than in 2007. It may be that potential applicants are hearing stories that law firms are filled with robo-lawyers, but if so it’s thanks to misinformation from outlets like Marketplace, not facts. It boggles my mind that reporters can get away with simply passing memes off as explanations for people’s behaviors. It’s not something that should be taught in journalism programs.

Speaking of higher education, that same article tells readers they should like another published in October titled, “Arne Duncan: Education Beyond High School Is Absolutely Necessary.” Oh joy. According to the interview:

When asked if he thought everyone should go to college, Duncan said he believed everyone needed additional education beyond high school: “If young people drop out of high school today, they are basically condemned to poverty and social failure. There are no good jobs out there… the economy has changed.”

I have no idea why Obama didn’t replace Duncan in his second term. The education secretary strikes me as an uninspiring one-term posting, like every other no-name in executive branches you didn’t even know existed. But we’re stuck with Duncan for a while longer, and with quotes like these, we can expect a warm seat for him at the student loan welfare Lumina Foundation. I forget if I’ve said this before, but in the coming decades when politicians start flinging mud at one another over the student loan write-down, Incompetent Arne will be long gone. At least the voters deciding the issue will have watered-down credentials to help them make the right policy choices.

Household Spending on Legal Services Declines Too

But first, I should inform you that for the second year the ABA Journal has chosen to admit The Law School Tuition Bubble into its Blawg 100. It states:

Matt Leichter makes data-driven arguments in favor of changes to the legal education system. Anyone concerned about the levels of student debt and the state of employment in the legal industry would do well to visit his blog and examine his data firsthand.

I endorse this characterization, and you can endorse my Web site here.

********************

Speaking of data about the legal industry…

A brief follow-up to Monday’s article on the legal services industry’s continuing contraction: It turns out a few months back the BEA updated its personal income and outlays tables. Although they can only tell us about household consumption of legal services, the data go back much further than the GDP by industry tables do, and arguably household spending on legal services does a better job of capturing the health of the legal services industry for lawyers who enter small practices. I discussed them before here.

There are a few relevant findings.

One, inflation-adjusted household consumption of legal services fell by 3.27 percent in 2013. It’s about 15 percent less than in the peak year, 2003.

Percent Change Real Personal Consumption Expenditures by Function

(Source: National Income and Product Accounts, Table 2.5.3., author’s calculations)

Two,  the peak year for legal services as a share of total household expenditures was 1990 (1.09 percent); in 2013 it had fallen to 0.85 percent. It’s comparable to 1983 or 1973.

Legal Services Share of Household Consumption Expenditures

(Source: NIPA Table 2.5.5., author’s calculations)

The point isn’t just that households are spending less lawyers, it’s also that legal services historically have been a trivial expense. Americans spend about twice as much on higher education than legal services (but they certainly didn’t use to!). By contrast health care surged from 6 percent in 1959 to 21 percent in 2013. Compare that to the public perception of lawyers.

Three, household spending on legal services as a share of the industry total has been declining since the early 2000s.

Personal Consumption Expenditures of Legal Services Share of Legal Services Industry

(Source: NIPA Table 2.5.5., GDP by Industry Value Added, author’s calculations)

All of these trends point to the withering of small-law. I am pessimistic of the outlook over the next several years.

Commerce Dept.: Legal Services Sector Contracts (Again) in 2013

Earlier this month the Commerce Department’s Bureau of Economic Analysis (BEA) updated its GDP by industry data. The chief finding for law-watchers is that in 2013 the legal services industry shrank by 2.9 percent. Ouch. The legal services industry includes all private law firms, and it employs about half of all lawyers. Meanwhile GDP grew by 2.2 percent, meaning that once again, the shriveling legal sector is being outdone by the rest of the economy.

Percent Change Real Value Added by Industry

(Source: GDP by Industry (xls), author’s calculations)

[Correction: Half of wage and salaried lawyers work in the legal services industry; most self-employed lawyers probably work there too.]

I’m providing moving averages to illustrate the break between the legal sector and GDP that began in 2005. That’s not to say things were hunky-dory before, just that those data still haven’t been revised yet. Go ahead, look at the old data and show me the situation was better before 1997. I dare you.

To editorialize, yes, the annual updates are horse-race reporting and recent years get revised a little bit each time, but I’m not enjoying reporting on the contracting legal sector nonetheless. I’m genuinely surprised that it’s still doing so badly, and I thought the Great Law Depression would’ve leveled out by now. Maybe future years and revisions will bear that out, but it’d take a sustained period of significant growth for the outlook to improve. Even a single year of 2.9 percent growth wouldn’t persuade me things are getting better, but even a piddly 0.4 percent would be nice to see.

To make things worse, when drilling into the real value added components, “compensation of employees” has been consistently contributing to the decline.

Contributions to Legal Services Real Value Added

(Source: GDP by Industry (xls), author’s calculations)

Only “taxes on production and imports (less subsidies)” has been growing consistently in the last three years.

The legal sector’s productivity measures are similarly unrelentingly bleak. Real value added per person engaged in production has fallen by about $20,000 since 1997 while the same measure has grown steadily throughout the economy and for the legal industry’s sibling in the “Professional, Scientific, and Technical Services” category, “Computer Systems Design and Related Services.”

Real Value Added Per Person Engaged in Production

(Source: Real Value Added by Industry, NIPA Table 6.8, author’s calculations)

If things keep going at this rate, the average legal services worker will be indistinguishable from the average worker overall. I guess it’s a good thing that the mean average worker isn’t anything like the median? It’s clear, though, that computer design is a much better candidate for “golden-ticket industry” than legal services.

Finally, we have the Bureau of Labor Statistics’ output per hour measure of labor productivity, which is a bit sharper than the real value added per person engaged in production estimated above.

Percent Change Output Per Hour

(Source: BLS Nonmanufacturing Multifactor Productivity Tables)

Here too, the long dashed moving average line (legal services) is comfortably below the thick line (nonfarm business), showing that the legal sector is not becoming more productive with the rest of the economy. More alarmingly, it’s lost about 8 percent of its productivity since 2007, and now the amount of private legal services the country is getting per hour worked is about what it was in 1988.

In conclusion, the data again depict a sputtering industry. For all the reporting on the declining supply of future law graduates, little is said about the long-term trends in the sector that’s most likely to drive demand for their services. Increasingly it appears to be dwindling while at the same time better opportunities for workers are forming in other sectors.

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.

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