This is the second of three posts on the current state of the legal job market. The first discussed the preliminary results of a study I did of employment of recent graduates from my law school and explained why nine-month job data does not tell the whole story on employment. This post discusses the idea that the market for legal services is undergoing a profound structural change. The next post will discuss the Bureau of Labor Statistics projections for lawyer employment. [Update - the third post is here.] The whole series is collected in this document.
The Structural Change Issue.
Another piece of the current conventional wisdom is the argument, generally associated (at least in US law circles) with Bill Henderson, that the legal job market is undergoing profound structural change. My reaction to this argument has taken an interesting trajectory. I was initially deeply skeptical of the argument. The more I thought about it, the more I started to think that there was something to the structural change idea. My current thinking is that some structural change is occurring in the legal job market, but that this change has been gradually occurring for many years. I therefore think that this structural change is something that legal educators should think deeply about, and I agree with some of what Professor Henderson has to say about the subject. I am skeptical, however, that the structural change has much, if anything, to do with the current state of the legal job market. I am also a bit skeptical of how deeply the structural change will penetrate into law practice. Professor Henderson has written a lot on this subject that deserves a more thorough analysis than I can give it in this post. For now, I want to focus on these last two points – whether structural change is responsible for the current state of the job market, and how deeply structural change will impact law practice.
The structural change argument has a few components to it, but for me the most interesting part of it is the claim that technology, specialization, and process engineering are making legal work increasingly standardized and systematized. Professor Henderson, discussing the work of Richard Susskind, writes that “Susskind asserts that legal work is gradually migrating from bespoke (e.g., court room practice), to standardized (e.g., form documents for a merger), to systematized (e.g., a document-assembly system for estate planning), to packaged (e.g., a turn-key regulatory compliance program), to commoditized (e.g., any IT based legal product that is undifferentiated in a market with many competitors).” (Blueprint for Change, at 479). As legal practice becomes more routine and commoditized, compensation for lawyers will come under pressure. The structure of legal services will change as well, with lawyers (or, more broadly, legal service providers) working for specialized firms that look more like service providers in other industries than contemporary law firms.
Although I think it has limits, I think it is true that at least some change of this kind is occurring in the legal industry. I do not think, however, that it is particularly new. One example of this kind of change discussed by Professor Henderson is the rise of firms that provide contract attorneys for discovery work. My first big assignment as a law firm associate in 1997 was to supervise a major document review and coding projects (ah, the glories of Biglaw!). At one point, I had 60 contract attorneys working for me. We were using technology to make the review process more efficient. This technology has improved over time, but technological change has also created a dramatic increase in document review work. Even in 1997, the increased use of e-mail was creating many more documents for review than had been created in the past when written communication was exclusively on paper. In the document review world, technological change has probably created more work in the last 20 years (by exponentially increasing the number of documents to be reviewed) than it has eliminated (by automating parts of the process). It is also worth noting that while certain aspects of document review can be performed by trained monkeys (and thus can be automated), other parts require the work of human beings exercising judgment. More importantly to the subject of this particular post, I don’t see change in the document review world in the last few years that is different in kind than change that had occurred in the prior 15, making it unlikely that any changes in this area are the cause of the present relatively poor job market.
Another example noted by Professor Henderson is the rise of internet form providers such as Legal Zoom. Form documents have been available on the internet for a while, so I’m skeptical that Legal Zoom et al. have much to do with the current job market. I’m also skeptical of how deeply the widespread availability of forms, no matter how good they are, will change the existing practice of law. To be clear, I do think forms are changing, and will continue to change, the practice of law. I’m not sure, however, how deep this change will go.
Forms have been a part of legal practice for as long as I’ve been a lawyer. Over time, the forms have become more sophisticated. Most residential real estate transactions today involve the use of form purchase-and-sale contracts. These forms aren’t perfect, but tend to be pretty good. The widespread availability of good forms, combined with the availability of reasonably competent professional advice from real estate agents, has led to the reduction of the role of attorneys in residential real estate transaction. This is a pretty good example of the type of structural change Henderson and Susskind are talking about. An area of law where lawyers used to play a large role is now dominated by non-lawyers. This kind of change is also reflected in the real estate title search and closing processes. As I noted above, a fairly large number of our graduates included in my study are working in-house at title companies. These people are working as lawyers, but are doing so in specialized, non-law firm environments. I think this kind of structural change has been going on for a while, and will continue to develop in the future.
I think, however, that this kind of structural change, especially reliance on forms and non-lawyer professionals has its limits. I should first note that the reduced role of attorneys in the residential real estate context is not an unambiguously good thing for consumers. Real estate transactions are incredibly complex. They present a host of risks to the parties, especially the buyer. Most buyers would benefit from the advice of an attorney as part of the process. For my Real Estate Transactions class this semester, I obtained a random selection of deeds that had been recorded in our local Recorder of Deeds office for us to review. One of the deeds, for a home built and sold by a sophisticated developer, had an innocuous-looking provision that shifted a good amount of title risk from the seller to the buyer. I would never have advised a client to accept this deed. Considering the probability of a problem occurring, however, the price of this risk was fairly small. Given the amounts of money involved, it is often rational for a party to a simple residential real estate transaction to proceed without counsel.
When the amount of money at stake increases, however, the wisdom of proceeding without counsel becomes more doubtful. Even if a form is available, forms are subject to negotiation and change. Any time the parties can negotiate the terms of their agreement, the parties would benefit from counsel. Put another way, any transaction where (a) the terms are negotiable and (b) there is sufficient value to justify the cost of an attorney will involve what Susskind calls bespoke legal work. As I noted above, Professor Henderson refers to “form documents for a merger” in the second step of systemic change. Any merger of more than trivial value will be subject to negotiation, whether or not the parties start with set of form documents. The work that lawyers do on this kind of transaction will be customized to the particular facts of the deal. To be sure, in some areas of transactional practice, certain forms are widely accepted, and where repeat players are involved the amount of negotiation for a particular deal might be limited. In these contexts, law firms compete on price by using specialized lawyers who can get things done quickly and efficiently. Law firms were doing this when I was in private practice, and I’m sure that the trend towards specialization will continue in the future.
In sum, I think that specialization and technological progress are changing law firm practice to a degree. I’m sure that competition between law firms will lead to further specialization, technological innovation, and process engineering improvements in the provision of legal services. I’m skeptical, however, of how deeply these changes will penetrate into legal practice, because so much of legal work is fact or transaction specific, making a good deal of it what Professor Henderson refers to as “bespoke.” I also think that these changes have been gradually occurring over a long time, and have very little, if anything, to do with the current state of the legal job market.
I will close on this subject with three further thoughts. First, I see very little reflection of systemic change in the alumni study described in my prior post. Most of the people included in the study are doing work in traditional legal settings. Only 0.8% of the graduates are working for agencies that provide contract attorneys. [In the comments to my prior post, Tyler noted that the number of attorneys doing document work might be regional, and suggested that if one of the major document review providers opened a facility in central PA, that the numbers would be higher. That very well might be true.] The one exception is the apparent shift in real estate practice reflected in the number of graduates working in-house at title companies.
Second, I think it is a mistake to focus on loss of work in any one sector of the legal job market. A few years ago, for example, tons of attorneys were doing work on securitizations. Now, many fewer are doing securitization work. It is not at all unusual for work in particular sectors to expand and contract. There is something of a cliché of big firm M&A lawyers switching to bankruptcy workouts when the economy turns bad. Some areas of practice go the way of the dinosaurs, while others spring up. The shale gas boom and the implementation of the Affordable Care Act, for example, have provided a lot of work for lawyers that didn’t exist a few years ago.
Third, I am old enough to have lived through several economic cycles. In both booms and busts, there is a tendency to talk as if the current situation will be permanent. During the last boom, there was a lot of talk about how technology-created increases in productivity would lead never-ending growth. During the ‘80s, there was a lot of talk about how the US economy was never going to recover, and about how Japan would dominate the world economy in ‘90s and beyond. I think we need to be very careful in both booms and busts not to become overly convinced that our current situation is the result of permanent change.