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August 20, 2014

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Victor Fleischer

Hi Ben. Thanks for the post. A couple of questions:

1. What happens when you add in un/underemployed lawyers to the mix? It is not self-evident that if there are x number of new legal jobs, all will be filled by new graduates.

2. While I agree that the market for legal services will probably grow a little, it's not as clear that the number of bar-required jobs will grow. My impression, which could be faulty, is that many growth areas in the market for legal services are in the JD preferred or JD optional sector.

3. Any thoughts on the quality/salary of law jobs? One possible effect of technological change is downward pressure on wages.

In sum, I am optimistic that the market for legal services will grow, at least a little, but I'm not sure that it will cause a spike in demand for JDs.

Vic

anon

"In a relatively short time, we will have gone from an environment where employers received hundreds of resumes for every open position to one where employers might not receive any resumes at all."

Ben, the math is the math, so no argument there. But, I might disagree with the statement above.

The notion of "full employment" (no resumes at all!) strikes me as a bit fanciful because this would be the first time in recent memory (the past 50 years), good times or bad, that this has happened?

Is that accurate? (I ask honestly, not rhetorically).

Please identify any time in the past 50 years that ads for attorneys went unanswered, or, please tell us why the situation today is unprecedented (i.e., has there ever been in the past 50 years, equilibrium between available positions and new graduates, and during those times of equilibrium, was there a "shortage" of attorneys?).

PS Forgive me if this information is set forth above; I read quickly!

Just saying...

A lack of entry-level lawyers will mean that under-employed, laid-off, stay-at-home mom/lawyers, hate-being-retired lawyers will have opportunities. I know many who would gladly take an entry level position to get back in the profession.

The issue is not whether there will be enough entry-level lawyers (newly graduated). It is whether there are enough lawyers, period.

Ben Barros

Vic (and Just saying . . . ), I agree that underemployed lawyers are relevant. As I mentioned, I don't think there are as many underemployed lawyers out there as many people think, but there certainly are quite a few. I don't expect law school enrollment to turn around any time soon. At some point the excess supply will be soaked up. I think that will be sooner rather than later because law school enrollment has dropped so far. I anticipate that there at least be modest growth in the number of bar required jobs as the economy grows. There might be more growth in JD Advantaged, etc, but I think that this growth will be tempered by lack of supply. I'm agnostic on whether technology will put downward pressure on salaries, but I'm sure (Econ 101) that a reduction in the supply of lawyers will put upward pressure on salaries. It will be interesting to see how things play out. Finally, I'd note that my analysis doesn't require a spike in demand for JDs. I assumed flat demand.

Anon, fair questions. That was a bit of a rhetorical flourish on my part. I do expect that there will be some jobs that go unfilled, though these will be on the low end of the desirability scale. For example, I expect that temp firms will have a hard time filling demand for temporary document review positions. That very well may be a good thing. What is unprecedented is the very rapid nationwide drop in law school enrollment. There hasn't been anything like this, ever. Let me know if that doesn't fully respond to the question. By the way, there are some localized shortages of attorneys right now in rural areas. That's a different issue, though . . .

anon123

1. I am not certain if I missed this, but another important fact is that the classes coming up will be entering the job market for the first time when there will be large numbers of lawyers retiring. Look at when the graduating classes started to dramatically increase, and those people are now getting close to retirement age. Now, do I think a partner at Skadden Arps will be replaced by a new grad? Of course not. But when an Executive DA retires, typically people beneath him or her are promoted, and a new slot opens. A sole practitioner may decide he wants to work 3 days a week. All of this bodes very well for the upcoming classes.

2. As to the comment that there are many unemployed or underemployed recent grads, while that situation is unfortunate, I find it unlikely that once someone has been out of school for over 2 years that person will be attractive in the market place. Yes, some of those people may be working in JD advantaged jobs which might be parlayed into law firm jobs, but then the JD advantaged jobs open up. The person who has been traveling or waiting tables is not likely to get the call.

anon123

To add to my previous post, possibly someone could clarify, but I think the BLS numbers purport to estimate the INCREASE in legal jobs, whereas the ABA data tracks people hired into positions. One difference, of course, would be people retiring. That number will increase dramatically in the coming years, and as it does, there will be more jobs for new graduates.

Ben Barros

anon123, re: your first point, I've seen this point made before, and it makes sense to me. I haven't studied the numbers in-depth, so I don't have a tremendously informed opinion on it. I'd note in this context that the BLS projections of job openings account for demographics and presumed retirements. Re: your second point, this also makes sense, and highlights the importance of people doing everything they can to increase their marketable skills. In prior discussions of related topics, I've made the argument that it makes sense for new graduates to take jobs that have low initial pay but that provide great experience. ADA and PD jobs are a classic example, but there are other types as well. I think, by the way, that the number of people who are just waiting tables is very small. Re: the issue raised in your second comment, my understanding is that the BLS projections estimate the number of new openings, including openings caused by things like retirements. But you are correct - the ABA numbers report actual jobs, while the BLS projections estimate new openings over a ten year period.

TG

A few points:

1. With all due respect, Ben, you are not a disinterested party when it comes to these sorts of forecasts; you personally benefit from optimism among potential law students. I am not attacking your integrity, but confirmation bias and cognitive dissonance comes into play here. That's not to say you should be ignored solely on that basis, but it certainly warrants close scrutiny of your arguments, particularly the qualitative ones about your sense, impression, etc.

2. As someone who has actually practiced law in a contemporary time frame, there are certainly significant structural changes that I've seen, particularly when it comes to a lot of the time-intensive, profit-making document review that large firms used to bill for. Indeed, the people who dismiss the structural-change argument tend to be those with no recent experience of the practice of law.

3. A not insignificant percentage of "currently practicing" lawyers are not, in fact, making money. There are plenty of smaller firms that are living on past years' profits or lines of credit. When these attorneys retire that does not open up a job for a new graduate because the work is not there and wasn't there for the retiring lawyer at the end.

4. The BLS' projections are done by very experienced statisticians and economists; if just looking at historical employment figures (and assuming, as is not the case, that these figures prior to the law school transparency movement, were accurate) yielded accurate results then the BLS would do that.

5. The BLS properly uses projections rather than forecasts because they are, as you, law students, and law schools should be, focused on long-term employment, not whether you'll be able to briefly have a job 3 years from now.

Observer

The problem is, the relevant issue is not what fraction of new law school graduates will get full-time Bar Pass Required jobs after graduation.

The question is whether new law school graduates will get any sort of job that will allow them to service $150,000 or so in debt after graduation. A full-time Bar Pass Required job that pays $40,000 a year doesn't allow you to service that level of debt.

Of course, there are a couple of offsetting factors - the increasing prevalence of discounting sticker law school tuition may mean that average debt loads may start falling, at least for the portion of law school graduates receiving significant tuition discounts.

And, as you note, if there is really a shortage of lawyers, that will tend to push up salaries for Bar Pass Required jobs.

However, given the debt loads currently taken on by the average law student, you would need both a significant reduction in debt loads, and a significant increase in average salaries to make law school a financially viable proposition for more than a small fraction of graduates.

MacK

Please reconcile:

Ben Barros (OP): "The key thing to understand is that the nine-month job data does not provide the whole picture on legal employment. As the name implies, nine-month job data measures employment outcomes nine months after graduation. Many people get jobs more than nine months after graduation. I explained this phenomenon in detail in a prior post."

Anon123: "As to the comment that there are many unemployed or underemployed recent grads, while that situation is unfortunate, I find it unlikely that once someone has been out of school for over 2 years that person will be attractive in the market place."

Ben Barros re Anon123 above: "Re: your second point, this also makes sense, and highlights the importance of people doing everything they can to increase their marketable skills."

Ben, I second the point about confirmation bias and cognitive dissonance. The reality is that someone not employed (or holding a solid job offer) at 9 months after graduation is now competing with the next years graduates and suffers from essentially the same problem as a 2-year graduate. The suggestion about taking PD and ADA jobs runs into the problem that there are now hundreds of applicants for every PD and ADA job that opens up, many from T-10 and T20 schools.

That you did not spot this inconsistency in your arguments in the same thread exemplifies the confirmation bias, optimism bias, etc.

Inigo Montoya

Ben,

You keep using that word, "shortage." I don't think that word means what you think it means.

Roger Roger Roger

Law schools won't have a problem with fewer applicants, since they can always add LLM students from overseas.

So, accordingly, since law schools can always add LLM students, which doesn't affect rankings, there will not be a lawyer shortage.

End thread.

Scott Bauries

Ben, I find this analysis pretty convincing, though like some of the commenters above, I also believe that the cost issue must still be addressed. For example, the bimodal salary distribution was a problem even during the "good" times. But that said, I think you're correct about the coming merger of supply and demand.

As to the prospect of a shortage, you rely in part on the study that you did of your own school's graduates' employment outcomes more than nine months out. This study was a great idea, your findings are very interesting, and at this point, it's the best data we have available as to the accuracy of the nine-month reports. But I am wondering whether we should view it as generalizable to the national legal economy for the purposes of a prediction like this. It seems to me that, depending on the school, the nine-month number could be an over-count or an under-count. For example, take a school that provides school-funded positions for a substantial portion of its graduating class that extend for one year. Such schools exist, and they will be counted as having a larger portion of their classes employed on the nine-month deadline than are likely to be employed three months later. I think it is admirable that you cut the effect you found in half just to show how robust your prediction is, but there is a possibility that the effect could be very different--maybe even negative--in different regions and at different places in the law school distribution.

All I think this means is that someone needs to take your study's methodology and do a more national version of it, with a stratified random sample of law schools at different places in the distribution and in different geographic regions. The study may find an even larger effect than you found, strengthening your prediction.

antiro

I believe there are two major problems facing legal ed: cost and lack of jobs. Solving one is only half of the battle.

Students going to low-ranked private law schools regularly take out more than $150,000 in student loans. A larger percent of them, say, 50-60%, rather than the dismal 30-40% is a step in the right direction, but the $1000+ monthly loan payments will still be crippling.

IBR/PAYE is a bandaid, and as Unemployed_Northeastern repeatedly posts, it is in the crosshairs of both Democrats and Republicans.

Ben Barros

TG, (1) Fine. I'm not a huge fan of this kind of argument, but I welcome close scrutiny. (2) As I noted in the post, document review was being outsourced when I entered practice in 1997. I'm sincerely interested in your answer to this question: how can a phenomenon that existed when I practiced nearly 20 years ago explain the post 2008 job market? (3) I think this is less true than you suggest, but it is undoubtedly true that there are some lawyers who are not making a lot of money, or who are otherwise unemployed. Hence my comments about underemployed lawyers. (4) Re: the BLS, yes, they know what they are doing, which is why they say not to use their numbers in this way. Can you respond to any of my specific points about the BLS numbers? I really don't want this thread to get sidetracked, but I will note for the record that I don't agree that the ABA numbers were fundamentally flawed prior to the law school transparency movement. More importantly for this thread, I don't think that anyone would argue that the current numbers used in this thread are inaccurate. (5) No, if you are suggesting that people should rely on the specific numbers in the BLS projections, for the reasons that I give in the post. Yes, if you are suggesting that people think about the long-term growth trends identified by the BLS. As I noted in the post, the BLS expects modest growth in the number of jobs for lawyers.

Observer, I don't really want to get into the issue of debt loads on this thread. As I've noted in prior posts, I agree with the concern about debt, though I disagree with the focus on entry-level salaries in this context. But I want to focus this particular thread on the relationship between jobs and graduates in 3-4 years.

MacK, I don't see the inconsistency. My post on my alumni data study, which you read, explains why you are incorrect about people without jobs nine months out. The ADA and PD point was a simple illustration of the importance of building your human capital. I am fully aware that these jobs have been hard to get for the past few years. They will become a lot easier to get in the coming years. Let me make a request. I would like you to explain why the arguments in my actual post are wrong. Don't just say "confirmation bias". I made arguments in the post. Please explain why they are wrong. I'd be especially interested in your take on my points about the BLS data.

Inigo, I appreciate the cultural reference, but an economic shortage is when demand exceeds supply. Hence my post was about the demand for new lawyers exceeding the supply of new lawyers.

Scott, thanks. I suspect that the basic effect that I found in my study is generalizable, but I completely agree that it would be better to have more data. I'd be very surprised if the number went down, even for schools that have school funded jobs (a) because the improvement that I saw at my own school was so great, and (b) because of the basic dynamics of the legal job market (timing of bar results, jobs coming open between January and May) that I describe in the post. Again, though, more data would be fantastic.

Adam

Ben,

I applaud your careful work here. I am unsurprised that some commenters are pivoting back to debt levels, rather than your actual analysis. Debt levels are a crucial topic, too long ignored by law schools, but they are merely one part of a broader discussion.

I have a comment about nine-month figures and some of the assumptions surrounding them. I agree with you that the nine-month figure significantly undercounts legal employment fairly attributable to a law degree (this is the rare statistical measure that has been both game-able by law schools and "unfair" to law schools at the same time). I also agree with the Scott Bauries' point that it would be nice to know how generalizable the delta you found between 9-month and ultimate outcomes is. I'd surprised if the After the J.D. studies don't cover this, perhaps indirectly.

MacK suggests that students unemployed at nine months are in the same boat as those unemployed for two years, and that both groups are unlikely to find jobs. That has not been my observation throughout my career in teaching, even stretching back to classmates in law school. For those not fortunate or interested enough to get on the summer associate/clerking-fall start job track, there has always been a substantial lag in securing a job. Many public interest entities and smaller firms hire sporadically during the year. My anecdotal observation has been that most people unemployed 9 months later find something by the following fall.

But this is a long-term impression, less true since the Great Recession. And I sense that the pushback on this stems from the felt experiences of those commenters seeking jobs, or observing classmates seeking jobs, over the tumultuous past few years. So, while I think MacK is wrong to equate 9-month and long-term unemployment, it would be nice to have more data.

JM

Ben, there is one key assumption that is fatal to your analysis. You assume that any full time long term license required job is a desirable employment outcome.

Check out the headline in the article below:

http://money.cnn.com/2014/07/15/pf/jobs/lawyer-salaries/

It reads: "Go to Law School. Rack Up Debt. Make $62,000."

You think the article is describing a fairy tale? Uh, no. It is describing a nightmare. Reading this article will deter people from going to law school.

So, out of your 100% employed graduating cohort, how many fall in the "Go to Law School. Rack Up Debt. Make $62,000" category? Probably 20,000/26,500.

Life it tough. Even 100% of grads become attorneys, law schools will still face fire. Maybe its time to reduce those costs.

Jojo

Adam,

How can debt not be part of the "actual analysis"? If a 0L could convince the SBA to give you $180,000, just as easily as a 0L could convince Aunt Sallie to give him $180,000 in Grad PLUS loans, you'd have near total "entry level" employment. The 0L could open a small restaurant or coffee kiosk or bakery or oil change shop. Said 0L could get some revenue and hobble along for a few years until the money ran out and the small business folded.

Ben raises the ultimate straw man argument here. In economic terms, Ben simply argues that legal services are a "good", something that people want. Like haircuts, or oil changes, or landscaping. Of course there is a demand for legal services, just as there is a demand for food, clothing, gasoline, and widgets. There aren't a whole lot of people paying for them, however. Talking in terms of the market for "entry level jobs" without mentioning the cost to obtain such jobs and opportunity costs is misleading.

I also challenge the fundamental premise asserted here as pure rose colored conjecture. Where's the data revealing a shortage? There will be fewer graduates in 3 years than in 2013, but so what? Where's the evidence of SHORTAGE? Labor shortages are actually studied by actual labor economists, not law professors talking their book. Hint: if there were a labor shortage in the labor market for attorneys, you would see signs in the data, such as rising wage pressure. We do not see rising wage pressure. We see falling wages. There is no evidence of shortage in the data.

Please stop selling.


JM

"Debt levels are a crucial topic, too long ignored by law schools, but they are merely one part of a broader discussion."

When people refer to law school faculty/administration as arrogant, this is exactly what they are talking about.

Adam, do you really think that you and your colleagues will get to dictate to prospective students to prospective students what additional factors are relevant?

We all know that now law schools want prospectives to value "practice ready" programs. The problem is they don't. Nor will they ever.

There are only three relevant factors: debt, location and employment outcomes. You and your colleagues will just have to learn to live with this.

John Thompson

Using your estimate for the number of 2,017 JDs and this year's FT/BR-at-9-months, the "best entry-level job market" in years would still leave 7,138 JDs not employed in FT/BR positions as of February 2018. Assuming the numbers hold constant and we see an 8% year-over-year drop in class size, it'll be 2021 before the number of new JDs match the number of positions available in any given year, before one considers the reserve army of unemployed and underemployed JDs of various experience. Therefore I don't accept that there will be much "upward pressure" on lawyers' salaries except perhaps among experienced associates. Meanwhile the distance between starting median salary and debt burden continues to widen. If your definition of "best" ends at "percentage obtaining FT/BR jobs within 9 months of graduation," I suppose it will be the best.

As part of your survey, did you ask your long-term-underemployed Widener graduates what it was like during the period greater than nine months when they wondered if they would ever get a job in the law? Or how they felt about their investment of time and money in Widener, relative to those who got jobs within 9 months?

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