Still More on What Matters Most (Or, A Guided Tour of Pandaemonium)

As I have previously observed, if you think there is no oversupply of recent and imminent law graduates, you live in a fantasy world.  If you think that every underemployed law graduate in America is just too lazy, too stupid or too greedy to take one of the countless paying jobs just waiting out there to meet the legal needs of the poor (who have no money to pay you, despite their substantial and serious needs), you live in a fantasy world.  If you think that there are untold thousands of wonderful, remunerative jobs that don’t require a law degree but that instantly become available to law graduates just because they have one, you live in a fantasy world.  We have lots of data measuring the differences between what’s going on here on Earth, and what you think you see from Planet Pangloss.

But there is an equally corrosive rhetoric at the other extreme in this discussion, and it is just as pernicious and misleading.  For example, this recent quote from Paul Campos in Fortune:  “[I]t's like the subprime mortgage scandal without securitization. When people realize it's a worthless degree, the system is going to collapse.”  Lest anyone accuse me of being a hater, let me be clear that I think Prof. Campos has done us all a great service in raising and focusing public discourse on a number of extremely serious and important issues regarding the current state of legal education, and has regularly contributed to the discussion with reasoned and empirically-based arguments about where we are and where we might be headed.  My concern is his tendency to lapse into self-loathing (such as in this inaugural post on his blog and much of the rest of what he posted there that month) and hyperbole (such as the remark I just quoted), and the rage and panic it excites in many of his followers. 

In a recent post, I called those indulging these rhetorical extremes “Pandemoniasts.”  I was thinking of Milton’s Paradise Lost, and the prospect of Hell presented to the fallen angels from the site of the city they will build there, Pandaemonium, which sounds for all the world like this crew’s prospect of all life after law school:

The dismal Situation waste and wild,
A Dungeon horrible, on all sides round
As one great Furnace flamed, yet from those flames
No light, but rather darkness visible
Served only to discover sights of woe,
Regions of sorrow, doleful shades, where peace
And rest can never dwell, hope never comes
That comes to all; but torture without end . . . . 

(Book I, lines 60-67, spelling modernized) 

Before those on the waiting list for anger management start to pile on, let’s all be clear that there is in fact loads of misery in the post-law-school world.  There are literally tens of thousands of recent law-school graduates who made six-figure investments in their legal educations, many of them incurring huge nondischargeable loans to do so, who cannot find full-time, long-term employment making any substantial use of what they paid so dearly in time and treasure to acquire.  This distress is by no means evenly distributed across the graduates of all law schools, but it is having real and significant effects at almost all of them, including many very well and thoughtfully administered institutions such as the one where I am fortunate to work.  This is nothing short of tragic, and of course it has to be addressed to reduce the numbers of future victims of this misfortune.  (And we should never forget that prospective reform of the kind currently under discussion in many quarters does little for those already caught in the riptide of the shrinking law-job market.  Disaster relief for those already swept out to sea will be the subject of a future post, and is something we should all be thinking about as well.)

That’s why I’ve argued that What Matters Most right now is that there are not enough law jobs for the recent and imminent law grads entering the workforce:  Responding to precisely these circumstances, the relevant markets are already bringing powerful forces to bear.  What happens when you make more of something (here, entry-level lawyers) than the market wants?  Supply contracts and price falls until the market clears.  And that’s exactly what’s going on right now.  Law-school applications are down precipitously again this year (hat-tip to Dan Filler for the latest numbers) as more prospective law students conclude that the investment of time and money in a JD is not justified.  The first-year class that started this past fall is smaller than the previous year’s by at least 10% at roughly half the accredited law schools in the United States.  Many schools will shrink, and some will simply fail when they cannot attract enough of what they consider the right kind of applicants.  Similarly, price competition among law schools for desirable matriculants is already increasing, right now mostly in the form of price-discounting through offers of financial aid, but with a few institutions freezing and reportedly considering reducing their tuitions.

Judging from the oversupply revealed by the employment numbers gathered and disseminated by the ABA Section on Legal Education, my relatively unscientific guess is that we can expect the number of seats in accredited law schools to shrink somewhere between 20% and 40% from its high in the class entering in the fall of 2010.  My equally unscientific guess is that we can expect to see the reduction fairly quickly (on an academic timescale)—perhaps within the next 3-5 years.

This correction, which is obviously substantial, will create more dislocation and hardship.  That is deeply regrettable.  Students at institutions forced to close will have their studies disrupted, and perhaps terminated (with concomitant loss of their investment) if they cannot find an institution willing to accept them as transfers.  The faculty and staff of those failed institutions will lose their jobs, and finding similar jobs elsewhere will be very difficult as many of the schools remaining downsize their own faculty and staff to serve reduced student bodies.  (The difficulties I am hearing about from very accomplished and talented applicants for law-teaching jobs this year are just a small harbinger of things to come.)  Schools that choose to compete by reducing price, either by selective awards of financial aid that allow them to price-discriminate more effectively, or by reducing nominal tuition rates across the board, will undoubtedly require their faculties to teach more and get paid less.

These hardships will not fall equally on every law school.  The really interesting questions are which schools are going to be most quickly and profoundly affected and why.  I have some thoughts about that, which I’ll share in a post soon to come.  Readers’ predictions in the Comments are solicited.  In the meantime, some schools are embracing the inevitable proactively (props to Dean Frank Wu at Hastings, for example, who decided last spring to reduce his census by 20% even though he could still fill 100% of his existing seats, thus seizing the opportunity to manage into and through the change), while others will undoubtedly be dragged down in price or numbers kicking and screaming (and denying and denying some more).

Those in the Schadenfreude brigade who take some joy in these prospects should be ashamed.  When markets contract, many people suffer.  But is this the end of the world as we know it?  Is “the system” going to “collapse”?  Don’t be ridiculous.

The legal profession is still an indispensable handmaiden to the American economy.  Even with a deeply depressed economy and critical structural changes reducing the staffing and pricing of legal services, there are still countless disputes of all kinds to be resolved, still deals to be done, and more regulations than ever to comply with.  There is an interesting debate to be had about whether, in the medium or longer term, the traditional model of conventionally defined legal services provided by guild-licensed professionals will survive (Gillian Hadfield and Richard Susskind, among others, think—with apologies to Prof. Hadfield for oversimplifying her complex and nuanced views—perhaps not).  But right now, and for the foreseeable future, there is no responsible argument that every law degree is “worthless” or that “the system” is on the verge of “collapse.”  Over 23,000 of the law students who graduated in 2011 had long-term, full-time jobs requiring a law license within nine months, and some modest (and I stress “modest”) complement on top of that found work towards which their law degrees made a real and significant difference.  That’s a lot fewer than the 43,000+ who graduated that year, and some of those who succeeded in the job market are making only a marginal living.  Those are very significant problems that have resulted in real and serious loss, disruption and pain to many thousands of disappointed graduates.  But to suggest that soon no one will be attending law school because there are, or will be, no economically viable entry-level law jobs is absurd.

Bottom line:  The legal academy is already shrinking, and that’s going to accelerate for a while—but it will slow and then stop.  We have the choice to face the forces driving these changes thoughtfully and proactively, or to be dragged along willy-nilly.  What we can’t do is resist them, and those who try will do so at their peril.  When it’s done, we will likely be sadder, hopefully wiser, and certainly more modest in our dominion.  “Better to reign in Hell than to serve in Heaven”?  You tell me.   

--Bernie

Comments

[john]

"But right now, and for the foreseeable future, there is no responsible argument that every law degree is “worthless” ... But to suggest that soon no one will be attending law school because there are, or will be, no economically viable entry-level law jobs is absurd."

Agreed. But is anyone actually making a serious argument that the above is true? From what I have read, most of the scam movement seems to be concerned primarily with three things:

1. Reducing the total number of graduates to somewhere in the mid-20k range (through whatever combination of school shrinkage or school closure is necessary).

2. Getting tuition in line with actual job prospects (it might be reasonable to pay $40-50k/year at a top ranked school where Biglaw or a well-funded LRAP are real possibilities, but bottom ranked schools should be charging half that, or less).

3. Providing relief for those that have already graduated (as you mentioned, tens of thousands of people with six-digit debt, no job prospects, and no bankruptcy protection).

If all three of the above came to pass, there would be no scam movement because there would be no scam. No one expects, or wants, the legal profession or legal academia to disappear.

[John Steele]

@john: In the linked article, Campos is quoted as saying: "'This isn't sustainable,' warns Campos. 'There is a zealous faith in American culture that higher education always pays for itself, but it's like the subprime mortgage scandal without securitization. When people realize it's a worthless degree, the system is going to collapse.'"

Still, if Professor Burk was paraphrasing that quote from Campos in the passage you highlighted, I'd find the paraphrasing to be a straw man position that Campos wouldn't be likely to agree with. (That is, although I don't speak for Campos, I don't believe Campos believes that every law degree is "worthless." To take an easy case, a law degree earned at Stanford with a huge discount off the sticker price is worth a lot of money.

And as for "collapse," what counts as collapse? A 100% drop in enrollment? 50%? 25%? Given the current numbers, "collapse" may be an accurate description and not just a useful bit of hyperbole. It's common to use "collapse" when a bubble bursts.

[shucks]

All of that and not one word about the deceit that law schools have engaged in with their employment numbers.

You're missing a large part of the story.

[MacK]

I while ago I did start a list I called the law school death watch - on Campos' forum. I actually think it is important for commentators to discuss which law schools are going over a cliff - both the the interests of their students and potential students - and also for new faculty hires. My own view is that law school's current capacity is about double where it should be - and the cost of law school probably twice what it should be. A correction thus means both cutting capacity and lowering fixed cost - which for law schools is essential faculty payroll. Thus you have a situation where a brutal and wrenching adjustment will happen. Many professors, especially at prawfsblawg indulge in all sorts of fantasies, such as the idea that law firms will subsidise law schools. I have summarised the issues that means that law schools will likely have to close before:

1. Law schools have a very high fixed cost and a very low variable cost – that is to say that the vast bulk of a law school’s cost is faculty payroll and benefits. There is a growing administration burden, but a lot is effectively directed towards marketing – the admissions office for example - and despite the scorn directed at career services, shrink those offices and there will be even more outrage.

2. The tenure guidelines which are the normal basis for University and law school tenure arrangements amount to an effective contract between the tenured faculty (and those with quasi-tenure, like 3-5 term contracts), while letters of appointment and the usual correspondence telling a faculty member what his/her pay will be next year can usually be claimed to amount to a contract. In addition even a pre-tenure academic might be able to argue that they were persuaded to go to school C and not school G because of representations of greater security.

3. One effect of this is to make salary and benefits something that forms part of the faculty member’s contract with the school – and there are cases where any substantial reduction in that package, or removal of say secretarial support was a breach of contract – and even has been held to be “constructive dismissal” in one US case (a term more familiar in the UK, Ireland, Australia and Canada.) Any lawyer who has worked with businesses where there was a choice between pay-cuts and layoffs will tell you, senior employees with better job security always “regretfully” prefer layoffs. This makes across the board pay-cuts hard (and there is always someone with a big mortgage, child support, alimony or student loans), plus cutting the pay of someone on $300k by 10% is not the same as a 10% cut on say $150k. Attitudes may of course change after a few law schools close their doors and closure becomes forseeable for faculty asked to agree to a pay cut.

4. AAUP guidelines then also provide that only in financial exigency can a college department layoff faculty – but how severe this exigency must be is not clear, the issue varies state to state.

5. Finally in the AAUP guidelines as well as some publications and in the formal rules of a number of law schools there are formal rules that require layoffs to run in accordance with seniority – newest and most junior (and cheapest and hardest working) first, most senior and highest paid (and laziest?) last. See for example:

http://www.ccc-aaup.org/union_docs/contract/article08.htm
http://www.uni.edu/vpaa/99-01facultycontract/five/index.html
http://www.calstate.edu/laborrel/contracts_html/cfa_contract/article38.shtml

and numerous others

6. However, there is exception that avoids the entire issue of layoffs or cutting faculty pay – closing the department.

7. If colleges and universities are a business, they have treated law schools as their shiny profit centers for quite a while. ABA rules limit how much money the parent school can soak the law school for to 20% of tuition – but numerous reports tell us that this has been routinely broken, with parent institutions taking up to 40% Now we are beginning to see a situation where many law schools are not going to sending money to the parent institution, but rather looking for subsidies. Parent schools though will take a hard look at the law schools and ask “is this a temporary embarrassment.” If the answer is no … then the parent college is quite likely to shut the law department. I think in a lot of instances the answer will be no.

8. There are a number of additional reasons that may make closing a law school attractive:

a. The law school is contiguous to a main campus – which means that its facilities can be repurposed to other departments (and those nice faculty and deans offices to other faculty); or
b. The law school has nice shiny down-town facilities worth real money, or possibly usable for graduate courses (business, etc.);
c. The law school is lower ranked than the parent school (it drags down the colleges overall reputation);
d. There are other law-schools in the same metropolitan area who could accept current students as transfers;
e. The school has recently been involved in some scandals (UNSNWR false reporting, scam-suits (even if they were dismissed);
f. It is a state school in a system with multiple state schools (transfers plus state government will find it easier to close one of plural state law schools.)

There are over 200 ABA accredited law schools. I find it very likely that a few will close (or at least announce their end) in the next 12 months. There are a number of ways they could do this:

A. Simply state that the class of 2016 will be their last class;
B. Say that they will close after commencement of May 2014/15 - giving students a year or two to transfer or graduate;
C. Announce that school W is merging with cross town school Y - with Y being the surviving institution (in reality W is closing and transferring en block its students.
D. Announce by say February/March that they will close as of commencement 2013.

[MacK]

I will add that Campos may from time to time be a little over the top - but only a little. However, it is a necessary corrective to the jaw-dropping complacency and self serving drivel that comes out of the law school professoriate - stunning examples being Larry Mitchell's New York Times Op-Ed, Steve Diamond on this forum and pretty well anything from Brian Leiter (who has become a self-caricature), not to mention defenders of Dean O'Brien at NESL.

[Josiah]

MacK -- That is a very longwinded, roundabout way of saying that if a law school does not have enough students/revenue and cannot cut costs enough, it may eventually close.

[MacK]

Josiah -

Yes it's long - but - you need to read some of the maunderings of various law professors convinced that there will simply by cost cutting applied through things like across the board salary cuts, or a few layoffs - reducing administrative expense. Law schools have been a state of pretty constant growth, both in size and revenue since World War II. I do not think anyone in the law school industry has any idea what is involved in cutting costs, how difficult it can and will be and the extent to which contractual relationships underpin the decision.

If predicted application levels this year are anything to go by - law schools will start closing by fall 2013 - alea iacta est. Once the first two-to-five go, the idea that law schools can and should close will not longer be considered outlandish and many more colleges and universities will give it serious consideration as an option.

I see no realistic way that the current 203 ABA accredited law schools can all survive in a market where demand for their graduates is at about 22,000 per year for the foreseeable future and the system is designed and staffed to output 50,000 - at tuition levels that would be high if most graduates were securing jobs at $160k. It seems that many law professors do - while denying the existence of the Tooth-Fairy and Santa-Claus. The capacity cuts and cost cutting is going to be very very bloody right up to the top schools

[joe, formerly of the blog Exposing The Law School Scam]

Don't forget that many of those who did find work as a lawyer post-graduation lost that job within a few years. The fact is that a very substantial percentage of entry level law jobs are of an 'up or out' nature, meaning that these firms hire young law grads and then pit them against each other. After 2 or 3 or 5 years, they kick most of them to the curb. Those who are kicked often cannot find other permanent legal work. And they move to another field. So...the real percentage of recent grads who find longterm legal work? Perhaps one-third....

[Josiah]

MacK - Yes, law school is like a lot of industries that have undergone business failures and wrenching cost cutting in the last few years. It hits people unequally, and regardless of their individual performance. It is generally not a cause of celebration. As you note, tenured professors (like Campos) are the safest in this situation, and may not agree to across the board costs to save others' jobs.

[Barry]

Paul Campos has some comments here:

http://www.lawyersgunsmoneyblog.com/2013/01/i-dont-think-this-is-what-socrates-had-in-mind

[Barry]

Bernie, I note that you said the 23,000 out of over 40,000 grads had real legal jobs after nine months. Considering that they paid well over $100,000 for their degrees,that's pathetic.

[MacK]

Josiah -

Yes and no to "law school is like a lot of industries that have undergone business failures and wrenching cost cutting in the last few years."

1. Law schools have yet to experience even wrenching cost cutting;

2. They have also not had a down cycle in the living memory of any of their professors, deans, etc. Rather it has been 40-50 years a pretty well straight growth, in budgets, size, salaries and tuition.

By comparison take say the tech industry. Almost every person in a mid-level or senior management role and a lot of the engineers in tech sectors have been through 2 or even 3 cycles of down revenues and cost cutting. It's not new and people know how to deal with it - the same goes for autos, steel, consulting, law firms, etc. Since the vast majority of law professors today fled to the academy within 2 odd years of passing the bar, this sort of experience is essentially alien to them. They react to the idea that law schools might close or that there might be layoffs with incredulous laughter. It does tend to engender a certain lack of sympathy - though not actual schadenfreude. I would suggest though that the experience of being through savage cost cutting will perhaps make the survivors less oblivious to the situation of their graduates and perhaps better professors.

[Josiah]

MacK -- In any industry, those running businesses will often, up until the day the plant closes, say that it is ridiculous that the plant will close. When law firms close or close offices, they insist they will always be around up until the day it closes. When layoffs are looming, the day before the layoffs there is denial all around that layoffs are imminent.

No one really knows how to deal with it, even if their industry has seen such cycles before. They deal with it when they have to. They resent those who revel in their demise.

[Barry]

Bernie: "But there is an equally corrosive rhetoric at the other extreme in this discussion, and it is just as pernicious and misleading."

This is simply not true. First, the sell-side rhetoric has been more misleading - compare Paul Campos to any dean. Second, the effects of the sell-side has been to put tens of thousands of students in a state worse than bankruptcy, each and every year. I dare you to find that effect from what Paul Campos has written.

[John Thompson]

"Those are very significant problems that have resulted in real and serious loss, disruption and pain to many thousands of disappointed graduates. But to suggest that soon no one will be attending law school because there are, or will be, no economically viable entry-level law jobs is absurd."

It *is* absurd. So let me give you a formulation that isn't: that soon no one will be attending certain law schools because the last five years have shown that only a handful of its graduates find economically viable entry-level law jobs and a bare majority find entry-level law jobs of any sort.

But please, law schools and your employees, please don't ever question any of your assumptions about what you're teaching, or why and how well you're teaching it. It can't be that you are all just sorting boxes for employers in which a little education happens by accident.

[Bernie Burk]

For those of you still following the commentary on this post, both here and elsewhere, I offer the following modest thought: Paul Campos (and others) contend that I have "obviously misinterpreted" Prof. Campos' quote in Fortune magazine last month. Prof. Campos, who is undoubtedly the most reliable authority on what he thinks, assures us that he doesn't think every law degree is "worthless." He (and others) believe that my quote took his words out of context and that his meaning is clear when the full quote is considered. See http://insidethelawschoolscam.blogspot.com/2013/01/comments-on-comments-on-comments-etc.html

Here is the entire quote from that article in Fortune: "This isn't sustainable," warns Campos. "There is a zealous faith in American culture that higher education always pays for itself, but it's like the subprime mortgage scandal without securitization. When people realize it's a worthless degree, the system is going to collapse."

The best argument that this is most appropriately understood only as rhetorical hyperbole comes from my friend John Steele (Comment on this post, Jan. 14 at 10:45 a.m.) I don't think that the rest of the quote makes that interpretation more likely, but I certainly acknowledge that the words can fairly be read that way, and I fully believe Prof. Campos when he says he didn't mean them literally. My concern is that not everyone is as smart, sensible and knowledgeable as John Steele. When a widely quoted commentator on these issues states that "When people realize it's a worthless degree, the system is going to collapse," there is a real concern that ordinary interested observers will take this as an authoritative opinion that, um, "it's a worthless degree," and that "the system is going to collapse."

I suggest that those who are bringing the news to the world outside our own little hothouse have some responsibility to consider the way in which the rest of the world will take our words. As I noted at the outset, it's a modest thought, and not everyone may agree.

--Bernie

[John Steele]

Bernie, thanks. It has occurred to me that we may be at our peak "claim-of-scam" moment -- because the mandatory disclosures are now so detailed and the bulk of the law suits are over -- and that we're all about to move on to the difficult job of actually adjusting to a new set of inputs. You and I lived through at least two tech bubbles inside law firms and if what the law firms went through is any indicator there will be some very difficult choices for law faculty, state bar examiner committees, and students. I wish the best to all of them moving forward.

[Attorney99134]

John Steele, the "claim of scam" moment is not complete.

Thanks to the law school lawsuit dismissals, low-ranked schools are allowed to post whatever nonsense they want without judicial consequences.

Yes, the ABA requires disclosure of more detailed information. But post-grad employment data is difficult to obtain - especially at low-ranked law schools. Law school administrators are also inclined to report the numbers in a subjective manner most favorable to them. So I think data finessing will continue.

[John Steele]

Attorney99134,

Please notice that I said "peak," and was trying to riff off of "peak oil" and similar terms. I didn't say the moment is "complete," just that the problem has crested. I could be wrong, of course.

I used to do plaintiffs-side antitrust and business torts and I'm a firm believer that law school stats get juked and books get cooked. At my blog I've been saying that since 2005 and been saying that the students had become deeply cynical about law school candor. It's also been a terrible way to teach students by example how to be an ethical lawyer.

Back when I was doing plaintiffs work, one of the cases I worked on was a case against a company that "fired" workers for brief periods of time each year so that it could maintain its eligibility for small business status. When we sued, it defended on the grounds that the stats were literally true and that the reporting methodology was required by the regulators (the SBA). The federal judge ruled on summary judgment that we had established that the defendant had committed fraud. The judge recognized the difference between the use of reporting methods and the abuse of those methods. To me, the parallels are obvious if, for example, a school "hires" students for brief windows in order to work the stats. If I were the judge, I would have allowed all the cases to go to discovery and then re-assess them on summary judgment. So I'm not throwing in the towel on vigilance, I'm just predicting that the problem has peaked.

[john]

>>When a widely quoted commentator on these issues states that "When people realize it's a worthless degree, the system is going to collapse," there is a real concern that ordinary interested observers will take this as an authoritative opinion that, um, "it's a worthless degree," and that "the system is going to collapse."

To get from Paul's words above, to your words below, is such a stretch that I am surprised you came back here to double down.

>>But right now, and for the foreseeable future, there is no responsible argument that every law degree is “worthless”

>>But to suggest that soon no one will be attending law school because there are, or will be, no economically viable entry-level law jobs is absurd.

BUT this statment is actually true:

>>or that “the system” is on the verge of “collapse.”

We are on track for an applicant pool in the low 50k range this year. That's another double-digit drop in applicants, year-over-year. That will mean fewer applicants this year than there were total acceptances in recent years. You have to go back decades to see numbers that low (and decades ago, we had far fewer schools). If numbers drop again next year, we will have fewer applicants going forward than we have had total matriculants in recent years. That is obviously not a sustainable situation.

Some schools will shrink, some will close. A lot of people will be out of work.

How is that not the verge of a collapse? Do you honestly read Paul's statement to mean that even Stanford and Yale have to go out of business?

More importantly, why are we even wasting our time arguing about this. We have a serious problem and getting sidetracked with arguments about the place for hyperbole does little to solve it.