New Study on the State of the Entry-Level Law-Jobs Market and its Implications (Part IV: What the Current State and Likely Future of the Law-Jobs Market Means for the Legal Academy)

This is the fourth in a series of what I originally intended to be four posts springboarding off my new study of the entry-level Law-Jobs Market.  I’m now planning a fifth (and if that’s what you have to look forward to, you have my sympathy).  The full paper is available here.  Part I laid out the current state of the job market, and you can find it here.  Part II was about “JD Advantage” placements, and you can find that here.  Part III made some predictions about where entry-level hiring is headed in the foreseeable future, and that one is here.

In the first post in this series, I showed you that the entry-level Law-Jobs market appears to have finally leveled out after a decade-long decline, but that the number of entry-level Law Jobs is now 25.7% lower than it was in 2007, and at levels not seen since the early 1990s.  The proportion of the graduating class getting a Law Job (the Law-Jobs Ratio) has recovered, but that’s only because of the crash in the number of people attending law school.  In short, there are way fewer entry-level Law Jobs than there were ten years ago, but even fewer people graduating from law school.  In the third post, I predicted that while the long, steep decline in entry-level hiring is probably over, the steady and rapid growth in the job market that preceded it for at least thirty years is not likely to return anytime soon.  Instead, we have reset to a new, more modest entry-level job market about 25% smaller than the one we had in 2007, one likely to show, on average, only gradual growth of perhaps 1%-2% per year.

So what does this mean for the legal academy?  I offer my reflections after the jump.

Thinking about where the legal academy ought to go from here should start with an assessment of the demand for legal education, or more specifically for JD degrees.  (Let’s agree that three-year JD degrees will be the focus of this discussion, and that we’ll put aside for the moment one-year specialty programs terminating in an MLS or LLM that are, at least for now, a modest sideline to the flagship JD program at virtually all American law schools.)  I start with the observation that almost everyone who seeks a JD degree does so to become a lawyer.  I showed in the second post in this series that the still-persistent contentions that JDs are or ought to be sought for a wide range of uses not requiring a law license are simply contradicted by the actual data in the educational and job markets. 

As you can see from the graphs in the earlier posts, the demand for new lawyers took a nosedive after 2007.  The market for the JDs needed to enter this rapidly shrinking market also took a nosedive after 2010, a rational and predictable reaction.  By 2016-17, the number of new law jobs for the graduating class was down about 26% from 2007, and the number of unique applicants to accredited law schools (a good measure of demand for legal education) was down 36% from 2010, with total law-school enrollment down 27% over the same period.

For the first-year class entering in the fall of 2018, unique applicants and total applications to law school increased about 8% over the prior year, the first meaningful increase since 2010, and that increase skewed toward applicants with better conventional qualifications such as LSAT scores.  A survey of prospective law students suggests the increase was prompted in significant part by a surge in graduating college students’ interest in involving themselves in the political events of the day.

While those motivations may be admirable, unfortunately there is little reason to believe that appreciably greater numbers of Law Jobs will be available to the class of 2021 than are available today.  The continuing improvement in the Law-Jobs Ratio (the proportion of the graduating class obtaining Law Jobs within 10 months after graduation) is attributable specifically and uniquely to the substantial decline in the number of law graduates seeking employment.  Thus continued improvement for future graduating classes of the Law-Jobs Ratio, which is a direct measure of the likelihood of the average graduate’s obtaining a Law Job, is in most cases likely dependent on keeping entering classes at or near current sizes.

So what did law schools do with the enlarged (and improved) 2018 applicant pool?  Jerry Organ of the University of St. Thomas School of Law has done a thorough analysis.  You can (and should) read the whole thing here, but I’ll try to summarize.  While the applicant pool expanded by about 8% in 2018, the aggregate entering class increased by only 3%. Predictably, that additional 3% was not evenly distributed. Prof. Organ has shown that there is a roughly linear relationship between the 2018 changes in a law school’s entering class size and its 2017 median LSAT, with law schools having a median LSAT of 160 or greater (about the 80th percentile among all test-takers) having increased their entering-class sizes on average by 6.4%, while law schools with a median LSAT of 149 or less (about the 40th percentile of all test takers) having actually reduced their entering-class sizes on average by 5.9%. “All of the growth in enrollment,” he reports, “functionally occurred among law schools with a median LSAT of 155 or higher in 2017 [about the 63rd percentile among all test-takers].” Even more intriguing, and in striking contrast with recent years, 95% of all accredited law schools either increased (54%) or held (41%) their entering class’s median LSAT scores in 2018. This appears to reflect a widespread strategy to preserve or improve the conventional qualifications of the entering class, with increasing revenue by increasing class size at most a secondary goal at most institutions.

What about the law schools that increased entering-class size?  Was that a good idea for them?  I’m going to go out on a limb here and say it depends.   On what?  Fair question.  Generally, given the overall state of and prospects for the entry-level Law-Jobs market, it would seem to be a bad idea to matriculate a greater number of students than in recent years in the absence of specific and quantifiable reasons for a particular law school to believe that the employment markets that school predominantly serves can accommodate in three or four years the extra graduates it plans to matriculate now. Deans and admissions officers who expand their entering classes without such grounds do so at the risk that a commensurately smaller portion of their graduating classes will be able to get jobs that justify the time and effort of obtaining a JD. Students choosing among multiple law-school acceptances would be wise to bear this in mind as well.

In thinking about a whether a particular law school has a strong basis for expanding, one reason that will probably not prove out is that the expanded class has conventional qualifications that are as good as or better than prior years’.  Here’s why: There is no discernible evidence that the reductions in entry-level hiring over the last ten years are the result of any growing mismatch between the abilities or skills of new graduates and the needs of legal employers generally—while it can be argued how much better law schools have gotten at meeting prospective employers’ (and clients’) needs over the last decade, there’s no serious argument they've gotten any worse at it. Instead, the reductions in entry-level hiring appear to result from structural changes in what new law graduates are used for in the legal services market and under what circumstances an employer’s marginal addition of more of them at any given time is economic. Thus, predicting that the steady or improved conventional qualifications of larger graduating classes three and four years from now would induce legal employers to hire more of them makes no sense.  After all, legal employers pay little attention to the factors (LSAT and undergraduate GPA) that got someone into law school; they focus much more intensively on the law school new graduates attended and their class standing--which is an ordinal list based on curved grades.

OK, then what are some good reasons to grow?  It’s not insignificant that the bulk of the recent entering-class growth has taken place among relatively more prestigious law schools. There likely is a “prestige effect” that will to some degree reduce (quite possibly significantly) the erosion of some more prestigious law schools’ Law-Jobs Ratios as their class sizes increase.  The strength of this effect should typically depend on how highly regarded a particular law school is relative to others with which it competes in the job-placement market. In addition, the extent of any such effect for the substantial majority of law schools will likely be limited and dynamically dependent on other competing law schools’ actions, and accordingly quite difficult to predict.

To illustrate with a simple example, if your law school is in California, your job market is so saturated with local graduates that an increased number of graduates from your school are unlikely to place very well unless you are a true standout like Stanford or Berkeley, or you have historically outstanding placement outcomes for other reasons.  (Interestingly, USC expanded its entering class by about 7% in 2018.  Its graduating class of 2017 achieved an admirable Law-Jobs Ratio of 86%, so there’s a decent chance this was a good move on SC’s part.  But there may be dynamic effects:  Because the job market overall is unlikely to expand as much as USC has expanded, extra graduates USC manages to place will likely take jobs from graduates of other law schools.  In this scenario USC and its students win; other schools and their students lose; and the market stays more or less the same.) 

There also may be geographical or specialty areas uniquely or predominantly served by a particular law school that provide reason to believe that employment outcomes for that school may improve at greater rates than the job market as a whole. But such a conclusion must depend on a clear-eyed, data-driven analysis of features demonstrably specific to that law school. Generalized optimism regarding a rising employment tide that will lift all student boats will probably prove for many only a prelude to a shipwreck.

That said, it bears noting that the overall expansion in the 2018 entering class is only 3%, not much more than the rate at which my paper predicts the entry-level Law-Jobs market might reasonably be expected to expand. But as just discussed, that 3% increase is an academy-wide average, and a good many law schools have expanded their entering classes a good deal more than that. Roughly half the law schools in the country, including some that are well-regarded in their local markets, have Law-Jobs Ratios that are under the aggregate Class of 2017 average of 65.9%, and a Law-Jobs Ratio of 65.9% still leaves over a third of the class without a Law Job ten months after graduation. Under these circumstances, a goal of maintaining current levels of placement success seems an anemic ambition for any law school whose placement numbers are not excellent already.

And what will happen if entry-level employment outcomes disappoint?  Well, we’ve seen the answer to that question over the last ten years.  Prospective applicants take those outcomes into account in deciding whether or where to go to law school, and they do so a lot more these days than when these trends began ten years ago.  The market will correct toward equilibrium:  The number of applications will fall; the number of applications to schools with weaker employment outcomes will fall more; trouble for more than a few schools (in the form of shrinking classes, falling qualifications, and intensified price competition resulting in greater tuition discounting) will follow.

My next and last post in this series will try to address the question why the Law-Jobs Ratio for the class of 2017 is only 66%, and why that is actually a pretty good overall rate historically.  Stay tuned.

--Bernie

Comments

[Anon]

Of course, this result is not unique for legal employment. Across the board hiring has been weak despite headlines about low unemployment. Hidden behind those headlines is a lot of informal and temporary work that is low paid.

This has been the problem with the attack on legal education since the battle first began - the tendentious effort of law school critics to attempt to separate legal employment from the macroeconomy.

[concerned_citizen]

Thanks Bernie. I enjoyed reading through the series and appreciate all the time and effort involved.

So Ben was wrong in late 2014 when he warned us here about "The Coming Lawyer Shortage" (I think that is the correct title).

At Anon - sure, you need to compare to the overall economy.

But outside of veterinary school, I don't know of any other sector where there's still quite so much of a mismatch between numbers of new graduates vs. jobs for them.

[PaulB]

cc, there's one graduate program far worse than veterinary school. Music conservatories. Think of them as having the admission standards of Stanford and the job outcomes of Golden Gate.

[Anon]

MBA:

US MBA Programs see drop in applicants
Business Insider 10/2018

Nothing special: MBAs are no longer prized by employers
Economist 6/2016

MBA employment rate in 2018 was 79% (another 11% unemployed and 10% allegedly "self-employed") while NALP's data for JDs was 88.6% overall and 72% for bar required jobs.

[concerned_citizen]

Hi PaulB, thanks for the information re music conservatories; I was unaware. Did some digging and, well, ouch.

Hi Anon - Would be great if you could please provide link (although I recognize this forum has real problems with links, so maybe that's not do-able).

But in any event, claiming NALP's 88.6% overall employment for JD's is really only relevant for the recognition that 11+ percent of JD's are not even employed. Those 11% couldn't even get jobs at Starbucks or slinging Panini at Panera bread? Is that what this datum says?

Also, NALP's supposed 72% bar required number, even if true, is at variance with the ABA disclosure numbers.

And even if it weren't - who in their right mind would claim that 72% was a good outcome?

I don't actually get what you're trying to do here.

[Anon]

"I don't actually get what you're trying to do here."

Burk writes (ad nauseum) about the alleged jobs crisis for law school graduates. I point out that he does so without any comparative analysis to what is happening in the overall economy. This has been the achilles heel of the law school critics from the beginning of this debate.

You then chime in with the baseless claim that there is a bigger mismatch in legal education and jobs than anywhere else.

In five minutes of "research" I found data that shows that law grads really aren't doing any worse than MBA grads.

In other words, as many of us have tried to make clear (to people who clearly don't care) that legal education and legal employment is subject to the wider swings of the economy. There is no "peculiar" problem with legal education. Which is not, of course, to say that legal education should not reform or innovate. And, in fact, it has in many areas.

This will be disappointing to the critics who have staked their reputations and, in some cases, business models on a fiction about a law school crisis. But there it is.

[anon]

As pointed out above: "So Ben was wrong in late 2014 when he warned us here about "The Coming Lawyer Shortage" (I think that is the correct title)."

Anon, you might want to review the claims made by "ben" as well as others, including forward looking statements made by law school officials. Do you not consider it to be even worth of a whiff from your sophisticated nose? Or, were all criticisms of such assertions wrong, per se, because asserted by your nemesis: "law school critics"? Did you defend such assertions back in 2014?

Second, are you seriously asserting that other professional schools have experienced similar shrinkage and enrollment, and job opportunities have disappeared to the same rate in other professions? Your five minute google search notwithstanding? (Not that we all don't admire your obviously superior powers of investigation and discernment.)

Finally, why did you come here to comment? To prove what? Are you arguing that the law school establishment is doing so remarkably well, that is such a finely tuned academic enterprise serving its constituents and the greater society in such beneficial ways that it should be immune to criticism? Examination? Even a question or two?

YOu seem to be a calm, stable, unemotional and objective judge of all things: Lubet apparently thinks so highly of you that he needs to make sure no one confuses you for someone else.

Enlighten us.

[concerned_citizen]

Anon - I think I found the report on MBAs you were referring to.

Interesting that among US students, the ratio is 96% employed and 4% unemployed. The international students don't seem to get quite as much benefit from a US MBA program once they return home, though.

As for "allegedly self-employed" MBAa, it hardly seems fair for us to sniff at these while new law grads soloing are counted as full-time, long-term JD required jobs.

But who is it that you suppose has a "business model" based on the law school crisis?

[concerned_citizen]

"Burk writes (ad nauseum) "

That was hardly fair. He writes what he writes. You don't have to read it, you know.

[Anon]

Yes, you're right, hardly fair - after all, snarkiness has no place on this blog!