The conflicting economics of “too many lawyers”

There have been a slew of articles and blog posts of late detailing the reasons why going to law school is a bad decision.  We thought we’d throw in our two cents.  

The reasons law school is “bad” rest on two givens: the enormous debt incurred and the lack of opportunity.  The argument is that we are producing more law school graduates than there’s any real demand for.  Two recent articles lay out the case:  Daniel Luzer’s article in the Washington Monthly titled Too Many Law Schools?  and the Op-Ed in the L.A. Times  titled No More Room at the Bench.

Let’s summarize the main points made in these articles:

1.  We are producing more law school graduates than there’s need.

2.  People rack up an average $92,000 in debt because of the implied promise of a high-paying job at the end (for our coverage of law school student debt issues click here).

3.  Industry predications indicate that there are likely to be less than 30,000 legal jobs available per year yet some 45,000 people graduate from law school every year.  And yet law school applications are still way up due to the poor economy (click here).

4.  A massive portion of law school applicants are extremely ill-informed about the career prospects resulting from a law degree (an issue that has long been covered — and extensively — by Tom the Temp).   

And who is the chief evil doer behind all of this according to the pundits?  The American Bar Association which continues to allow unneeded new schools to open and refuses to properly regulate the schools, many of which release numbers that paint an overly rosy picture of employment prospects for their recent graduates.

Given this situation, many bloggers call for restricting the number of lower-tier law schools because, as one commenter said, “given that the status-based hiring practices of law firms means that employment prospects are heavily correlated with law school tier this can be seen as shutting down organizations which are essentially scamming their students by selling them a very expensive degree on false pretenses”.  But this same commenter also said “it might be better simply to more heavily regulate the advertising of law schools (especially their often-misleading use of self-reported wage statistics and so on and such forth) and better-publicize the actual facts about job prospects for lawyers”.   Yes, since law schools are incapable of self-regulation due to conflict of interest, an enormous financial self-interest — and survival.

In fact, the L.A. Times opinion cited above went so far as to say “because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them”.

Ok, good point.  Well, good point for incumbent lawyers for the federal government to step in and shield them from competition from large numbers of new law school graduates.  As Matthew Yglesias in his blog post Too Many Lawyers, But Also Too Many Cartels  says “the continual flood of law school graduates not only suppresses wages but also reduces the cost of legal advice. You could say that the flood of new smart phones like the Palm Pre and the Nexus One suppresses profits at Apple, but it would be foolish to say that it only suppresses profits at Apple. It also creates new opportunities for consumers… An oversupply of skilled professionals is annoying for skilled professionals. But it’s a boon to the rest of the population.”

But there are many who believe the Federal government should play no role in the student loan market imbroglio.  For examples, check several posts on the Center for College Affordability blog (click here) and this piece from the Republican Policy Committee (click here).

The industry and the economics aren’t so clean-cut.  Especially for contract attorneys.   For instance, the biggest problem with the off-shoring of legal services is that the bulk of it is not substantive legal advice (although that is quickly changing as offshore works does become more substantive) but highly structured/repetitive functions such as document review, research tasks and processing.   For most contract attorneys (not all) the idea that attorneys are “practicing law” is a misnomer.  The skill set they are using is rudimentary.   But the effect on the contract attorney market is enormous.   As one blogger put it:

“The skill set would be the same for the permanent associate at the firm.  But that associate will advance, whereas, contract attorneys have no such expectation. Nonetheless, many contract attorneys take assignments to fill gaps in employment, so it would be a net loss to them if those opportunities were lost.  That is the problem with offshoring.  Profitable for the client corporation, devastating for the worker attorney.” 

 To summarize three other economic points to Michael’s post and the cited articles:

1.  If lawyers were actually trained to be lawyers in law school (the way doctors are trained to be doctors in medical school, internships, residency, etc.), then the statement “more lawyers, lower fees” might be beneficial.  But they aren’t.  Lawyers are trained to be lawyers once in practice.  With so many new graduates, and so few law firm openings, these untrained “lawyers” are able to provide little benefit and at great risk to their unsuspecting clients.   A person can be licensed as an attorney but have little to no legal training. This is because law school does not teach the skills or law necessary to represent clients, it only teaches you “how to think like a lawyer”, whatever that’s worth.  Real legal training comes from employment. The market is now so saturated that a large number of licensed graduates cannot find any employment and therefore are not really competent to act as lawyers. Most of these people, rather than attempt to represent clients, either work in document review or leave the profession, having completely wasted their time and money on law school.

2.  In theory increasing the supply of lawyers should lower the price of legal advice to individuals. In practice, it doesn’t work out that way.  People at the bottom end of the legal job market seem in practice to drop out of lawyering. They do things that may be peripherally law- related but aren’t providing legal services to clients.

3.  Law school economics and self-interest.  If applicants understood what a financial risk going to law school was, fewer would do it.  But that would create a problem for the existing law schools out there, which have an obvious incentive to stay in existence.  Not to mention those who have their affiliated universities, which like having law schools because law schools generally generate a lot of money for the university.

Yes, bad economics all around:  bad for current lawyers under crushing debt loads and trying to find work, bad for the “newbies” who actually want to work in the law or with the law.

Does the system suck?  You betcha.  But our concern/goal at The Posse List is not to fix the system.   Our concern is for the incumbents – to help those who got through the system, may be up to their keisters in debt, are looking for jobs, are looking for alternatives, are looking for answers, are looking for education.   How do you use background, your education, your skill set?  Not all of you are looking to leave contract review work, or e-discovery.  It is why we have expanded our coverage of e-discovery, and expanded our job lists (click here) and why we now number 18,000 members that include forensics consultants, paralegals, in-house counsel, law firm attorneys, solo practitioners, e-discovery vendors, legal media, and others, in addition to the original population of contract lawyers.

Note: LegalTech New York will be February 1, 2 and 3 in NYC at the Hilton New York Hotel (1335 Avenue of the Americas, New York, NY 10019) and several sessions are open to all at no charge (click here) and anyone can get into the exhibit hall for free and meet with vendors by registering for an exhibit hall pass (click here).  

But many of you want alternatives other than e-discovery.  And in spite of all the challenges those of you face trying to hit the “exit” button and get out of contract legal work be comforted by the fact that scores of Posse List members are doing it, and have been successful at doing it.  The best news:  we are working in a part of the legal industry that is unusual because it is open to sharing and collaboration, through publications, quality conferences, and trade shows, and peer networking organizations.  That’s why we have posted “action items” in the past such as:

1.  Join LinkedIn, Twitter, JD Supra, LexisHub and other networking, publishing, or directory services.  See our previous post here but we’ll have more coming up later this season.

2.   Start blogging and build a website if you don’t already have one (we gave you pointers on how to do this in a previous post here) and we’ll discuss that more, too.

3.   Start writing for publications that actively seek out lawyers even if it means doing it pro bono because you can build your online presence that way and then actually monitor your presence and those with whom you want to connect via Google searches and Google Alerts and other analytics.  We will have a complete “how to do it” post next month.

As always, we appreciate your support and value our feedback.  You can always email us at manager@theposselist.com.