Why Go to Law School?
Supply, demand, tuition, and bonuses
It’s December, which means that the long season of law schools competing for students is beginning again. You read that right: law schools compete for students, not the other way around. The Times ran an article earlier this week describing the tuition cuts and financial aid packages that law schools are using to try to fill seats in their entering classes.
It’s December, which also means that it’s bonus season at law firms. And early indications are that experienced associates at top-tier firms are going to go home happy this year, with several firms announcing bonuses exceeding $100,000. (As opposed to the bankers, they may even show their appreciation; law school tends to select for the polite, deferential, and insecure, rather than the overbearing, aggressive, and insecure.)
These facts go together.
At one end of the pipeline, poor employment figures for recent law school graduates (resulting from the 2007–2009 recession) and a series of attack articles by David Segal — some warranted, some silly — has dramatically suppressed law school applications. Total first-year enrollment fell by 24 percent from 2010, a record year, to 2013, and now stands at levels last seen in the 1970s. The number of LSAT takers this fall (who are generally hoping to start law school in 2015) is down 50 percent from 2009, so either enrollments will fall further or the standards for getting into law school will go down more than they already have. With most of their costs fixed, law schools recognize that a student paying half tuition is better than no student at all, hence the competition for students. And, as Steven Davidoff Solomon wrote recently, it makes little sense to close a law school — even one in default on a loan payment — so the competition is going to continue.
At the other end of the pipeline, the real economy is 8 percent larger than at its peak in the summer of 2008, when job prospects for new lawyers were generally good. That economic growth has been haphazard and unevenly spread, but one sector that is doing well is corporate America, which happens to be a major employer of lawyers. With M&A, securities offerings, and corporate litigation (much of it related to intellectual property) all at high levels, the law firms that cater to large corporations need people more than ever, and they are willing to pay to hold onto them.
That is how the market works. Demand for lawyers is driven by the level of economic activity, particularly among corporations. The supply of lawyers can adjust to demand, but only with a lag of at least four years: the time it takes to take the LSAT, apply to law school, and attend law school. In practice, it will take longer, because college students’ assessment of law school is likely to be tainted for years to come. And so this market tends to overcorrect. From the time the market for actual lawyers improves, it will take several years for law schools to adequately supply that market.
The 2013 entering class had a total of 39,675 students, according to the American Bar Association. Not all of those people will graduate. The graduating class of 2013 (which entered in 2010) found 37,730 jobs as of nine months after graduation, according to the National Association for Law Placement. Of those jobs, 76 percent required bar passage, in 16 percent a J.D. was preferred, and 6 percent were “professional,” leaving only 2 percent “other non-professional.”
Everything is not rosy, of course. Those figures are inflated by 1,700 jobs that law schools provide for their own graduates, essentially to inflate their employment figures for rankings purposes. Many jobs are only part-time (although fewer than 5 percent of the jobs for which bar passage was required fell into that category). The percentage of graduates with jobs requiring bar passage — roughly speaking, lawyers — has fallen by twelve percentage points from the pre-crisis peak. Still, it seems as if, in a few years, all of America’s law schools will graduate barely enough people to fill the jobs that are currently being taken by new lawyers.
Does that mean that now is the time to go to law school? Not necessarily. The most important factor, of course, is whether you actually want to be a lawyer. There are also reasons to be skeptical about the job prospects of future law school graduates. One is a shift in the relationship between law firms and their corporate clients, who are less willing to pay top dollar for inexperienced first-year associates. The most valuable people at big law firms are the senior associates who can carry the ball on complex matters but don’t get a cut of profits at the end of the year. But those senior associates have to come from somewhere, and that somewhere is the first-year classes at those same law firms. In addition, I have to point out that most lawyers do not work at the large firms that can pay six-figure bonuses; the median starting salary for lawyers is $62,000 overall and $95,000 at law firms.
There is also the theory that demand for American lawyers will decline because legal services will increasingly be provided by technology, by paralegals, or from offshore. These things are all possible. But you have to consider the likelihood of legal jobs vanishing relative to the likelihood of other jobs vanishing — specifically, the jobs that you would do other than going to law school. As Michael Simkovic and Frank McIntyre pointed out in a recent paper, the other types of jobs that we think of as alternatives for people who go to law school are similarly at risk of being automated or outsourced away.
I happen to be an associate professor at a law school, so you might say I’m talking my book. But I don’t particularly care one way or the other — smaller classes are better than bigger classes, all else being equal, and smaller graduating classes mean that a higher proportion of our students will get good jobs, and financially the issue doesn’t affect me. The most important thing is that prospective students should consider the facts available to them and make educated guesses about where they think they will end up upon graduation. As a professor, what I really want are students who have a realistic perspective on their future prospects — and who want to be in class.
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