As market reality sets in law school critics get testy

As the economic recovery continues and evidence emerges that the job market for lawyers is continuing its steady growth, the small group of hard core law school critics is getting a little nervous. From the very beginning the critics have been fueled by misguided notions about how markets actually work and severely challenged abilities to understand the empirical evidence of the relative health of the market for lawyers.

One recent example is an ongoing exchange between Professor Ted Seto of Loyola Law School and blogger Matt Leichter. Seto had the temerity to note that projections about future legal employment made by the BLS, long and heavily relied upon by law school critics, had recently been adjusted. Under the old, now discredited, BLS methodology it appeared that law schools, collectively, were graduating far more JDs than could be absorbed by the market. It turns out the opposite is very likely to be the case, as Seto explains quite clearly.

Now retired lawyer Steven Harper expands the critics’ new offensive with a claim that many law school deans and professors will soon declare the “crisis” to be over. He provides no basis for this claim, which he likely will suggest was purely rhetorical. It is extremely rare that “many” deans, much less “many” law professors, ever declare anything collectively to be true. I don’t know about the law schools Harper is familiar with, but we have trouble getting committees of seven people to agree on a time for a meeting.

Unfortunately, this kind of rhetoric is typical of the way he plays loose with the facts. It’s the kind of approach one has come to expect from Harper, as demonstrated here and here. In the same post, for example, he relies on data for something he calls “total legal services employment” with a link, not to the original data – which is from the BLS, but to a compilation of the BLS data by Ben Barros for the blog Faculty Lounge.

This data shows a slight decline, he notes, between the end of May 2013 and the end of November 2014 of 100 jobs (out of a total of more than 1.1 million.)

This leads to his key conclusion: that despite what he admits is an overall macroeconomic recovery, “the hoped-for increase in attorney demand was nowhere to be found.”

There is only one problem, well, actually three problems.

First, Harpers fails to explain that the data Barros provided is seasonally adjusted.

This means the data has been smoothed by the BLS wizards to provide a different picture of the labor market. The BLS does this with its employment numbers because it can sometimes be helpful to abstract away from seasonal ups and downs in the labor market. But that also means you are not seeing the actual employment data and that you will not get end of year averages. More specifically in the law context, while the BLS has its own reasons for seasonal adjustment one impact is to reduce the employment numbers in summer months failing to show the impact of hiring of summer associates.

In fact, the unadjusted data (link below) show an increase in legal services employment between May 2013 and November 2014, from 1,131,300 to 1,134,800.

Second, the data category Harper uses includes more than just lawyers. Now Harper notes this in a parenthetical reference but he does not explain it. In fact that “legal services” category includes so many non-lawyers (e.g., some 270,000 paralegals) that the category is nearly double the size of the number provided by the BLS for people actually working as lawyers. Of course, the ups and downs of that larger “legal services” category tells us something about the state of the legal industry though what exactly is not entirely clear. But it is not automatically a good proxy for “attorney demand” and Harper makes no case that it is, instead he just blindly relies on it.

This might be ok if we did not actually have data for people who do work as lawyers but in fact the BLS tracks that, too. Inconveniently for Harper, however, it shows a fairly steady recovery in employment (and incomes) for lawyers since the onset of the 2008 crisis.

As I pointed out in a recent post: “The number of lawyers employed in the US has risen steadily every year over the last decade (except for a one time drop in 2008 to 553,690) to a high in 2013 of 592,670. Average annualized earnings have grown every year as well from $107,800 in May of 2003 to the May 2013 total of $131,990.”

(There were 425,170 people working as lawyers in May of 1997. That climbed to 504,370 in May, 2002 and hit a pre-crisis high of 555,570.)

The third problem is that even if one only had the “legal services” employment data, that data actually shows steady recovery from the crisis, too. Here is a link to the entire data set month by month for the last decade, non-seasonally adjusted, thus allowing the creation of annual averages. So at year end, what do annual averages show?

That jobs in legal services grew steadily from 2004 to 2007 and then as the crisis took hold fell off in the following three years (2008-10) before beginning to grow steadily over each of the next four years (2011-2014) hitting a number last year higher than any since 2008.

In fact, if Harper had gone back to the original data he could have seen that even his seasonally adjusted number (data set here) improved from November to December in 2014.

Of course, steady recovery over the last several years in employment of lawyers does not mean the crisis is over for law schools. Just as many more students delayed job hunting by going to law school post 2008, now the delayed impact of the inevitable downturn in enrollment is hitting home.

It does mean, however, that the dominant meme of the law school critics – that law schools themselves are fraudulent institutions that should be radically restructured if not eliminated – is discredited.

“It’s the economy, stupid,” as James Carville famously pointed out, not the allegation of central planning made by the critics and their right wing friends at the Cato Institute.

As explained here and many other places, law school enrollment tends to be counter-cyclical. Law school was seen in the past by many recent college grads as a place to hide out if economic conditions were weak. Since most business downturns subside more quickly than the 2008 crisis, this was a reasonable strategy. But it proved unworkable with such an unusually severe and prolonged downturn. So an overhang of law school graduates was created and it will take time for that to resolve.

Perhaps even more important to take note of: law schools are not great at tightly controlling the production of new lawyers. We don’t have central planning in the US. Despite what the critics may think of the ABA it does not exercise Stalinist levels of control over law schools in our free market society. So there is always going to be some level of mismatch between supply and demand.

Meanwhile, Ted Seto is probably right to note the potential for a swing in the opposite direction now. What led to oversupply over the last few years may lead to undersupply in the near future.

A related data point (also based on historical BLS and ABA data, not projections) is significant: while law schools specialize in producing licensed lawyers, that does not mean they produce graduates who predominantly work as lawyers. The ABA tracks the number of licensed lawyers in the US and the BLS, as noted, tracks the number of people working as lawyers. Over the past 17 years (I could not access precise BLS data for lawyers prior to that), slightly less than half of all licensed lawyers are, it appears, actually working as lawyers. (There are others who work as judges and in other JD-required roles.) I think it’s reasonable to presume that relationship has been stable for some time. (It was 45% in 1997, 49% in 2003 and 47% in 2013.)

Whether we admit it or not, in other words, law schools have for a long time been in the business of producing almost as many non-working lawyers as working lawyers – and that is not a function of any kind of misleading brochures handed out by marketing staff. It’s a function of the value of a JD to the many thousands of people who continue to maintain their law license even though they are not working as lawyers. That’s why the best study of the earnings premium associated with a JD – by Simkovic and McIntyre – is able to demonstrate a career earnings premium for the JD itself not for a career working as a lawyer.

No one wanted the kind of mismatch in JD’s and jobs that occurred after 2008. And I didn’t want to sell my home at a significant loss in the wake of the crisis either. But as court after court has pointed out law students cannot blame the law schools for the problems of the wider economy any more than I can blame the bank that loaned me money to buy my house. Had the law school critics taken up the calls for debt relief that I and others issued instead of worrying about over-wrought theories of law school as a scam, thousands of recent graduates might be better off today.