Where have all the lawyers gone?

https://youtu.be/0LZ2R2zW2Yc

In the renewed debate over the relative health of legal education that has taken place on blogs and elsewhere of late, Professors Tamanaha and Merritt, widely known as opponents of law school as it currently exists, claim there are missing lawyers somewhere. In a recent exchange on Prawfsblawg following the misleading New York Times story on 2010 law school graduates, Professor Merritt claims demand for new lawyers is flat and Professor Tamanaha asks me why every recent law school graduate doesn’t have a job immediately upon graduation.

These kinds of questions have been at the heart of the critics’ case as they have to insist that there is an unprecedented structural crisis in legal education that cannot resolve itself through ordinary market mechanisms. Thus, there have to be a lot of missing lawyer jobs in order to create a deep-set structural mismatch between the number of students graduating from law school and the number of jobs available. Most of the time the critics rely on the BLS’s notoriously unreliable projections of future legal jobs to conclude that there are just too many law students and not enough lawyer jobs. (Even BLS officials admit the limited usefulness of these projections.)

But a review of the actual historical data used to estimate job numbers and income going back to the late 90s available from the Bureau of Labor Statistics reveals a very different pattern than the one law school opponents desire.

I reviewed this data in an earlier post but did not apply that data to the question of supply and demand raised now by Professors Tamanaha and Merritt. In addition, another year of data – up to May 2014 – is now available from the BLS.

First, the new added data through May 2014, confirms the trend stretching back to 1997. The number of people employed as lawyers and the income they earn are both up again. As of May 2014 there were 603,310 lawyers employed in the United States and on average (mean) they earned $133,470 per year. That’s an increase in jobs from 592,670 the previous year and an increase in income from $131,990.

In fact, income for lawyers has increased every year since 1997 (the earliest year for which data are readily available from the BLS) and the number of people employed as lawyers has increased every year since 1997 except in 2008, the high point of the credit crisis.*

(Median income increased by 54% in nominal terms. Medians however declined in two years in this period – 2000 and 2010.)

Now, what is the implication of the available BLS data for the question posed at the outset: where have all the lawyers gone? Or perhaps more importantly where have all the young JDs gone?

Well, it is not accurate to state as Professor Merritt does that demand for new lawyers “will remain flat.” In fact, demand for lawyers has increased every year since 1997, except in 2008 and as a result lawyers have been able to increase their incomes significantly faster than inflation or the rate of GDP growth. (Correction: nominal GDP has increased faster than nominal lawyer incomes.) Arguably, there are too few lawyers and that explains why they have been able to grab more income for the profession. In fact, that likely explains why right wing anti-law school anti-higher education outfits like the Koch Brothers funded Cato Institute have feted figures like Professor Tamanaha and his colleague in arms Professor Campos (in their Friedrich Hayek Auditorium no less). These pro-corporate think tanks are well aware of the cost impact of legal services for their constituents and would like to see that bill cut back significantly.

But the news for lawyers is that this effort has not been terribly successful. And, in fact, the news for law schools is that, more or less, law schools have managed the supply of lawyers quite successfully despite what opponents of law schools say. Of course, this is not to minimize the terrible short term mismatch that occurred in the wake of the bursting of the credit bubble.

How do I reach this conclusion?

Well, there were approximately 425,000 lawyers employed in 1997 and 600,000 in 2014. That means over 18 years we added, net, about 175,000 new lawyers. Every year – except 2008 – that annual number increased. That tells me society wanted to employ more lawyers and when we add in the fact that lawyer incomes increased each year in that period as well, from a low in 1997 of about 73,000 to a high in 2014 of 133,000 it tells me society was willing to pay lawyers more also.

That growth in the average (mean) annual wage paid to lawyers is significant, too, because it outstripped inflation and the growth in GDP. This suggests that lawyers have market power. No wonder Cato and the Koch Brothers are upset.

Now let’s go back to the number of employed lawyers. On average, the net number of additional lawyers employed each year from 1997 to 2014 is 9,722. Let’s just call it 10,000 per year. ABA law schools on average produced roughly 40,000 JDs every year. Let’s assume that 5000 of these students do not pass the bar (very conservative I think) and that another 5000 do pass the bar but do not want to be employed as a lawyer (again, likely very conservative). That leaves 30,000 newly minted licensed JDs each year who want to be employed as lawyers. Some will want to go solo, but such a small number that we can leave that aside for the moment (again a number that helps the critics but perhaps it offsets the rounding up to 10K).

Now we saw above that, net, the market for employed lawyers absorbs about 10,000 new lawyers each year. So we have to get rid of 20,000 of the existing pool of employed lawyers every year. How hard is that? Well, people’s lives change, people retire, and, sadly, people die. If we guesstimate that on average over the last two decades we have had 500,000 lawyers employed each year, that means we need for about 4% of them to leave the profession – one way or another each year on average – to make room for the newly minted JDs. That does not seem an absurdly high number.

Of course, non-ABA law schools add some more to the supply. There are roughly 10,000 students enrolled in these schools but of course the graduate rates and the bar passage rates are very low so perhaps the non-ABA schools add another 2,500 licensed JDs who want to be employed. That would require bumping up the leave rate a bit but not by very much.

In other words, over a long time frame – nearly two decades – law schools have managed to generate a supply of new lawyers that roughly matches social demand. In fact, one could argue that we don’t produce enough lawyers because society is actually willing to pay employed lawyers substantially more than they once earned. Rather than complaining you would think Koch and Cato would celebrate the graduation rates of new JDs.

Now this answers Professor Merritt’s claim that demand is flat but what about Professor Tamanaha’s concern that recent law school graduates are not all finding full time long term jobs as JDs?

Well, of course, nothing in the BLS data tells how long each lawyer is employed and we have to allow for at least 20% to fail the bar or choose to do something other than become employed as a lawyer. But nonetheless it is clear that for a limited period of time starting soon after the bursting of the credit bubble in 2008 that supply appears to have outstripped demand.

That conclusion – as unfortunate as it is for the newly minted JDs who could not immediately find work – is not terribly informative about the job that law schools perform. Given the variables involved – law school pass rates, bar pass rates, decisions of thousands of students to work as lawyers or pursue alternatives, retirement rates, death rates – it is easy to imagine a situation where in any given year or for a period of several years, supply and demand do not match.

Indeed, there was likely a kind of perfect storm after both the dotcom/telecom crash and the credit crisis of 2008. College graduates with BAs likely could not find work so applied in much larger numbers to law school, already employed lawyers likely put off plans to retire as uncertainty about their financial futures increased, employers of lawyers (law firms, government, corporations) delayed hiring plans.

But this is the expected, if problematic and unfortunate, impact of a financial downturn. It says very little about the performance of law schools and as I explained in my review of Professor Tamanaha’s book Failing Law Schools he fails to make the case that there was opportunistic or manipulative enrollment management underway in law schools. In fact, when law school applicants hit 100,000 in 2004 1L admitted applicants actually declined from the prior year.

While there are many changes that law schools can and should and in fact are making in the way they deliver legal education, it is a mistake to be overly concerned – some might even say fanatically obsessed – with the daily lives of law professors and deans. Actually, the biggest concern we should have is that the current economic recovery – which in my region of the country has pushed the mean salary of lawyers to more than $200,000 per year – falters. That could delay what is already a painfully slow economic upturn and would make all but impossible the expensive and complex restructuring that so many of the law school critics advocate.
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*Now, these numbers are “employed” lawyers so they do not include solo practitioners or partners who qualify as employers. But the first number is relatively small, approximately 4% on average of all practicing lawyers over that time period. And the second number is likely to skew income higher not lower, so excluding that number does not help the critics case that much. Arguably solos do less well financially (though we don’t know for sure based on the BLS data) so perhaps they cancel each other out.