2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART II

Part I of this series addressed the ABA rule change that will allow 2014 law graduates until March 15 — an extra month from prior years — to find jobs before their schools have to report those graduates’ employment results to the ABA (and U.S. News). That change will almost certainly produce higher overall employment rates. But relying on any alleged trend that results solely from an underlying change in the rules of the game — such as extending the reporting period from nine months to ten — would be a mistake.

This post considers a second rule change. It comes from the U.S. Department of Labor, and it’s a whopper.

The Government Makes Things Worse

The Bureau of Labor Statistics recently adopted a new statistical methodology for projecting the nation’s legal employment needs. Just about everyone agrees that, by any measure and for many years, the economy has been producing far more new lawyers than JD-required jobs. But the new BLS methodology declares that any oversupply of attorneys has evaporated. In fact, applying the new methodology retroactively to previous years would lead to the conclusion that the obvious glut of new lawyers never existed at all!

Using its earlier methodology, the Bureau has been revising downward its predictions of new lawyer jobs. In 2008, it projected a net additional 98,500 legal jobs through 2018. In 2012, it dropped that number to 73,600 through 2022. Taking into account retirements, deaths, and other attrition, the BLS separately projected that the profession could absorb about 20,000 new graduates annually for the next ten years. Most knowledgeable observers of the changing market for new lawyers have concurred with that ballpark assessment. Unfortunately, schools have been producing about twice that number (40,000).

Remarkably, the BLS’s new approach more than doubles the number of anticipated new legal jobs over the next 10 years. Rather than annual absorption of about 20,000 new lawyers through 2022, the Bureau now projects room for more than 41,000 a year. Overnight, demand caught up with what had been a chronic oversupply of attorneys.

In Defiance Of Sound Statistical Analysis And Common Sense

There are numerous technical and analytical flaws in the BLS’s new methodology. (See, e.g., Matt Leichter’s recent post, “2016 Grads Shouldn’t Take Comfort in New Jobs Projection Approach.”) Beyond those are common sense tests that the new methodology fails. For example, since 2011 the ABA-required data have revealed a persistent FTLT JD-required employment rate of 55 percent for new graduates. That’s not far from the projections that the BLS’s old methodology produced for a long time.

The BLS’s new approach amounts to saying that, somehow, all of those unemployed graduates must have been finding law jobs after all. As the old joke goes, endless digging in a roomful of manure was worth the effort; there was indeed a pony to be found – with the help of a little regression analysis.

Another common sense test considers actual employment numbers. For example, legal sector employment (including non-lawyers) through December 2014 was 1.133 million — about the same as a year ago and down more than 40,000 from 2006. Although the economy generally has recovered from the Great Recession, total employment in the legal sector is still far below pre-recession levels. If the BLS’s proposed approach were valid, it would suggest a remarkable attrition rate, raise serious questions about the state of the profession, and cause many prelaw students to wonder whether law school was the right choice.

The Bad Beat Goes On

Meanwhile, weak law schools that will benefit most from the ABA and BLS changes remain unaccountable for their graduates’ poor employment outcomes as they lower admission standards to fill classrooms. Median law school debt at graduation currently exceeds $120,000, and some of the schools with the worst employment outcomes burden students with the highest levels of debt. But there’s no financial risk to those schools because the federal government backs the loans and they’re not dischargeable in bankruptcy.

The escape hatch is small. If income-based repayment programs survive austerity demands of the Republican-controlled Congress – a big if – then students who persevere through 20 years of IBR will get a large tax bill because forgiven debt will count as income to them in the year it’s forgiven. The shortfall between the amount IBR students actually pay and the amount they owe will come from the federal purse.

Voila! The Crisis Is Over

Sometime in 2015, the synergy between the new ABA-rules allowing law schools to report 10-month employment data (discussed in Part I of this series) and the new BLS methodology projecting 41,000 new lawyer jobs annually will produce a law school chorus declaring that the crisis in legal education is over, at least in a macroeconomic sense. Indeed, the hype has already begun. Discussing the new BLS approach, Loyola University – Los Angeles School of Law professor Ted Seto observed: “If the new BLS projections are accurate, we should see demand and supply in relative equilibrium in 2015 and a significant excess of demand over supply beginning in 2016.”

The operative word is “if.” As noted in Part I, Seto’s similarly conditional prediction in 2013 didn’t come to pass. Meanwhile, only about half of his school’s 2013 graduating class secured full-time long-term JD-required employment within nine months of receiving their degrees. Average law school debt for the 82 percent of Loyola-LA law graduates who incurred debt was $141,765 — placing it 22nd (of 183) among schools whose students graduate with the most law school debt.

Here’s the real kicker. The vast disparity in individual law school employment outcomes makes broad macroeconomic declarations about opportunities for law graduates disingenuous anyway. It’s no surprise that the loudest voices come from schools where many graduates have great difficulty find any JD-required job.

But even at the macro level, anyone concerned about the fate of marginal law students, exploding student debt, or the future of a noble profession should look beyond any distracting noise about the supposed end of the legal education crisis. At least for now, the real question should be whether anything has really changed — other than the rules of the game.

6 thoughts on “2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART II

  1. I wonder why Mr. Harper finds it necessary to attack my school simply because I read the available data differently than he does. Is he trying to persuade me to stop saying what I think? Or is this just who he is?

    Prof. Ted Seto
    Loyola Law School, Los Angeles

    • Seriously? Reporting a school’s long-term, full-time JD-required employment rate and average student debt is an attack on the school? In fact, the data provide a real-life context for Prof. Seto’s persistently optimistic — and as yet unrealized — hopes that new graduates everywhere may benefit from an imminent lawyer shortage. A lot of those graduates would settle for full-time long-term work that actually required a JD.

  2. This is a proposed change on which the BLS is still seeking comments, at least informally. Not clear the proposed change will be adopted.

    • According to the BLS website (as of January 2, 2015): “BLS is continuing to review feedback and expects to issue further information about the proposed methodology change in early 2015.”

      We should all hope that the BLS is actually rethinking the change, but given its extensive written justification (specific to attorneys and three other occupational groups), I doubt it.

  3. It is a change that would apply to all occupations, not just law. The one size fits all approach does not work here.

    If you are a child care worker, and you leave that job at age 28 to become a receptionist in a medical office, your child care job will create a job opening.

    The same is not necessarily true in occupations that have extensive educational and licensing requirements, like law, and up or out policies in law firm jobs.

    Law is different from child care work because of the structure in law has a big element of pushing people out of the profession at young ages. The biggest growth comes at the bottom, with each year’s graduates passing the bar and becoming licensed.

    It is pretty clear from looking at the total number of lawyer jobs as per BLS and the total number of entry level lawyer jobs as per the ABA, that as lawyers age there are many fewer jobs per age group. It may go from 25,000 jobs for very recent classes to 15,000 jobs for the class that graduated 32 years ago. That is the big drop out element the BLS is talking about.

    The assumption of the proposed projection that each person who is pushed out of law by this structure opens a job is not strictly true. What is true is that more experienced lawyers are being weeded out of the profession altogether by younger lawyers. There is no job opening created by the demise of a 35 year old’s legal career. The class of 34 year olds has enough lawyers already working to fill that lawyer’s job. Only the youngest class will represent a new opening when the class ahead of it moves on.

  4. If you do the math on the occupational transfers as per the BLS figure of 25.5% occupational transfers over ten years and the BLS estimate of 760,000 lawyer jobs over all, you have on average 19,380 occupational transfers of lawyers per year. Over say,35 years (the length of an average career), that number comes to about 678,000 lawyers leaving the profession for other jobs. That number, 678,000, when you add it to the 760,000 practicing lawyers is pretty close to the number of law graduates of ABA accredited schools over the last 35 years or so.

    If I am right about these numbers (someone else can comment on this), what the BLS numbers on occupational transfers represent is a picture of a pretty darn unstable profession where a quarter of all lawyers are pushed out over each 10 year period, and where at any given time, almost half of people with law degrees are not working as lawyers.

    I am not saying an occupational transfer by a lawyer never opens a legal job. What I am saying is that is probably does not open a lawyer job in many cases.

    The BLS numbers do not present a pretty picture, and do not bode well, even for the law grads of the Harvards, Yales, Stanfords, Columbias and Chicagos of this world. The evidence that I see and have seen for at least a decade, is that this staggering failure rate of lawyers affects even those with the top academic records.

    To me, the BLS figures demonstrate that going to law school – anywhere- today is a lot like on walking on ice, and never knowing when the ice will crack and you will fall through.

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