Declining Enrollments

On Friday I posted a projection of when the number of JD graduates might decline sufficiently to match available jobs. The calculations were very rough, based on assumptions tendered by others. However one varies the assumptions and calculations, though, one message is clear: Declining law school enrollments offer some hope to prospective lawyers, but bad news for law schools.

Successive Declines

First-year enrollment declined 7.2% between fall 2010 (52,488) and fall 2011 (48,697). The following year, in fall 2012, it declined another 8.7% to 44,481 students.

We don’t yet have statistics on the number of first-year students who matriculated this fall. We do know, however, that the number of applicants for the current 1L class declined to 59,426, a 12.3% decline from the previous year. Projecting an 8% decline in matriculants for this year, therefore, seems appropriately conservative. Using that estimate, about 40,923 1L’s are currently preparing for law school finals.

Three years of successive decline add up. In fall 2010, law schools were dreaming of revenues based on 52,488 entering students per year. Now we are looking at 40,923. That’s a decline of 22.0%–more than one-fifth in three years. Those empty seats, of course, generate no JD tuition.

To match graduates to available jobs, moreover, we still have a long way to go. The Class of 2012 found only 30,453 full-time, long-term jobs that required bar admission or benefited from a JD. Assuming a 10% attrition rate, as I did in Friday’s post, we could enroll an entering class of 33,837 JD students each year to generate an ongoing supply of 30,453 graduates per year.

That number of first-year seats represents a whopping 35.5% decline from our peak first-year enrollment in 2010. If the market is pushing law schools toward an equilibrium in which the number of graduates approximates the number of openings for full-time, long-term, law-related work, legal education faces a dramatic decline in JD enrollment.

Will It Really Be That Bad?

These calculations may be unduly pessimistic for at least two reasons. First, they assume that job openings stabilize at 2012 levels. Opportunities could increase; indeed, many legal educators hope that they will. I would be cautious, however, about assuming significant growth. The above calculations already include “JD advantage” jobs, which serve as fallback positions for at least some graduates. Even if the number of jobs for licensed lawyers increases, those jobs may simply substitute for JD advantage positions. That will be good news for the graduates taking those jobs, but it won’t change the overall number of law-related openings for graduates.

Second, law schools may continue to benefit from optimism bias among prospective students. Employment rates may not need to reach 100% for full-time, long-term, law-related jobs; applicants might return to law schools as those rates reach 70%, 80%, or 90%. Employment needs to rise only to the point at which individual applicants think that they will succeed.

Changes in the quality of law positions, however, may counterbalance any optimism bias. Staff attorneys, contract attorneys, and document reviewers have replaced many conventional associates. Law firms and clients have little reason to reverse that trend; these lower-paid, less secure workers perform their tasks quite adequately. The 2012 count of law-related jobs includes many of these positions, and numerous signs suggest that these jobs will continue to displace more secure ones. Even if the entry-level hiring market expands, applicants may not respond to a 70% chance of becoming a document reviewer.

No one can predict exactly when the number of law school graduates will match the number of entry-level jobs making use of those grads’ JD coursework. On balance, however, it seems that first-year enrollments will have to decline considerably more–perhaps to as few as 34,000 students–to reach that equilibrium. Law schools haven’t enrolled that few 1L’s since 1970, when there were 146 accredited law schools.

Could It Be Worse?

Could the numbers be even worse than the ones calculated above? Could the market push first-year enrollments even lower before the numbers stabilize? Sure. There are at least two ways in which my projections may be overly optimistic.

First, I include JD advantage positions in my count of jobs that will satisfy prospective law students. Although some students seek those jobs after law school, others take them only as placeholders. According to NALP’s 2011 Jobs & JDs report, 46.8% of graduates in JD advantage positions were seeking other work. [These reports are available only in hard copy, and I don't have the 2012 report at hand, but the figure is likely similar.] As prospective students become more savvy about the legal job market, they may discount the availability of JD advantage jobs. Most of these jobs are open to BA’s. If a college senior wants to do compliance, paralegal, or human resource work, why not go directly into the job market?

Second, the entry-level job market may get worse. The last two years have produced some signs of minor improvement, but those years have also been marked by law schools funding their graduates, career services staff exerting heroic efforts, and alumni pitching in to hire graduates during the critical counting period. How much of the improvement in employment rates stems from those efforts? How long are those efforts sustainable?

Stiff competition, meanwhile, continues to characterize the market for legal services. Law schools have graduated a lot of un- and underemployed lawyers during the last five years. Those graduates continue to swell supply, allowing employers to pay lower wages and offer more contingent work. Competition from foreign lawyers, compliance managers, and other educated non-lawyers persists. Technology will continue to reduce the number of lawyers needed to complete many tasks.

Yes, we will always need to lawyers to perform both sophisticated work and in-person counseling. But there are already a lot of lawyers out there in the market. Being realistic about the current oversupply, together with ongoing trends, it’s possible that there will be fewer full-time, long-term positions for entry-level lawyers going forward.

Uncertainty cuts in both directions, and the current market for lawyers is very uncertain. It is possible that attractive entry-level employment for JDs will fall even below 2012 levels.

Implications

As prospective law students obtain more information about legal employment, the market is working for them: Some are seeking opportunities in other fields, leaving more jobs for their peers who are fully committed to law. This is good news for both the students who choose law school and those who pursue other paths. But for law schools, the prospects are sobering. Enrollments are unlikely to return to 2010 levels; indeed, they are most likely to continue falling. How should schools respond?

Some schools are expanding their LLM programs and targeting foreign students. Others are polishing their JD programs in ways that they hope will give them an edge over competing law schools. If some schools close or shrink enrollments, there will be more students for surviving institutions.

But this is also a good time to rethink the framework of legal education. As I have argued before, a three-year JD offers too much education (at too high a price) for many jobs. At the same time, it provides too little training for other positions. We need to unbundle legal education, much as lawyers have disaggregated legal services, to provide education that better matches workforce opportunities.

  • Benjamin Barros

    Deborah,

    This is an interesting analysis. I have a couple of observations/questions. First, I understand that nine-month job data are easy to find, but they do not provide a complete picture of the legal job market, as I report here:

    http://www.thefacultylounge.org/2013/04/reconsidering-the-conventional-wisdom-on-the-legal-job-market-part-i.html

    Doesn’t that suggest that predictions based on nine-month data alone are too
    pessimistic? In this context, I worry that a lot of commentators have a vision of the job market that is at best incomplete. Many (indeed, I’d suggest the vast majority of) legal employers do not hire well in advance. Instead, they hire when a position opens up. This introduces a good deal of variability into hiring timing. This is not to suggest that nine-month data is not relevant – among other things, it shows that the job market for the last few years has been relatively poor. The nine-month data, however, is not the final word on how many people in a given class get jobs in a particular category.

    Second, I understand skepticism of the JD-advantaged and other professional categories. These categories are highly variable. There are some very good jobs in each, and there are some mediocre jobs in each. Would it make sense to use the 46.8% number as a proxy to suggest that at least half of the JD advantaged jobs are good ones? And to take a similar approach to the other professional category? I understand that there was reasonable skepticism when some people suggested that there was no need to worry when bar pass required jobs dropped dramatically, because the law degree is very flexible. We would have a problem if we were expecting 50% of graduates to go into the JD-advantaged and other professional categories. But the law degree is in fact very flexible, and a certain percentage of graduates have always pursued non-bar-pass-required jobs. It seems reasonable to assume that a certain percentage of each class would prefer to go into government relations, regulatory compliance, politics, business, or some other good, but not-bar-pass-required, field. The hard part is trying to put a number on that percentage.

    As an aside, compliance is a widely variable field. There are a lot of compliance jobs that are not open to college graduates. There are some that are JD only. I remember getting headhunter calls when I was in biglaw for (_very_ well paid) compliance positions at major corporations that required several years of practice experience. I think it is a mistake to assume that the compliance jobs that lawyers get are the same compliance jobs that are open to college graduates. As you suggest, though, it would be a mistake to assume that all available compliance jobs are truly JD-advantage.

    My own sense is that the job market will improve significantly in the next few years. Based on conversations with recent graduates, it seems like this year’s job market is significantly better than the last few. It will be interesting to see what this year’s nine-month job data looks like – even if it is incomplete, it does provide a good basis for year-to-year comparison. If it continues to improve, then the students graduating in small classes in the future will be the luckiest new lawyers in at least a decade.

    Ben

    • DeborahMerritt

      Ben, thanks for the interesting comments. I agree that, as time goes on, more graduates obtain permanent jobs. Two important questions, though, are (a) whether students are willing to invest seven years of time and tuition, plus another year or more to find a permanent legal job, when college and the workplace offer other opportunities; and (b) whether the attractiveness of those eventual legal positions will justify the long delays and expense.

      I think college graduates are voting with their feet on these questions. There are very attractive opportunities today in engineering and other fields. Notably, students can begin work in these fields after college, confirm their inclination for the field while earning good salaries, and return to for additional degrees if they choose.

      This is one of the reasons I have suggested dividing law into an undergraduate major and a 2-year JD. I agree that there are still professional opportunities for individuals with a legal education, but the education tracks don’t mesh well with the available jobs. Law is not nearly as mysterious or difficult as we sometimes suggest–it’s no more difficult than biomedical engineering and other attractive college majors. I think it’s time to restructure legal education in ways that will better fit the workplace and–ultimately–offer parts of that education to more people rather than less.

      • Benjamin Barros

        Thanks for the reply. I am much more positive about the legal job market, and think that undergraduates who are interested in being lawyers are missing out on not going to law school. Even though we might disagree on this point, I’m looking forward to your future posts on the bar exam and on shifting some part of legal education to the undergraduate level. We should always be looking for ways to reduce the cost and improve the quality of legal education. I’m also very interested in what is going on in Washington State right now. Given your interests, I’m sure you are as well.

        Ben

    • kindasorta

      The nine-months-out horizon is good at communicating a sort of misery index for a school’s graduates, wherein the lack of a full-time, bar-required job after nine months can be viewed as failure to some extent in the majority of cases. In addition, if one is to work in a NLJ 250 firm, a federal government office or a federal judge’s chambers (e.g., well-paying and prestigious jobs that mark one as worth employing by law schools, among others), it will have begun within that time frame or not at all. In any case, the longitudinal data for legal employment is too scant to make any real statements about the lifetime earning potential of a JD, although NALP is trying to remedy that.

      I would also remind you that the majority of these “_very_well-paid” JD-advantage jobs that exist are going to people with resumes very much like yours at that time. Nobody’s who can’t find a job in the law after nine months is going to step into one of these jobs instead, at first or maybe ever. If this crisis were about people who were offered highly remunerative compliance jobs after a few years clerking for a federal judge and working at Latham & Watkins, it wouldn’t be the problem that it is for law school applications. Certainly it would be difficult for a student from Widener to duplicate your success, in the absence of wealth, family connections, etc. For that matter, a Fordham graduate these days would find it a hard road to walk too.

      • Benjamin Barros

        You raise a lot of issues. Let me just touch on a couple of them. (1) You are correct in a sense about some of the compliance jobs – the ones I was getting calls about were open to Big Law associates. But the point I was making in this context is that some compliance jobs are truly JD advantaged, and many pay well. My sense from my former students who have gone into compliance is that they were hired because they were lawyers. The starting salaries seem to be respectable. If we are counting the jobs that JDs get, we can’t completely discount compliance. (2) One of the biggest problems in discussions of the legal job market is that too many people focus only on the high-prestige jobs. I will concede that I’ve had a number of these jobs. I am close with a lot of my former students who are not in super-high-prestige jobs, but who are doing interesting work, are becoming leaders in their community, and are making a good living. Working as a lawyer for the state government, for example, is a highly desirable job. (My wife, who has better credentials than me, works for a state agency now). State jobs, state clerkships (including appellate clerkships), and very good small to midsize firm jobs often open up later. The hiring process for the majority of the legal economy does not follow the same hiring pattern as the types of jobs you mention.

        I agree completely, by the way, about the lack of good data. It would be great to be able to talk about these issues with a truly robust data set.

        • kindasorta

          I’m not discounting compliance work, or any other field where a background in law is an advantage. I simply believe that such work is typically less JD-advantage than it is legal-experience-advantage, and with good reason – if they’re hiring people for their legal acumen and you couldn’t find a job as an attorney first, why would they hire you over somebody else who did?

  • Barry_D

    Deborah: “Second, law schools may continue to benefit from optimism bias among prospective students. Employment rates may not need to reach 100% for full-time, long-term, law-related jobs; applicants might return to law schools as those rates reach 70%, 80%, or 90%. Employment needs to rise only to the point at which individual applicants think that they will succeed.”

    You might want to check placement figures; overall, law schools have ~50% placement in ‘full-time, long-term, law-related jobs’, and that’s with schools cooking the books.