Why Has Law Practice Changed?

When legal educators talk about changes in the legal market, we focus on the Great Recession, the slow recovery, globalization, technology, and the routinization of some legal services. These trends undoubtedly are shaping contemporary law practice, but they’re not the root cause of our graduates’ ills. The force that rules law practice today is competition: To comprehend the profession’s economic trajectory, we have to understand the tremendous rise in market competition for legal services.

The Post-WWII Years

During the third quarter of the twentieth century, the legal profession benefited from a remarkable number of trade restraints:

1. Bar associations maintained minimum fee schedules, which bolstered the price of routine legal work.
2. Professional regulations forbid advertising, which restrained competition among lawyers and prevented consumers from identifying cost-effective service providers.
3. Courts strictly enforced rules prohibiting the unauthorized practice of law, which helped lawyers maintain their monopoly over a wide range of services.
4. Professional regulations greatly restricted practice across state lines, requiring clients to hire new attorneys or local counsel for many matters.

In addition to maintaining these protections, the legal profession welcomed relatively few new lawyers each year. College enrollments were lower then than now; few women or minority men considered attending law school, and they encountered formidable obstacles if they did; and many law students left school before completing the degree. In 1963, just 9,638 students graduated from accredited law schools.

The Tide Turns

During the final quarter of the twentieth century, the legal profession’s protections began to fall. The Supreme Court struck down minimum fee schedules in 1975, making clear that antitrust prohibitions encompass the legal profession. Two years later, the Court initiated a series of decisions striking down restrictions on attorney advertising.

At the same time, state supreme courts and legislatures opened doors for non-lawyers to perform tasks that lawyers had once claimed for themselves. Accountants and title agents replaced lawyers in some roles. A new class of paralegals emerged to assist–and then replace–junior lawyers on some of their work. Companies began generating do-it-yourself forms for individuals with simple legal needs.

Barriers to interstate practice also diminished. States began to repeal residence requirements, and the Supreme Court declared those rules unconstitutional in 1985. As law firms expanded across state lines, and as corporate clients demanded more fluid legal counsel, states eased restrictions on interstate legal assistance.

As the profession’s economic protections diminished, its numbers swelled. Accredited law schools graduated 27,756 JD students in 1973, almost three times the number that had earned degrees ten years earlier. By 1983, the number hit 36,389, almost four times the number who graduated in 1963. During the last eight years of the century, each class exceeded 39,000 graduates–and two topped 40,000.

First Impact

These momentous changes in the legal profession first affected solo practitioners and others who served individuals and small businesses. Those lawyers were the ones who handled many of the matters taken over by non-lawyers; they also benefited most from minimum fee schedules. Between 1975 and 1995, the median, inflation-adjusted income of Chicago solo practitioners fell by almost 50%. For lawyers at the smallest Chicago firms, median income fell by 25%. Both of those figures come from the groundbreaking study conducted by John P. Heinz and his colleagues, Urban Lawyers (p. 163). That study, published in 2005, remains one of the best analyses we have of the legal profession.

Notably, Heinz and his team found that the median income of government lawyers fell during the same period. In 1995, median income for those lawyers was $45,000. Twenty years earlier, it had been $70,828 (in 1995 dollars). Government pay doesn’t depend directly on minimum fee schedules, advertising restrictions, and similar market restraints, but it probably does respond to compensation in the private sector. As solo and small-firm attorneys earned less, government was able to offer lower salaries to attract those lawyers.

The New Century

Since 2000, technology has greatly intensified the changes that began during the last quarter of the twentieth century. Advertising in phone books and on billboards promoted the fortunes of some lawyers, but internet advertising is much cheaper and it reaches more potential clients. The internet has also fed aggressive price competition: consumers can now compare prices for many legal services before they contact their first lawyer.

Computers have made do-it-yourself legal forms more sophisticated, user-friendly, and accessible. One online company, LegalZoom, has generated legal documents for more than 2 million clients since 2000. An online law firm, LegalForce RAPC Worldwide, declares that it “protects more intellectual property as patents or trademarks per year than any other law firm on the planet” and that it secures this protection “for a fraction of the cost” charged by conventional firms.

These technological tools have moved well up the ranks of law practice. Major law firms and corporations use computers to conduct discovery, draft legal documents, comply with government regulations, and perform other professional tasks. Technology has also enabled these organizations to tap lower-wage workers abroad; countries with rising economies have improved their education and infrastructure to meet that demand.

Technology and globalization then prompted innovative lawyers to restructure other parts of their practice. These lawyers reduced prices and secured new clients by unbundling legal tasks and routinizing some of their services. Having successfully shifted routine work to computer programs and offshore workers, these lawyers moved other tasks to staff attorneys and contract lawyers.

The recession and slow recovery exacerbated all of these trends. Even the wealthiest clients wanted price cuts, and they were vocal about their needs. Technology allowed them to track their legal bills more closely than before, to solicit bids from competing firms, and to press for lower prices. Globalization permitted them to look abroad for both high-level legal counsel and routine support work. Well versed in the benefits of efficient production and commoditization, corporations hired law firms that endorsed those approaches.

By now, we’re all familiar with this part of the story. We tend to forget, however, that these changes are occurring in a legal market that is vastly more competitive than it was in earlier years. Today’s market reflects the pro-competitive changes implemented during the late twentieth century. Those changes, moreover, continue to unfold. Courts and bar associations are still discarding rules that restrain competition; non-lawyers are taking on still more law-related tasks; and the largest JD class in history graduated in 2013. Even if graduating classes now contract, we have already flooded an increasingly competitive market with new lawyers.

The Market’s Triumph

Competitive market forces are the most important characteristic of today’s legal market. Technology, globalization, and commoditization are key trends, but their impact depends on the economic context. If the legal profession still enjoyed the protections it held during the 1970s, today’s technology and globalization might have produced more jobs and higher salaries for lawyers. In today’s competitive market, on the other hand, these trends are pushing inexorably on the bottom line. Clients are tracking prices and seeking competitive bids; law firms are employing efficient technologies and low-cost workers to meet client demands; and non-lawyers are continuing to take over legal work.

These competitive forces are highly favorable for clients. The law practice I knew in the 1980s was remarkably inefficient. Highly paid associates proofread briefs, reviewed documents, and continuously reinvented the wheel. Clients of all types paid more for legal services than they should have; they had no other options. A competitive market has given clients more choices, reduced prices, and (despite the protestations of some lawyers) caused no apparent loss in quality. Indeed, competition may have spurred some lawyers to provide higher quality services.

This competition would have forced 21st-century lawyers to make their practices more efficient, even if technology and globalization had remained stable. Rapid advances in the latter forces, however, compounded the impact of a newly competitive market. These changes offered significant efficiencies that the competitive market insisted we adopt. Rather than enduring a simple shift from protectionism to market competition, which would have been dramatic in itself, the legal profession had to adapt to open competition and new efficiencies at the same time.

This combination explains why law graduates will continue to face a daunting job market–and may not earn as much during their lifetimes as recent generations of lawyers did. The legal market is not rotating through a cycle; it is tumbling out of protectionism. Even when the economy booms again, corporate clients will not pay first-year associates to do work that overseas lawyers can handle. Nor will mom-and-pop clients pay for customized wills and leases, when standardized documents serve their purposes. The efficiencies and cost economies that we have achieved in law practice are here to stay.

The new market, of course, will create opportunities for some lawyers. Technology-savvy JDs will profit by developing attractive software programs marketed to others. Lawyers with strong management skills will earn extra pay by coordinating interdisciplinary teams spread across the globe. Some law firms will prosper by identifying new practice areas and assembling the right combination of lawyers, other professionals, support staff, and technology to efficiently address those needs. As always, the market will reward lawyers with unusual legal knowledge, skills, or client connections.

For most lawyers, however, competition will reduce the financial rewards that recent generations captured. That’s what deregulation does. As we project the economic future of the legal profession, we have to remember our loss of market protections over the last forty years. Those changes have accumulated over time, and many of them acquired greater force with the emergence of new technologies and globalization.

The public, including the large corporations that pay our heftiest bills, is unlikely to restore the protections that favored 20th-century lawyers. Instead, our graduates will practice in a world of accelerating competition. Recent graduates are competing with more peers than ever before. Lawyers of all ages are vying with lawyers in distant cities, states, and countries. Lawyers everywhere face competition from computers and non-lawyers. Competition is the new hallmark–and driving force–of the U.S. legal profession.

  • Benjamin Barros

    Deborah,

    We seem to agree on a lot of things, but seem to strongly disagree on the current and future of the legal job market. As you may know, I am a skeptic of the argument that the current anemic state of the legal job market is the result of structural or technological change. I acknowledge that the legal industry has been undergoing technological and structural changes, but these changes have been occurring over a long period of time, so I don’t think they can explain the job market of the past few years.

    This leads to a question for you: can you point to any data to support the position that technological and/or structural change is having a profound impact on the current legal job market? This is intended to be a friendly question, because I acknowledge that I can’t point to much data to support my position to the contrary. My study of recent alumni job data from my own school showed little or no evidence of structural change, but that was a limited data set. We can each point to anecdotes that support our positions, but that does not substitute for data. Maybe a preliminary step would be to identify what data would be relevant to the issue. I will think about this issue on my end, but if you were going to point to data to prove your position, what data would that be? (Even if that data currently is not easily available.).

    Ben

    • DeborahMerritt

      Ben, thanks for the thoughtful question. We seem to agree that structural and technological changes have occurred over the last 40 years; our difference arises over the impact of those changes. In particular: Have those changes altered career paths for law school graduates? If so, are the alterations likely to persist?

      To answer the first of those questions, I think we have to look at data over time. It would be instructive, for example, to compare your information about recent Widener classes with information about earlier classes: Have the percentages of graduates in solo practice, small firms, large firms, government, etc. changed? How have the jobs and career paths in those different organizations changed? E.g., if grads work for large firms, are they employed now as staff attorneys rather than associates? That type of comparison would show whether changes in the legal profession are affecting outcomes (either positively or negatively) for your graduates.

      I have done some studies of our graduates (details for internal use only) that suggest clear changes in career paths–even when I include updated information for the Classes of 2010 and 2011. The graduates get more jobs as time goes on, but (in the aggregate) they are different jobs than the ones secured by earlier classes. The story, of course, may differ by school–I hope to blog about that soon.

      I don’t think any data can answer the second question (if there have been alternations, will they persist). That’s a prediction and, as Philip Tetlock has shown, humans are abysmal at making economic or political predictions. Tetlock suggest that “foxes” make better predictions than “hedgehogs.” By that, he means that people who take account of many factors and draw upon various perspectives tend to make better predictions than those who rely upon “one big idea” or tradition. Applying Tetlock’s framework, I think predictions that say “it’s all the recession” or “it’s all a cycle” are likely to be off. On the other hand, some of the structuralists also sound a single idea, “it’s all structural.” Looking for nuance seems to be the best way to make predictions.

      I *don’t* think that the 2010-2012 job market will persist–I think changes are continuing to unfold in the legal profession. Will those changes make things better, worse, or the same for upcoming classes? That’s much harder to say. My best guess is that the nature of many legal jobs will continue to change and that the profession as a whole will become more unequal. I.e., some graduates will do better than ever before, while others will do worse. That’s one reason why our shared idea of layering education is promising: layered education would buffer the risk that future students might otherwise endure with all-or-nothing JD programs.

      • Benjamin Barros

        Deborah, thanks for the very thoughtful reply. I think that you are correct that we would need some kind of data over time. As you’ve noted, the JD Preferred category is too broad to be very meaningful. We’d need a more fine-grained data set. I am expanding my alumni data set to go back farther in time, but that data is for current employment, making comparison of entry-level jobs over time difficult. Maybe taking data from the nine month surveys, to the extent that schools keep them for more than a few years, would work. It would require some coding to look for particular job patterns.

        I agree that looking for nuance is critical. I think that we are all biased towards patterns that are consistent with our own experience. I practiced in the late 1990s and early 2000s. I saw a lot of the technological and structural changes then. I also practiced through a boom. I think that these two experiences make me inclined to focus on economic explanations. Even on reflection, I still think that the explanation for the job market over the past few years is largely economic, but is is always worthwhile to be conscious of our potential biases.

        Ben

        • DeborahMerritt

          Ben, here are a few tips if you’re going to broaden your dataset: (1) Your school almost certainly has data going back many years, especially if you have been reporting to NALP. Some schools did not participate in NALP until recently, Your CSO may not even realize what a wealth of data they have. I suspect you’re already on good terms with that office, from the work you’ve done. Chatting about the data/forms they have may reveal all sorts of treasures. (2) A growing number of people list their full working history on LinkedIn, so you can actually trace career steps for some grads that way. You’ll need a premium subscription, but your CSO probably already has one to track recent grads. (3) I think you will find that most (not all) grads really want bar-admission-required jobs right after graduation. Your own data show that–over the first two years, the former category increased while the latter decreased. As professors, we hold “JD Advantage” positions, so we tend to remember the grads who actively want those positions (even of different types). But the numbers consistently show strong preference for bar-admission during the early career. The internal study here also showed the pattern you found–movement into BAR, movement out of JDA. The possibility of movement is good news, but it also underscores the early-career preference.

          Good luck with the study! Your thoughts always stimulate me and I enjoy talking.

          • Benjamin Barros

            Thanks, these are helpful thoughts. One point about JDA jobs – I think you are correct that most (but not all) law grads have a preference for BAR jobs. A good number of lawyers later move out of BAR jobs into JDA jobs. You and I are examples. I saw a number of law school friends over the Thanksgiving holiday, and about half of them are now in JDA jobs (in the academy, at NGOs, and in government). It would be interesting to study whether the JDA jobs that people get later are substantially different (other than in seniority) than ones people get right out of school. It also strikes me that it is worth keeping this potential distinction in mind when we are talking about recent grad jobs, on the one hand, and total jobs for lawyers at all levels of seniority, on the other. The total jobs for all lawyers point would be relevant, for example, in fully understanding BLS projections, which focus on jobs that we would describe as BAR. We might be more comfortable about later-career JDA jobs, because they might be more likely to better match the preferences of the people who are looking for them at the time.

          • Cent Rieker

            Professor Barros,
            While Professor Merritt, your law school friends and you are all examples who moved into JDA jobs, you all possessed a certain educational pedigree that is a necessary requirement to attain these better JDA jobs (unavailable to the vast majority of JD holders)… that is important information, don’t you think?

          • Benjamin Barros

            Cent, sure, to a degree it is. The legal academy, for example, is absurdly status-obsessed. On the other hand, there are quite a few good JDA and Other Professional jobs available to people with a wide range of credentials. I have a number of former students who are lobbyists, health care executives, and political staff people. Many of these students went to law school to get exactly this kind of job. Indeed, a number of the students in our evening program never intend to practice law. There are, of course, some undesirable jobs in these categories. It is hard to come up with good numbers to distinguish between the desirable and undesirable jobs. One potentially relevant data point is the number of people in these jobs that report that they are seeking other employment on their 9-month surveys. I’d be interested to see whether people in particular types of jobs are more likely than others to be seeking other employment. I don’t think, however, that the data is reported in a way that would allow this kind of comparison – we’d need to look at individual forms to collect that data. And the 9 month data doesn’t help us with the later-career JDA jobs that we are discussing.

          • Cent Rieker

            I appreciate your acknowledgment of the status-obsession in the legal academy. I wish more members would be as forthcoming with the sentiment.

            To be fair, the absurd status obsession is not strictly limited to the legal academy. Hedge funds and investment banks often give preferential treatment to Princeton and Amherst grads who majored in art history over economics graduates from non-HYS yet reputable institutions (of course there are other factors such as prep-school nepotism, etc).

            Additionally, you are correct that the reporting of the data doesn’t allow for this type of comparison. Unfortunately, finding a way to capture that data is above my pay-grade.

    • kindasorta

      In two months, we’ll have the nine-months-out employment data for the class of 2013. If the class of 2013 is not doing appreciably better than the four classes preceding it, while many other indicators for the larger economy are improving, then how likely is it that we are seeing a change explicable by reference to the business cycle alone? How many more classes will we see where one JD in every three or four isn’t a full-time, bar-required employee within nine months of graduating, and how many of those will it take to convince you that this isn’t cyclical?

      • Benjamin Barros

        I agree that the next set of nine-month job data will be relevant. Based on anecdotal evidence from my students in that class, I expect that the nine-month numbers will be better. We’ll see what the data says.

        In answer to your last question, if we don’t see significant improvement in the number of jobs in the next couple of years, and the job market overall is significantly improved, then that would be very good evidence that it is not cyclical.

        I’d turn the question around on you – if the nine-month data significantly improves, would you concede that the weak job market of the last few years was cyclical?

        • kindasorta

          A lot depends on what we call significant improvement, and what weight we assign to changes in employment tracking methodology since 2008. Examples of these changes in methodology include delineating part-time/bar-required from part-time/non-bar-required, no longer counting 25% of non-respondents to the NALP survey as “employed” for purposes of a school’s overall employment rate on the theory that surely some of them were just too busy in their new jobs to reply.

          I believe that the most important metric is full-time, bar-required employment, because people typically wouldn’t give up 3 years of income and take on $100k+ in debt merely to get a temporary position or improve their chances of getting a job that they could have gotten without a JD (if the choice were put that starkly to them). I believe that the second-most important metric is the 25th percentile for starting salaries, because that is probably closer to the actual 50th percentile than the reported figure due to selection bias by the respondents and the schools’ career development offices. It also tells us how the least fortunate JDs are doing, which is important because they are also the ones likely to be carrying the most debt.

          According to LST, 41.2% of Widener’s graduating class of 2012 were known to be in FT/BR jobs. This is actually down from 46.3% in 2011, and 58.5% in 2009. If this downturn were cyclical, I would expect to see at least two-thirds of all U.S. law schools to return to their 2007-2008 numbers within the next year or two. In Widener’s case, I would expect to see the class of 2013 reach 55%+ FT/BR status.

          • Benjamin Barros

            Fair enough. I’m personally not a fan of the salary data, in part because of the issues you note and in part because I don’t think that entry-level salaries are very helpful in thinking about long-term salary prospects. I do think that it is reasonable to focus on FT/BR in this context – among other things, it is the best defined category, and so it provides a solid basis for year-to-year comparison. We’ll see what the data says when it comes out.

            Just for the record, I want to note that I don’t think that nine month job data tells the whole story about employment. I do think, however, that it is useful for year-to-year comparisons, and that trends in nine-month data over time can tell us a lot about overall trends in the employment market.

          • kindasorta

            It may not tell the whole story, but I have a very hard time believing that your average JD still waiting for his first FT/BR job nine months after graduation is going to be among a school’s happier outcomes, over whatever time frame you use. Excluding your politicians and natural-born plaintiff’s attorneys, this JD will almost certainly have a lower income potential than his peers who found FT/BR jobs and amassed legal experience right away.

            All of that is supposition, of course. But I think it’s almost inarguable that anybody still waiting for that first FT/BR job at nine months is going to be unhappy about that. Certainly none of my acquaintances who waited that long (or longer) to work as lawyers have good feelings about their investment in the degree, even if they generally enjoyed law school.

          • Benjamin Barros

            I disagree a bit about the outcomes for people who wait more than nine months, for reasons I explain here:

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

            You are correct, though, that the sooner someone gets a job, the happier the outcome.

          • Barry_D

            “It may not tell the whole story, but I have a very hard time believing
            that your average JD still waiting for his first FT/BR job nine months
            after graduation is going to be among a school’s happier outcomes, over
            whatever time frame you use.”

            This. In any other field, grads who didn’t get a job in on-campus interviewing, and didn’t get one after several months of post-graduate job searching, would be considered to be in deep trouble.

          • Barry_D

            A few things:

            First, Benjamin, from what people say, law careers are dominated by hierarchy, which is determined very early. If somebody doesn’t get a ‘good’ legal job upon graduation, they never will. They can get a job, maybe, but it will be one of the lower-paid and uncertain one, which doesn’t lead to much good. In that case, changes in entry level job figures are indicative of career changes. If a class has poor entry level figures, then their figures later on will be poor.

            Second, law schools do not publish good data later down the line. Given their behavior with the 9 month figures, that’s a telling thing.

            Third, we are seeing unprecedented changes in the legal profession – as evidenced by the lack of comparative data cited by advocates of the ‘cyclical’ theory.

  • Gregory Travalio

    Debbie,
    As you know, after 30 years in the academy I reentered practice five years ago.
    My experience over the past five years convinces me that your analysis is almost entirely correct. The world of practice I entered in 1975 before joining the Ohio State faculty bears almost no resemblance to today’s practice arena. The recession that began in 2008 has accelerated and exacerbated the change, but it is not responsible for it, nor will the economic recovery restore the “good old days.” As you accurately point out, the access to information (especially by clients and prospective clients) and the fall of barriers to entry (both formal and informal) have resulted in the explosion of legal capacity (both J.D. trained and non-JD trained). In addition, the willingness of clients to: (1) shop around for legal services; (2) forgo long-standing relationships to achieve more efficient delivery of legal services at lower prices; (3) find alternatives to J.D. provided legal services; and (4) forgo legal services altogether has increased expotentially. In response, law firms are hiring fewer associates, diverting more work that used to be done by attorneys to paralegals, law clerks, and legal secretaries, cutting their hourly rates, and increasingly finding ways to accomplish tasks more efficiently.
    None of this will change significantly with an improvement in the economy. The “oversupply” of lawyers will remain for the foreseeable future; the access to information by clients and prospective clients will only increase; and the barriers to entry into the legal services market will continue to diminish.
    Like you, I believe that much of this change is for the better. When I began practice lawyers did things that non-lawyers could have done because they could get paid for it. (I have lots of stories to make this point!). Clients did not require detailed billing, did not closely monitor who was working a file or what they were doing on it, and rarely switched from one law firm to another based upon price. None of this is true any longer, and will not become true even if the economy booms again.
    What will be the result of all of this? No one can predict for sure, but I think one result will mirror the economy in general–there will be growing inequality in the profession, with more lawyers in small or solo practice, more lawyers doing contract work, more lawyers doing quasi-legal work, and more lawyers working part-time–all for less money.

    • DeborahMerritt

      Greg, it’s so good to hear from you. I hope you will continue to comment on the blog, as time permits. Your experiences wonderfully combine practice, academia, and changes over time, giving you insights that are invaluable here. I will be blogging soon about clinical education, where you made such a difference in my own career path!