The Lost Generation?

In response to the recent series of posts with regard to supply and demand (Part 1, Part 2, Part 3, Part 4), Coder E asked whether law students that were squeezed out today due to supply and demand would be part of a "Lost Generation" that will never get a job, or would they be re-considered if and when more lawyers are needed.  Once again Coder E has posed a great question - but a question that includes several competing concerns.  We will address the "Lost Generation" issue below.

First, here is Coder E's comment

Interesting thing about the firm's hiring standards falling down to a 3.0 when hiring demand was higher.

I am curious about one thing:

sometimes, things seem to go in cycles. So, prior to having to drop your standards to a 3.0, your standards were a 3.3. Now, this is because supply of law grads was higher than demand. When the demand picks up and the firm feels it has to lower standards, does it ever consider some of the people that it passed up in the previous couple of years?

That is to say, some people from the previous class, or two years ago may have had averages of 3.2, and just barely missed the 3.3 mark previously. But now that demand picks up and the firm even considers lowering to a 3.0 for the present classes, would the firm (or, in your opinion, should the firm) consider a 3.2 from a previous class?

I guess what I'm trying to get at is this: is there really a "lost generation" effect where the timing just kills people? Like, it's better to have graduated with a 3.0 in a humming economy than a 3.2 in a sour economy?

There is a hypothesis floating out there that demand will pick up in the coming years for attorneys because of various new stringent regulations imposed by government over financial sector, healthcare sector , energy/environmental sector. Some people argue that kids going into law schools now will be fine. Others argue that kids shouldn't go into law school now because there is still such a backlog. Then the first group counters that the backlog doesn't matter. There can be 10 million attorneys backlogged, and it still won't matter because they are the lost generation and they will be skipped over and fresh grads will be hired instead.

I can see both situations as plausible. I wonder which one you think is more plausible. In other words, say attorney demand picks up in the year 2013. Would the law firms drop their recruiting standards to 3.0s of the graduating class, or would they be willing to look at people who graduated in 2011 with 3.5s but just couldn't get hired because of the bad economy?

I'll take a look at these questions in order, but a few underlying contextual statements are in order.  First, the law profession has never had a situation like the present hiring imbalance happen before.  We have never had mass lay-offs like we had in 2008-2010.  We have never had to deal with as much outsourcing pressure.  We have never had clients that demand so many concessions and sometimes refuse to let us bill for first years.  In a very real sense, we are charting new territory here.  That being said, I can form estimates for the answers of some of these questions based on past experience.

1) When the demand picks up and the firm feels it has to lower standards, does it ever consider some of the people that it passed up in the previous couple of years?

Simple answer - yes, there are previous examples of considering students from previous years (however, it is unlikely to happen in the present situation for reasons that I set forth below.)  Taking a look at the situation in 2003, as I mention in this post, in 2003 the market had been depressed for several years.  It was not a "jump" from 3.3 one year to 3.0 the next, but a gradual decline.  In that situation, firms were unlikely to go back and revisit previous candidates very often.

More specifically, the impact was much more likely to be felt by those in law school.  For example,  if you hire a 2L class and give them all offers in the fall, you have a pretty good estimate of your upcoming work capacity in the spring.  If your work load estimate is huge and exceeds your capacity, then you might go back to the well for the "near-miss" 3Ls.  You might also be more open to laterals.  However, firms at that time were not likely to go back to graduates that were a year or more out.

This is because the focus of the hiring process in most firms is on the 2L class.  If the firm is having trouble filling its 2L class for the summer, the firm is most likely going to make adjustments at that time.  Usually the firm does not have to go back to the well for 3Ls - and if so, then the 3Ls are so thankful that they don't need any increase in salary or anything to motivate them.

However, once a law student graduates, their legal education (which is really not that great in the first place from most law schools) starts to decay.  If they perform some non-legal work for a year, then many firms might consider them out of the market.  Certainly if they have no legal experience for 2 years, then they are pretty much out of the game.  That is, graduates without serious experience are really competing at a disadvantage with new grads.



So, returning to your question "When the demand picks up and the firm feels it has to lower standards, does it ever consider some of the people that it passed up in the previous couple of years?"  The answer is yes, sometimes firms go back, but typically the real decision is made with 2Ls and most of the "going back" is with regard to hiring 3Ls.  In the 2003 situation, the overwhelming majority of the graduates from prior years were out of luck - of course, they were often pretty bad, which is a different situation from now when you have actually pretty good people that have been overlooked.

Here are another couple important considerations:
Rate of change of legal work
You are right that if the amount of legal work drastically increases, it is going to put pressure to be more expansive in hiring.  However, that pressure is very, very unlikely to occur.  First, the volume of legal work is substantially proportional to the US economy - and the US economy is in trouble and not turning around any time soon.  Second, the sheer amount of the increase that would be needed boggles the mind and is far, far greater than anything that the US has experienced in the past.


Ratio of law school graduates to available work
Even if the amount of legal work available increases, you still have more and more people going to law school today.  The ratio of law school grads to available work is terrible and getting worse - and we are already pretty much locked in until 2013.  That is, the recent law school enrollment numbers that I have seen show increased enrollment until 2013.  If you have already graduated, your legal education will most likely be viewed as stale by 2013 and you will not likely be considered along with a law student - pretty much your only chance would be to try to get yourself considered as a lateral, but you are going to need SERIOUS experience - not just part time helping a solo.


2) "But now that demand picks up and the firm even considers lowering to a 3.0 for the present classes, would the firm (or, in your opinion, should the firm) consider a 3.2 from a previous class?"
Based on prior experience as mentioned above, law firms would take a look at 3Ls with a 3.1 at the same time as 2Ls with a 3.0 - and the 2Ls would most likely have an edge.  Historically, that was it.  Firms typically did not go back and consider people that graduated the year before.

You also have to realize that firm recruiting is a non-billed activity and consequently absolutely as little time as possible is spent on it.  Additionally, resumes from previous years are usually thrown out at the end of the year.  Consequently, the previous students were really only open to consideration if they re-sent their resumes - and there were not a lot that did so and those that did were mostly not good.  One very real factor to consider from the lawyer side is that if it takes half an hour to get a 2L with a 3.0 vs. 4 hours to get a 3L with a 3.1, then the lawyer is most likely going to go for the 2L.  It's not worth his time to consider the 3L.  In this fashion, you can see that they process is set up to favor 2Ls and 3Ls quite a bit.

3) "I guess what I'm trying to get at is this: is there really a "lost generation" effect where the timing just kills people? Like, it's better to have graduated with a 3.0 in a humming economy than a 3.2 in a sour economy?"
Short answers - Yes and Yes. Longer answers - we have never had an experience this bad before where really high-quality people are just without jobs due to supply and demand.  If the amount of legal work suddenly doubled Jan 1, then (based on the law student supply) we would be forced to go to the 2010 graduates.  However, the amount of legal work is not going to substantially increase - and is actually at a risk of decreasing as I will discuss below.

3) "There is a hypothesis floating out there that demand will pick up in the coming years for attorneys because of various new stringent regulations imposed by government over financial sector, healthcare sector , energy/environmental sector."

Nope.  Most of the regulations that I have seen actually seem to decrease the amount of legal work available because certain types of investments (that you would need a lawyer to create) are barred.  Healthcare?  I don't see it.  Not a lot seems to be legally changed.  Energy?  I can see that they want to create energy investment - and there may be a few projects - but not a lot.  Environmental?  There was a flurry of work over the last decade when new rules and regulations were introduced and companies that had not followed them tried to minimize their damages, but pretty much everybody seems to be following the rules right now.

No, the problem is that the amount of legal work typically varies with the US economy as a whole.  When the US is experiencing good times, capital gets invested, companies do deals, projects get built, startups get created.  None of that is happening now - nor is it going to ramp up in 2011 - and probably not 2012.  And even if it did, the supply of law students currently in law school vastly exceeds even an over-estimate of an amount of the increase - at least until 2013.   And if you are already out of law school and not able to get very good legal experience in the mean time, you are going to be part of the Lost Generation.

4) "Some people argue that kids going into law schools now will be fine. Others argue that kids shouldn't go into law school now because there is still such a backlog. Then the first group counters that the backlog doesn't matter. There can be 10 million attorneys backlogged, and it still won't matter because they are the lost generation and they will be skipped over and fresh grads will be hired instead."
No- you are not going to be fine.  There will still be a backlog. However, even if there was no backlog at all, you are missing the primary danger - the amount of legal work is vastly inferior to the number of grads - and it is not going to go up much by 2013.  Look at the numbers - even optimistically the estimate is that there will be about 45K grads for 30K jobs.

Further, a 10 million attorney backlog is going to be very meaningful (as a side note, I have to love the whole "well that won't be me" attitude - somehow 10 million attorneys not being able to find jobs get spun as a GOOD reason to go to law school.  What planet are these people on?)  It's not just going to be that the moment someone leaves law school they are thrown away if they have no job.  There is going to be a bell curve.  The bell curve is going to be influenced on the increase in work demand relative to new grad availability - which is going to influence how big of a GPA variance is acceptable and whether firms are willing to spend the time to pursue those that are out of law school.  If the amount of work suddenly shoots up, then I would put in a little time to go after a person with a 3.5 that is two years out rather than a 3.0 that is a 2L.

5) "I can see both situations as plausible. I wonder which one you think is more plausible. In other words, say attorney demand picks up in the year 2013. Would the law firms drop their recruiting standards to 3.0s of the graduating class, or would they be willing to look at people who graduated in 2011 with 3.5s but just couldn't get hired because of the bad economy?"

Going with your assumption (which I don't think is anywhere close to reality) that attorney demand picks up in 2013.  The first thing that is going to happen is that law firms are going to get more elastic with regard to the hiring criteria.  Relaxing from about 3.7-3.8 to 3.3 is going to effectively approximately triple the applicant pool.  3.3 is still a pretty comfortable number.  At some point, the firm is going to consider the lower GPAs unacceptable and is going to look at 3Ls.  Relaxing the 3L GPA is going to effectively double the market again.  You are now looking at a market of about 6 times as much legal work - which is just not possible.  Even 3 times as much is just not possible.

Finally, after going after the low-hanging fruit of the 2Ls and 3Ls, if there are previous grads that have made the effort to get their resumes in every year and follow up, then they might be considered as well.  Your scenario is for the year 2013, so considering the 2012 graduates effectively doubles the market of available hires yet again (we are so far out of sight, it's just silly).  Finally, if the firm is really scraping the bottom of the barrel for 2Ls, 3Ls, and 2012 grads, then the firm MIGHT consider 2011 grads.

Note that we have not considered laterals in the above analysis.  You can really only be considered a laterally if you have significant, valuable experience.  How significant it needs to be is going to decrease as firms get more desperate.  However, the lateral analysis is quite different from the new hire analysis - they are typically not considered together.

Going right to the heart of your hypo - it's 2013 and the firm has the choice to go with the 3.0 new grad or the 3.5 2011 grad.  I think that the majority of firms are going to go with the 3.0 new grad.  However, 3.0 is a real sticking point, so if you said 2.9 new grad vs. 3.5 2011 grad, I would think that the majority of firms would go with the 2011 grad.

The bottom line is that legal hiring is not going to pick up until the economy picks up - and the economy is not going to pick up for several years - and might not significantly pick up then.  (See "stagflation").  Further, even if the economy picked up, the current supply of law students is so great that it would more than exceed any reasonable "sunny-day" estimate of the number of available legal jobs - at least until 2013.  In this scenario, firms don't NEED to consider previous grads, so they won't waste their time doing so.  The previous grads will be a lot generation.

Even if we were living in a fantasy land where the amount of legal work suddenly exploded, it might explode to fill the current 2L class (although even that is not going to happen before 2013).  But it would have to 1) fill the 2L class, 2) fill the 3L class, and 3) fill last year's graduates before firms would even look at graduates farther back.

Ahhhh - one last factor to consider that make the situation even worse for law students that have previously graduated - deferments.  Placing deferments in their respective order, when the law firm is considering hiring, the law firm is first going to fulfill its word and give the deferred students their jobs - then look at 2Ls and 3Ls, etc.

In summary, demand for legal services may pick up in the next couple of years, but not significantly, and not the approximately 50% increase that would be needed just to employ the current crop of 2Ls.  It could always rain gold from the sky, but for all intents and purposes, the majority of the grads that don't immediately find jobs between now and 2013 are most likely going to be the Lost Generation.