Saturday, September 4, 2010

What Supply and Demand Mean for Law Students - Part 4

In this part, we continue our investigation of supply and demand in the legal profession and its impact on the hiring odds for law students  - Part 1 is here. Part 2 is here. Part 3 is here. In this part I we will investigate the timing of a decision to go to law school in light of current market conditions and compare it to other recent market experiences.

(Continuing from Part 3.)

Although now is a bad time to go to law school, the decision to decline to go to law school does not have to be forever.  If there is one thing that seems clear from past experience, it is that supply and demand fluctuates - and that it has a direct impact on your hiring odds.  Why not at least wait and monitor the market and only go to law school if and when the market forces are on your side?  It won't be difficult to tell when that will happen.  You won't "miss a window".  Just monitor law firm job creation vs. number of law firm graduates and wait until supply and demand is your friend again.  When a favorable report comes out in the spring, just apply to law school in the fall.  However, please be aware that using 1) my past experience about how the market shifts, 2) estimates of the "shadow market" of previous year's graduates that are not employed the way that they want to be and represent pent-up demand, 3) the current number of law students, and 4) current and projected future client demands for work, I think that it is 90% likely that you are looking at a start date (not a graduation date) of 2013 at the earliest.  More likely, you are looking at a start date of 2015-2016 - and maybe not even then.  Bottom line, monitor the situation and don't go unless the odds are in your favor.

"But I really want to go to law school NOW!"  Some potental law students say/whine.  This can also be rephrased as "I really want to go to law school when I am younger/without a family/now is the time/still used to going to school" or any other phraseology that indicates that they expect the world to somehow just accord to their schedule just because they want it to be that way.  Look, I know that you were raised to get a trophy just for trying, but that's not how the world works.  It was a bad time to buy real estate in 2007 because market forces were against you and pretty much everyone who bought got crushed - not everyone, and not everywhere, but most people.  No trophies for them.  It was a bad time to buy stocks in 2000 before the crash - and again people got crushed. You can find example after example like this.  People who decided to buy houses (because a lot of people have made money in real estate!) or stocks (because a lot of people have made money in stocks!) are just showing you what is statistically likely to happen if you decide to buy a law degree (because a lot of people have made money in law!) at this time - due to the impact of the market forces.

Just face it - it is a bad time to go to law school right now.  It doesn't mean that you are a bad person or that you are not smart.  You don't have to prove anything - especially not in a way that is going to hurt you.  Be an adult and face the reality of market forces - like people considering purchasing a house should have faced reality and postponed their "dream" and people considering purchasing stock should have postponed their dream of retiring a millionaire.  Don't allow yourself to be crushed by supply and demand.

Also, recognize that law schools are salesmen/women - they are selling legal education.  This is just like home builders and real estate agents were selling houses in 2007 and stock brokers were selling stocks to people in 2001.  The real estate agents really didn't care whether the house they sold appreciated - they got their money.  Of course, they used the statistics with regard to recent price gain as a lever to get you to buy - not as an indication that prices were overheated.  The law school salesmen do the same thing with the salaries at top law firms.  It gets people interested and greedy to get them to sign on the bottom line right now!  Easy financing with low interest student loans!

The present situation with regard to law school marketing is even worse than a stock broker or real estate agent.  A stock broker has at least some accountability because they need to keep you as a customer.  Even a real estate agent may care a little because you might turn into another sale for them in the future.  Conversely, there is zero probability of furture sales when it comes to your law degree - you won't be buying another law degree in the future.  Law schools also don't really care much about referrals at this time because the applicant pool is so vast.  Also, the cost of the law school is so much greater, the law degree "property" bought is not transferrable (like a stock or a house), and the debt to pay for the property is not dischargable in bankruptcy.

Further, as we touched on here, the law school selling practices are even worse than those of real estate agents because:
  1. Law schools are marketing to people with somewhat diminished capacity, or at least a difficulty in seeing through their sales pitch.  Most potential law students are making the decision at 21 years of age (application during junior year of undergrad).  This is a life-altering decision when they have virtually no life experience.  Not fair.
  2. Law schools are marketing under a false color of caring about the fate of their students.  Most career services offices at law schools do not add significantly to the efforts of the law student for many reasons.  Also, once the law student has graduated, they are on their own.
  3. Law schools are misrepresenting information to the prosepective customer.  The hiring statistics that are reported are not reflective of reality - and law schools know or should have known that.
  4. Law schools are misrepresenting the value of their product to the potential purchaser.  This applies not only to the hiring information above, but also to the actual subject matter learned in a law school.  For many law schools, the majority of classes are really not usable at all in practice and do not add value.  To the extent that a law school states that they will train a potential law student to be a practicing lawyer, they are ususally misrepresenting the extent and effectiveness of that training.
Bottom line - understand market forces and realize that now is not the time to go to law school.  Also, understand that the law school marketing activities are not in accordance with market forces and are typically not reflective of reality.


  1. I really enjoyed this post. I agree with you about now being a bad time to go to law school. The only problem I see here, is that it is going to be quite hard to convince people of this generation to put their law careers on hold. I'm sure people applying for law school know that it is a bad time to be looking for legal work, but I have a feeling they all have the "it won't happen to me mentality." It is hard to tell a person who has been dreaming of going to law school for years, to try and find work in another field. I think it would be extremely beneficial for potential law students to read your post before submitting the final application.

  2. The problem I see is that as ridiculously expensive as law school is now, it is likely to be even more so in 5 years.

    Let's suppose there is a boom in 5 years and you can go $300k in debt to have a 95% chance of getting a $200k a year job?

    Is that such a good deal? I don't think so, given that the next lower job from that $200k job will likely be paying a lot less.

    Anyway, there is also opportunity cost to consider. If you delay starting your career for 5 years, it will probably have a noticeable effect 40 or 50 years down the road.

  3. 2:50 - Thanks for your comment! (Case in point the next comment!) I agree that most young people that are going to law school straight from undergrad are very difficult to see sense. However, those who have had, say 5 years of experience in the real world are typically more realistic. I would really, really urge potential law students to review the economics before spending such a huge and life-altering amount of money.

  4. 3:20 - Wow. You are just really missing the whole point of supply and demand. One reason that law school tuition has gone up so fast is because of the incredible demand. The only reason that it could continue to go up so drastically is if there is ever-increasing demand. Of course, with even more law students graduating, the hiring odds are going to be even worse. Conversely, if fewer people start going to law school, you are going to start seeing price competition for good law students. The price of attending law school will come down if demand drops (realize that holding price constant in an environment of inflation is actually a price cut). Additionally, when demand is lower, there will be greater hiring odds.

    Consequently, the situation that you speak of - greater cost and greater hiring odds is not reasonable. It will either be greater cost and lesser odds or lesser cost and greater odds.

    Also, even if you were right, mathematically paying 300K for a 95% chance at a 200K job is actually a far, far better deal than paying 200K for a 15% chance at a 160K job.

    Additionally, you mention the opportunity cost - I agree that you should really consider it, but you are considering it wrong. Which has greater opportunity cost - option 1 where you work profitably for 5 years at a lower paid job, saving some money for law school, and then attend when you have a better chance, or option 2 where you go to law school now and get to spend the next several years without a job - oh, and when jobs come back, they will not really be looking at you, they will be looking more at recent grads. Opportunity cost? You plan pretty much forecloses the majority of your opportunities.

    Please, please, if you are considering going to law school take a step back and really think things through.

  5. 3:20 - Seriously, can you not see the direct parallels in your language to how people convinced themselves that they "had to buy stocks right now because the price was only going to go up!" and that they "had to buy a house right now because the price of housing is really going up and everyone knows that housing prices never go down!" Supply and demand, my friend. Your recommended course of action only perpetuates the bubble and makes it worse.

  6. While my advice to a prospective law school applicant may be to wait it out a little bit to see if the market picks up, I do agree with commenter #2 to some extent in that there is a risk that tuitions rise. And quite frankly, tuitions might rise above inflation rate.

    You are pretty adamant about the whole supply and demand thing, and that's fine. the only problem is, it doesn't seem to work in a pure sense for higher education. People have been calling a bubble pop for a long long time.

    As an example of why I think there's a chance the bubble just won't pop, you've mentioned in one of your posts (I think the second?) that when you were hiring in the years around 2003, your fir m had to raise starting salary because there were fewer kids graduating from law schools. Or at least not enough. The theory was that a few years before 2003, less and less kids were going to law school because they would rather be internet millionaires. However, I would ask whether college or law school tuitions decreased or even stayed flat during those years where kids were forgoing law school and instead trying to be internet millionaires. I was in school around that time, and I seem to remember tuitions going up. Perhaps more slowly or around inflation rate, I'm not sure. But I certainly don't remember tuitions going down.

    Higher education seemingly has no downward pricing ever. Demand goes up, prices go up. Demand goes down, prices go up. So by historical record, I think comment #2 is at least plausible.

    Now, that doesn't make it a good idea to go right now instead of later. Just that the risk of higher tuitions in the future is plausible.

  7. My 2 cents: Go to a qualifying non- US ABA school (do they have law school's in India) where cost is much cheaper, and where the ABA rules still allow you to take the bar exam for your particular state. Sure you can go to a ABA school as I did, and if you are lucky like me you will make a decent salary, but I even have to admit the debt load sucks for many years. If I had less debt over all, I would have a much better time living off my present salary.

  8. I have no idea what you're talking about, PoorGrad. Non-US law schools do not currently qualify to sit for the bar in any state, as far as I'm aware - only California allows non-ABA school grads to sit for the bar, and they have to be California-Bar approved (aka online crap schools, but whatever)

    If I have one quibble with this analysis in the post, it's about timing. 2003 was the best time to be a graduate, but it was not a great time to start as a 1L - those grads came out in 2006, right as the law market was making a big shift from hire to fire. You have to _anticipate_ the peak by a couple years because of the lag time, if you're going to be a "big winner." That said, with the current glut of bar graduates sitting idle, the next good peak won't be for quite some time.

  9. Yeah, Poorgrad, that was a poor answer. What I've noticed from all the "scamblogs" regarding the "law school scam" is that they all have one thing in common: they seem to have dove in without doing a minute's worth of their own research and merely listened to the 99.99999% employment stats from their 114th ranked law school in rural Appalachia. Whenever I have posted comments regarding what, if any research these people did outside of their prospective law schools' admission page, my comments are deleted.

    In any event, thank you so much for this post. I will be sending this page to a few future law students I know who refuse to listen to me because I went to a "TTT" yet have a good law job.

  10. Coder E - Great comment! It raised to many issues I decided to do a post on it.

  11. PoorGrad - I am also not aware of any non-US ABA-approved law schools. If you are aware of any, please provide us with links in the comments!

  12. 1:45 - Your comments about timing are well-taken. I have to agree that it would be difficult to time the actual peak (or trough) of the law school equation. That being said, I'm not sure that I need to - for example, I only need to be able to evaluate when the deal is "good"/"bad", not when the deal is "best"/"worst". I think that a reasonable observer could have seen that the deal was good starting in about 2000 - see my follow up post on JD numbers for an example.

    Also, my recollection is that 2006 was still a pretty good year (not as good as 2003, but decent). It was really 2008 after the economic displacement that caused such an upset in the demand for legal services that really changed the prospects. I feel really sorry for those that graduated in 2008 and 2009. They could not have realistically predicted their situation. However, people considering law school today should be able to understand the economics of the situation - and will really have to bear primary blame for the result.

  13. EvrenSeven - I can understand your frustration, but realize that many of those bloggers were caught in the events caused by the 2008 crash. Employment literally dried up overnight. They could not have realistically predicted the crash. Further, as a society we require those selling a product to be honest with regard to what they are selling. There is a real issue now with regard to law school spinning their recruitment data - as I think you admit. For example, if someone was sold a 200K house and it collapsed, we would typically not say that the purchaser "should have done more sue dilligence about the builder and consequently the builder should not have to pay." For me, it is especially troubling when the seller making the representations 1) does not fully release the underlying data, 2) takes on a color of honesty, and 3) knows that they are dealing with people with limited life experience.

    You certainly have a point that people considering attending law school should do their research - I certainly agree. However, people who sell hot air to 21-year-olds that leave them with a lifetime of debt and no prospects (and know that for 60% of the people that they are selling to, the degree that they are selling is not going to get the law student what they want) have really stolen something important from them. It is just not right.

  14. Great posts! I refer my students to this.

  15. "3:20 - Wow. You are just really missing the whole point of supply and demand"

    Sorry, but you are the one who is confused. There is a difference between the job market for law graduates and the market for law school itself.

    For example, Yale law school could easily double its tuition tomorrow and people would still line up to pay. For all intents and purposes, there is an endless supply of suckers ready to go hundreds of thousands of dollars into debt to go to law school.

    So even if a decent number of people twig to the law school trap, tuitions could easily continue to rise.

    "Consequently, the situation that you speak of - greater cost and greater hiring odds is not reasonable. It will either be greater cost and lesser odds or lesser cost and greater odds."

    Again you are confused. To the extent that supply and demand does affect law school tution, a hot job market can be expected to stimulate that demand.

    "Also, even if you were right, mathematically paying 300K for a 95% chance at a 200K job is actually a far, far better deal than paying 200K for a 15% chance at a 160K job. "

    That's probably true, but the better option is to forget about law school completely.

    "Opportunity cost? You plan pretty much forecloses the majority of your opportunities."

    What exactly is my plan?

  16. 9:35 - I have to agree with you that a good option might be to pass on law school right now!