No Jobs for Your JD? An Economist Explains What Happened.

Where did all the law jobs go?  And are they coming back?

Good questions.  More on that in a second.  But first, we have to say that we’re frankly tired of hearing law students and newish JDs moaning about the dearth of lawyer jobs to be had.  Particularly grating are the complaints that it’s somehow somebody else’s fault that they’ve got all this debt and no six-figure job to show for it.  Most of these put the blame on law schools for hoodwinking them into thinking the job market for attorneys was awesome.  We don’t get that — people who go to law school are grownups, adults with college degrees, but these ones are acting like they’re still kids.  Come on, at some point you have to be responsible for your own decisions.  Childhood ended a long time ago.  Anyway, one would think that someone intending to become a lawyer would have had the basic ability to research what the real job market was like.  A simple Google search would have turned up a plethora of articles and discussions about it, going back to mid-2008.  If they really had no clue what they were getting into, then they really need to re-think whether they’re in the right profession.

And if they’d bothered to research just a tad more, they’d have found that this ain’t the first time law jobs have been harder to come by.  This kind of thing happens every now and then.  It’s cyclical, just like anything else.  Demographics, economic cycles, and the coming and going of fads have all affected whether there’s enough hiring going on.

One need not understand why it was happening.  But for college-graduate adults to not even know that it was happening?  And to make life-changing, debt-incurring decisions based on law schools saying their graduates had good-paying jobs?  (Or worse yet, based on a fantasy that has never been true, that anyone but the top grads from the top schools would be making the big bucks right out of law school?)  That’s just idiotic.  Such complaints call into question the very ability of the complainer to have practiced law in the first place.  It makes you sort of glad they didn’t find a job, kinda.

Although one need not understand why it was happening, however, it’s still worthwhile asking the question.  We’ve had our own theories, but they’re based more on intuition and anecdote than on any rigorous analysis.  So it’s good when, from time to time, someone pops up with an explanation.

With respect to the latest turndown, our basic understanding was always this: Starting in the 1980s, for example, the financial sector really began to grow rapidly.  Its share of GDP roughly quadrupled between the Reagan years and the start of the financial crisis.  Among other things, this led to a burgeoning demand for corporate lawyers, to work on all the transactions that were being put together all over the place and deal with the related taxes, litigation, etc.  This is the bread-and-butter work of most of the large, well-paying law firms.  So demand grew for bright lawyers who could churn out a lot of billable hours on this stuff.  So long as there was money coming in, these very expensive young lawyers were still worth it.  But starting with the bursting of the mortgage bubble in 2007, there was a huge slowdown in the financial sector.  Big law firms now had a lot of very expensive lawyers on staff, and not enough revenue to pay for them.  So starting in 2008, the layoffs began.  Layoffs of junior associates, senior associates, even partners continued for what seemed like forever.  This had a ripple effect throughout the legal industry.  When the top grads aren’t getting the top jobs, they get the next best.  This shoves out those who otherwise would have had those jobs, and so on down the line.  The less-stellar one’s grades or school, the less likely there was to be a job out there for you.

That was our gut feeling, anyway.  Arnold Kling, however, has written a somewhat more insightful explanation over at econlib.org.  Answering a question about why the current economic slump seems to be taking so long to shake off, Kling focuses on “just one example of an industry that is undergoing a severe contractionary adjustment: the legal industry.  Many large firms have undertaken massive layoffs, and new law school graduates are having a horrible time finding jobs.  How can we explain this?”

He starts by referencing Axel Leijonhufvud’s “corridor” theory — basically, people are okay at handling the normal fits and spurts of an economy, but when something big and unexpected happens, people suck at it.  Extreme adjustments are required to recover from an extreme deviation, or else everything just gets worse.  (This has nothing to do with corridors.  Axel wrote it in Sweden in the early 70s, maybe you just had to be there.  The concept is intuitive to anyone who’s practiced unusual-attitude recovery in a plane, though.  Maybe it ought to be called the “shitohshitohfuckfuckfuck” theory.)

Why is this relevant?  Most of the time, everything is normal.  The economy — and your own portion of the economy — only makes mild deviations.  So people get used to making mild adjustments.  An extreme correction would be insane, and likely disastrous.  (Keeping with the pilot analogy, it would be like reacting to a bit of turbulence by shoving the nose straight down at the ground.  Insane.  Not done.)  Doing nothing is often just fine.  The blip passes.  Reacting to everything gets expensive, because every reaction incurs costs.

Because this is the normal state of affairs, people (and law firms) are generally “adjustment-averse.”

This is fine when there are small drops in demand for legal services.  Okay, sure there’s less work to go around now, but it’ll pick up later.  And it usually does.  You don’t need to go through the hassle of laying people off every time demand goes down a little.

But when demand goes down a lot, we still don’t adjust.  We ride it out, hoping it’s going to get better.  And by the time we realize how extreme the situation is, it’s too late to do anything gently.  Drastic measures are required.  (For the pilots out there, it’s like ignoring a small bank at night, maybe even getting used to it, until all of a sudden you find yourself inverted and nose-down.)

When things keep going back to normal, the economy is “mean-reverting.”  But the economy stopped being mean-reverting.  And the legal profession (among other industries) didn’t adjust to it.  “Because they had failed to adjust gradually to the underlying technological changes,” Kling writes, “what they got was a large step adjustment, greatly reducing the size of the legal industry relative to its previous trend.”

As a result, the legal economy, like the housing and other sub-economies, was “unsustainable as of 2008. … Once a shock took place, the need for adjustment was exposed…. [The legal profession has] since adjusted relatively rapidly and painfully….”

Economists who apply aggregate supply and demand, he says, would say “we can go back to something like the 2007 status quo with expansionary fiscal and monetary policy.”  Kling disagrees, saying that there is “no going back.  The market needs to figure out new ways to best utilize would-be lawyers and other unemployed workers.”  In other words, they need to find something else to do.  There’s no more room for them here, and that’s not changing.

-=-=-=-=-

We hadn’t really thought of it in quite the same way, but it does make sense.  We’d focused more on the simple macro causes, while Kling explains why the effects were so much more dramatic than they otherwise might have been.

Still, no matter how much the legal “industry” (ugh, we hate that) may shrink, what kinds of jobs are really being lost?  Jobs for which there is no demand.  That hardly seems like something to get upset about.

For longer than we’ve been alive, people have complained of there being “too many lawyers.”  We expect they always will.  But there are never too many good lawyers.  The profession always has room for one more good lawyer, no matter what the economy happens to be doing.  It’s funny, but life seems to work that way.

So instead of ending on a down note, here’s some encouragement to the rising JDs who are smart, hard-working, decent people who want to be lawyers for all the right reasons: Come on in.  There’s plenty of room for you.

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14 Comments

  1. internet guy, June 6, 2011:

    How are people supposed to predict the future when entering law school?

    “YOUR FAULT for going to law school and not knowing there wouldn’t be jobs three years from now! YOU’RE DUMB! HAHAHA!”

    Is that your point here?

  2. Nathan, June 6, 2011:

    No. It’s your fault for basing your decision on marketing materials from school X. If you started law school any time since 2008, it’s your fault for not seeing that the law was shedding jobs big time, with no reason to believe the trend would do anything but continue. Regardless of when you started school, it’s your fault for thinking that a JD from school X was enough to get a high-paying job with job security. It’s your fault for putting your faith in misconceptions when the real world was right there for the seeing. And to the extent you think it was someone else’s job to educate you about all this, you’re ridiculous.

  3. Ryan, June 6, 2011:

    His point in one sentence: ignorance is no defense.

  4. Bruce, June 6, 2011:

    I agree that students should have kept an eye out for all the warning signs. At the same time, it’s not only the “school marketing materials” that twist the facts. The ABA, NALP (Assn for Legal Career Professionals), and US News World & Report also all provide bogus employment information.
    There are some law school scam blogs here and there, but I think potential law students are more apt to trust the “official” data and often chalk up an individual law student’s bad experience to laziness.
    Cultural influence also blinds law students from making a rational decision. The obvious thing that comes to mind are legal dramas and TV shows. But what I’m really talking about is parental influence. For example, I was considering law school for a while, but I decided against it partly because of the dim job market. Yet my parents kept on pushing the versatility of a law degree, a lawyer’s financial security, and the intellectual value of attending law school. Honestly, my parents are still quite disappointed that I decided to get a job as a consultant instead. People are influenced by their parents’ advice, and the advice of an older generation.
    All in all though, I do agree with you. The job market is tough, but there will always be room for good people.

  5. Sam, June 6, 2011:

    It amazes me to no end that law students didn’t/ don’t see the dim job market coming from a mile away. As someone entering law school this year the thing I hear second most (after either a lawyer joke, or too many god damn lawyers comment) is that I shouldn’t go because of the job market at firms is shrinking.
    So without even a google search, I would have a pretty good indication I would want to do some secondary research on whether or not it was economically viable to get my JD. Fortunately for me, my decision to become a lawyer is almost 100% ideologically driven, so I’m fine with staying poor (although buying a new car one of these days would be nice).

  6. Irony, June 7, 2011:

    “Fortunately for me, my decision to become a lawyer is almost 100% ideologically driven, so I’m fine with staying poor”

    A textbook example pre-lawyer. 100% ideologically driven? I hope you aren’t going to law school because you want to “help people get justice”. Your job won’t be black and white, but gray. Sometimes YOU will help the bad guy win, such is the nature of zealous advocacy. As as for staying poor, making a humble salary is one thing, but paying back massive loans on a humble salary is another. Nonsense from someone who’s always had daddy to pay the bills.

    Many of these pre-lawyers see the truth, but do not understand the truth.

  7. Michelle, June 14, 2011:

    I stopped reading when you said there were tons of articles going back to mid 2008. I just graduated this year. I was accepted to my school in March 2008. I started 1L in August, and the economy collapsed that October. No one really how long this thing would last. Most of us thought it was a temporary downslide. I remember watching the stock market/ jobs collapse shit on TV and thinking “phew, at least I have three years of school to wait it out”. The classes of ’09 and ’10 had even less notice than I did. Although I’m lucky enough to have a decent job lined up, I’m one of very few amongst my classmates. Cut us some slack.

  8. Nathan, June 15, 2011:

    Pity you stopped reading, Michelle, because the economist’s explanation for why the jobs went away is that the law firms had also thought the drop in demand was a temporary blip. When they realized it was a permanent market change, it was too late for anything but drastic measures. You raise an excellent point that the same was true for law students. That’s a point worthy of some discussion.

    However, no slack should be given to those who insist on blaming law schools for the fact that they can’t get a job. Most that I’ve read seem delusional, believing themselves to have been tricked into thinking that a mediocre class standing from a mediocre school was somehow a ticket to big bucks, when that was never the case. And for those for whom this really was an unfortunate accident of graduating at the wrong time — those whose prospects otherwise would have been fine — it’s still just an accident. If the sea change in the job market was unforeseeable by law students, what made it any more foreseeable by law schools? Whining and blaming schools for their simple bad luck only further demonstrates their unfitness for the profession, and makes you wonder if the reason they can’t find a job is because this immaturity comes across.

  9. Lindsey, July 6, 2011:

    First, as a recent law school graduate, it seems mean-spirited that you laugh at newly minted attorneys who are not finding jobs. I DID research law schools, I DID do more than a Google search, and I was lied to by many more sources than just the law schools themselves. Yes, of course they lie and cannot be trusted. It’s a business. I get that. But I did that research back in 2007, before everything completely fell apart, because researching, applying, and picking the right school takes time. By the summer of 2008, when I admit it became obvious that the economy and the legal market was deteriorating, I was just a month away from leaving my friends and family and starting school. At that point, I had made plans for my future that I was going to see through. If an attorney has anything, it should be a backbone and the tenacity to follow through when things look bleak. I take responsibility for my actions and my decision to take on that debt, but it’s not as though I was trying to be irresponsible. Now, you and other taxpayers have to pay for the fact that the government lent me money that it is unlikely to get back. I’m ashamed of that. To cope, I vent with fellow graduates from time to time. And why shouldn’t we be outspoken? Even if it comes across as whining, talking about it may help others who are considering law school from making the same mistake.

    Second, I did not go to law school to find a $100,000 a year corporate law gig. I went because I wanted to help people. People who struggle to pay bills, find affordable housing, and want companies to stop polluting their air and water. I saw my future in a legal aid office or at a non-profit group advocating for the environment and civil rights. Believe me, there is nothing glamorous, lavish, or prestigious in those positions. However, now I can’t do any of those things because the market has constricted to the point where even graduates from Ivy League schools are struggling to find work. Now, they will be offered those opportunities over someone like me and they will accept them because the fancy jobs no longer exist. I’m sorry, but I can’t help but be frustrated.

    This was an investment gone wrong. One that I will be trying to pay for for much of the rest of my life. But please, the next time you want to judge someone in my position, think about all of the time, money, and effort you have put into your career and what it would feel like for it to have been for nothing.

    I will switch gears. Many of will. It’s not as though we are all completely unemployable. However, if this were any other profession, I don’t think people would be so quick to judge and laugh.

  10. Nathan, July 6, 2011:

    Lindsey, nobody is laughing at you. Your first point is off base.

    Your second point, however, is spot on. The market was trending in one direction, and the whole profession planned as if that would go on indefinitely. What happened, however, was a massive long-term shift in the demand for legal services. Those seeking work in less-lucrative positions are being squeezed out from above, as top candidates are forced to look outside the big firms for work. Meanwhile, they’re also being squeezed from below, as more and more people are doing away with lawyers entirely for things like basic wills and contracts and similar services that they’d rather do for themselves cheaply.

    The thing is, it’s just bad luck. It’s not the law schools’ fault. It’s not the legal profession’s fault. It’s not the fault of lawyers trying to keep people out of the profession, or any of the other excuses we all hear time and again from frustrated law students and recent JDs. This isn’t the first time the legal job market has been tight and scary, but it’s the first time all the out-of-work grads have been so insistent on placing blame on others.

    That blame is misplaced. For those who entered school before it all went south, it’s mostly just bad luck, and everyone else in the profession was taken just as much by surprise. For those who had fair warning, but still decided to go to a lesser school, or stuck it out despite getting less-than-stellar grades — those whose own decisions and poor performance are what made them uncompetitive — they can blame nobody but themselves for their own actions.

    And it seems that those whining the loudest are the ones most responsible for their own situation.

    Nobody is laughing at the merely unlucky. Neither is anyone laughing at the whiners and finger-pointers who refuse to take responsibility for themselves. Each one is a sad situation. There may be shaking of heads and tutting, but no laughing.

  11. JD/MBA/Computer Scientist, March 20, 2012:

    I agree with you. JD’s probably “should have known” the market for their over-priced degrees was thin. But fraud is fraud. And if law schools are knowingly overstating the salaries and employment prospects of their graduates, that is fraud. Whether we sell cars, yoga lessons, or law degrees we all have to abide by the same laws.

    Secondly, to make an economics supply/demand argument in the same writing that you chastise new JD’s for suing their alma maters for overstating employment prospects is logically inconsistent at best and foolish at worst. These JD’s are simply acting in their own best interests in a way that positively impacts the demand economics for the services they have to offer. If law schools are allowed to misrepresent the earnings and employment prospects of graduates, at least some additional students will be attracted to the study of law. The more attorneys there are, the lower the price for legal services will be. This is basic supply and demand. So, these lawsuits increase demand for legal services to the extent that they discourage would-be lawyers from entering the profession.

    Another problem for new JD’s that you failed to mention is simply the baby boomer overhang in the supply-side of the market. Some attorneys I know in their 60’s and beyond are looking to retire, but they cannot on account of losing retirement funds in the financial crisis. Alternatively, they simply do not want to retire; sixty is the new forty-five, I guess.

    New JD’s have to compete with this group, and they cannot. Frankly, the older, experienced attorneys are almost always better than the new attorneys at lawyering. In newer industries like Internet commerce, application programming, computer security, etc there is little competition from anyone older than 45.

    On the upside, almost every bust eventually turns into a boom for those that can survive. Just ask any experienced computer programmer who went through the dot-com bubble.

  12. MG, October 13, 2012:

    If you had any clue you wouldn’t be writing this. If you speak to recruiters they will tell you that new JD’s can’t or will have difficult time getting jobs because of lack of experience. Law school can miss lead students or potential students about available opportunities (internships/jobs and other).

    Again if you only had a clue. Very sad!

  13. JS, October 9, 2015:

    During undergrad, I worked for an insurance defense law firm in 1989-1990. The job market was horrible back then. The amount of debt incurred, the poor job market, and some of the conditions dissuaded me from going back. I waited for the economy and job market to become white-hot. I started in 2000, at night as an adult working full-time which was very different from going to undergrad after high school, and finished in 2004. I did have to retake the bar. When I did pass, the legal job market already was falling off the table. I did do my due diligence and remember placement stats indicating the vast majority of graduates had jobs after graduation and the non-big law salaries were roughly $60,000. I now seem to be overqualified for many non-legal jobs
    .

  14. JS, October 9, 2015:

    Overall, the author is correct about the large firm layoffs causing a ripple effect. However, many older lawyers who earned their degrees in the 1970s and early 1980s did so when jobs were more plentiful and the debt was more manageable; FYI there really aren’t nearly as many grants or scholarships for advanced degrees. “Financial aid” = loans. I bet the author doesn’t know what the competitive curve is that is used for 1L classes and any class with more than thirty students. What are your chances of being in the top ten percent of your class? One in ten at best. The reality is that this field vastly changed during the 2000s and nobody saw it coming, like the severity of the Great Recession. My law school actually added a day section as I was finishing up. What they should have done was reduced the class size. Sure, it’s a business and they wanted to bring in more revenue based on an increased number of applications that were in turn caused by a weakening job market for college graduates.

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