Posts Tagged ‘economy’

Too Many Lawyers?

Monday, August 19th, 2013

Keith Lee posted an interesting chart on his blog today, comparing how fast the number of lawyers is growing to how fast the general population is growing. The U.S. population has grown at a slow and steady pace since 1945. The lawyer population, however, has grown at a much faster rate since the 70s.

People have been complaining about “too many lawyers” since at least the 70s, if not earlier. This data would seem to explain some of that feeling, as the lawyer population has grown faster than the general population.

But how accurate is that complaint? Are there too many lawyers?

Not too long ago, you could say “no” and back yourself up with a convincing supply-and-demand argument. The market demanded more legal services, so more lawyers were coming out of school to fill that demand. If there wasn’t demand for a lawyer’s services, he’d soon find something else to do.

It’s not as if lawyers create their own work, after all — personal injury lawyers don’t go around causing traffic accidents; transactional lawyers don’t draft contracts because they feel like it; criminal defense lawyers don’t make people go out and commit crimes. It’s the clients who want to sue each other, who have deals that need to be structured, who get in trouble and need help.

So if more and more lawyers were out there, it wasn’t the legal profession’s fault. It was because the rest of you were suing each other more often. It was because life, business and government were getting more complex, and you needed more help in navigating your affairs. It was your fault, not ours. Simple supply and demand.

There weren’t too many lawyers. There were exactly as many lawyers as you, the clients, wanted there to be.

Actually, the growth in lawsuits and wills and ordinary lawyering wasn’t really ballooning. Ordinary lawyering was keeping pace with the population, for the most part. What was really growing, starting around 1970, was the demand for corporate transactional work. That’s what created the big firms, what drove the big fees.

But this new corporate demand wasn’t a permanent shift in the demand curve. It was a bubble. Actually, it was a series of bubbles — the M&A bubble of the 70s, the real estate bubble of the 80s, the dot-com bubble of the 90s, another real estate bubble in the 00s — Wall Street percolated with all kinds of demand for more corporate work. Each bubble burst, as they tend to do. But so long as Wall Street kept percolating, there were always new bubbles coming along. Overall, it was constant. And it drove higher and higher fees, higher and higher salaries, secure and steady work. And that drove more and more people to go into the law, looking to get some of that steady work and high pay. (Which is the exact wrong reason to go into the law, but that’s what happened.)

But then, about six years ago, it stopped. The demand for the high-pay big-firm corporate work dropped significantly. The profession tried to ride it out, keeping all those high-pay lawyers around for when the work came back. But it didn’t. And a year later they realized they couldn’t keep paying all those high salaries without the same level of fees coming in. So they started shedding lawyers.

Those were good lawyers, of course. These firms had only hired the best of the best. Which was great if you weren’t a top student from a top school — with those guys competing for the Wall Street-driven jobs, there was more room for you on Main Street. But once those guys started competing for the Main Street work, there was less demand for graduates whose grades or schools weren’t stellar.

And so you saw an awful lot of students who had entered law school expecting an easy job market graduate with no job (but plenty of debt).

If you asked one of those new graduates if there were too many lawyers, you’d probably hear a resounding “YES!”

But that’s because there were more lawyers competing for fewer jobs. The actual number of lawyers working as lawyers was still exactly as many as you, the clients, were demanding.

The job market took that hit in 2008, and it hasn’t really changed much since then. But law school applications — which had been steadily falling up until then — now shot up, rising faster than before for the next couple of years. Presumably well-educated college-graduate adults saw law school as an attractive option, despite all the evidence to the contrary. A lot of these applicants looked on law school as a default — the economy sucked, so this was a great way to ride out the recession and have a good-paying, steady, upper-middle-class career on the other side. They didn’t want to be lawyers for the right reasons, but they wanted to go to law school.

Supply and demand being what they are, if more people wanted to pay good money to go to law school, there were going to be more seats for them to fill. And so the number of law students continued to rise. And so even more fresh graduates came out to face the same job market that had NOT been growing at the same pace.

If you ask any of these new graduates if there were too many lawyers, you’d probably hear a resounding “YES!”

Supply and demand being what they are, of course, people eventually stopped applying to law school in such numbers. They’ve resumed their downward path. In fact, applications are going down faster than ever, and are probably at their lowest point in thirty years. Meanwhile, those who couldn’t find work as lawyers have mostly found something else to do. So this oversupply of fresh graduates is in the process of shaking itself out.

But even with this momentary oversupply of fresh graduates, the number of lawyers actually working is still going to be however many you, the clients, demand. The answer to the question “are there too many lawyers” is still “no.”

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Of course, what people are really complaining about when they say “too many lawyers” is that there are too many bad lawyers. Nobody complains about the good ones. But that’s a subject for another time.

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 Since I got off on this from looking at some graphs, I thought I’d make some of my own. Look at these and ask yourself if there really are too many lawyers:

Dear Whiners: Shut Up.

Tuesday, November 1st, 2011

 

Hey. Gen-X lawyer here. Could those of you whining about your law schools and sucky job market please shut up? Thanks.

There’s something about the gripes of new and rising JDs that’s not unlike the same bleats we’re hearing from many “Occupy Wall Street” types: It’s the complaint that they did everything they were supposed to, and now instead of getting a living they’re getting fucked. They went to school, took out loans to pay for it, in the expectation that the payoff would be worth it. That there would be a job out there — more than a job, a lifelong career path. A secure income. But that’s not what they’re finding in the real world. The dream jobs aren’t out there — at least not for them. They’re starting their adult lives with an insane amount of debt, and no conceivable way to pay it off. They feel betrayed. They were promised all this, they did their part, and now society isn’t doing it’s part. So they rant online, some take to the streets to complain, and a few have even sued to enforce the deal they thought they’d made.

This is nothing new to those of our generation. When we graduated from college, the job market sucked big time — only the engineering students seemed to be in high demand, much to the chagrin of those of us with History (cough), Art and Philosophy majors. It was pretty bad when we graduated from law school, too — we knew many bright, talented young JDs who had to work as bartenders, online marketers, and the like before landing a lawyer job (and the ones who persisted, by the way, did wind up getting cool law jobs and are doing quite well).

It sucked, but we knew it was coming. We had no illusions about the economy. We didn’t expect Social Security to even be around any more by the time we’d reach retirement. The Baby Boom generation had spent their lives focusing on how awesome they were, and fucking things up for the rest of us, and we knew it very well. A Washington Post article from 1991 began:

Now adulthood looms, like a cookie jar that somebody else already picked clean. Will the busters [the phrase “Generation X” had yet to be coined, we were called lots of things] ever be able to match their parents’ standard of living? The cost of starting out in life — college and a first house — has been racing ahead of inflation and wages ever since they were born. Meantime, adults have rung up nearly $3 trillion in national debt in the busters’ brief lifetimes, virtually all of it on consumption for themselves. The busters will get stuck with the tab.”

Another article from the Atlantic in 1992 (calling us the “thirteeners” — the 13th generation of U.S. history) described us thus:

After graduation they’re the ones with big loans who were supposed to graduate into jobs and move out of the house but didn’t, and who seem to get poorer the longer they’ve been away from home — unlike their parents at that age, who seemed to get richer. …

In them lies much of the doubt, distress and endangered dream of late twentieth-century America. As a group they aren’t what older people ever wanted but rather what they themselves know they need to be: pragmatic, quick, sharp-eyed, able to step outside themselves and understand how the world really works. From the Thirteener vantage point, America’s greatest need these days is to clear out the underbrush of name-calling and ideology so that simple things can work again.  Others don’t yet see it, but today’s young people are beginning to realize that their upbringing has endowed them with a street sense and pragmatism their elders lack. Many admit they are a bad generation — but so, too, do they suspect that they are a necessary generation for a society in dire need of survival lessons.

When they look into the future, they see a much bleaker vision than any of today’s older generations ever saw in their own youth. Polls show that Thirteeners believe it will be much harder for them to get ahead than it was for their parents — and that they are overwhelmingly pessimistic about the long-term fate of their generation and nation. They sense that they’re the clean-up crew, that their role in history will be sacrificial — that whatever comeuppance America has to face, they’ll bear more than their share of the burden. It’s a new twist, and not a happy one, on the American Dream.”

And you know what we think when we hear Millenials whining? The children of those self-absorbed Boomers, who gave them awards just for showing up, who slathered them with praise and “self-esteem” without actually making them do anything to earn it? (more…)

Falling Economy, Falling Crime

Tuesday, October 4th, 2011

Endless Origami: Crime Rates

Or maybe not…

For some reason, common wisdom would have it that crime should go up when the economy is going down. Violent crime in particular. Apparently, the thinking is that less prosperity leads to increased frustration and desperation, leading to more beatings killings muggings and rapes. As if the people who otherwise would commit such crimes are less likely to do so when banks are lending and people are investing in new and bigger business ventures.

Of course, common wisdom is frequently wrong. Which is good, because as we’ve pointed out before, the economy is going to continue to suck. Europe is facing massive uncertainty in the face of its Mediterranean peoples voting themselves the treasury. Here in the U.S., the Obama administration, elected on a platform of “hope,” is doing everything in its power to kill off any hope that investment in growth would be worth the risk. Instead of ensuring the stability and predictability necessary for economic growth, the governments of Europe and the U.S. are only spreading uncertainty and worry. It is now pretty much a certainty that a double-dip recession is upon us.

But the economy just isn’t that strong an influence on crime. During the prosperous 1950s and 1980s, violent crime went through the roof. During the Great Depression and the recent Crappy Recession, violent crime plummeted. The influence of economic hardship on crime is just not that strong. It is certainly not cause-and-effect — any effect is likely limited to exacerbating the effect of those things that actually do drive up crime. And right now, those things aren’t driving crime up.

So what are those things? What factors do drive violent crime? And are they going to come back any (more…)

Economics and Rising Crime Rates

Saturday, July 9th, 2011

Looks like there’s going to be more work for defense lawyers, and that’s a real shame.

Hey, we like working as much as the next guy, but we’d rather have a lower crime rate.  After Obama’s little press conference yesterday, though, we can’t help but think that the crime rate is going to go up.  Because the economy is going to continue to suck.

Of course there’s a whole lot more to crime rates than just the economy.  The gang crimes of the crack epidemic flourished during boom years, after all, driven not by poverty but by the turf battles and growing pains of an exciting new industry, like a dot-com bubble with guns instead of IPOs.  While wages were rising in the 50s, the crime rate was rising twice as fast.  And a tanking economy does not always coincide with rising crime rates — they dropped about a third during the Great Depression.

Demographics are a much larger factor, especially in violent crimes, which surge and recede with the unmarried young male population.  That population is responsible for about half of all crimes that get committed.  Cultural attitudes also play a big role — different communities of our wonderfully heterogeneous country can have markedly different views of what is right and wrong, and what is tolerable in others — so that population shifts and evolving community attitudes bring about noticeable drops or rises in local crime rates.

But although the economy is not the biggest factor, it still does have an effect on crime rates.  Financial crimes seem to bloom in downturns, partly out of reckless desperation, and partly because frauds are easier to conceal when everything is going up.  It also affects violent crimes committed by people other than the young-male demographic, for whom economic stress can lead to domestic strife.  For some of those feeling the lack of opportunity the most, opportunistic crimes lose some stigma and are more likely to be seen as options.

It would be foolish to claim any cause and effect between a down economy and the crime rate.  But a down economy — especially a long-term downturn — certainly amplifies the effects of more direct factors like demographics.

Well, the at-risk demographics have been swelling for a few years now, and we’re starting to see an effect on the statistics.  It’s likely that critical mass has been reached, or will be fairly soon.  Cultural shifts work in both directions, but in recent years they’ve been balancing out in favor of less, not more, homogeneity.  (It’s not that particular communities are more or less likely to commit crimes; it’s just that greater cultural diversity correlates strongly with deviation from the singular norm of the law.)  The amplifying effect of a long-term crap economy is most likely to be significant in precisely these circumstances.

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So why do we think the economy’s going to stay down for a while?  Because it’s the message the Obama administration has been sending lately.  What the president said after yesterday’s gloomy jobs report only solidified this impression.

The news was (more…)

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

Monday, June 6th, 2011

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 (more…)

Recession Creating More Work for Defense Attorneys — But Not More Criminals

Monday, March 9th, 2009

 

A couple of weeks ago, we were at a luncheon with some white-collar defense attorneys, listening to a presentation by the acting U.S. Attorney, Lev Dassin. Mr. Dassin let us know that, although he couldn’t spill any particulars, there are a number of ongoing investigations at the Southern District of New York right now, which he expected to provide a lot of work for us later this year.

He also confirmed our impression that there is a lot of political pressure right now, causing prosecutors and law enforcement to focus more assets on white-collar crime. Many see the current economic downturn as the result of Wall Street skullduggery, so law enforcement is being tasked with doing something about it.

Our biggest fear is that people who did nothing illegal may get caught up in the frenzy to blame people for the recession. A federal criminal investigation is a serious matter, and even people who did nothing wrong can wind up in prison because of how they behaved during the investigation.

Still, a lot of white-collar crime is now coming to light these days, because of the hurting economy. Ponzi schemes and other fraudulent investments are being caught out left and right, as investors start trying to pay bills by cashing out their accounts, only to discover that their money isn’t there.

Furthermore, PricewaterhouseCoopers today published a white paper, “Boom Time for White Collar Crime,” predicting that the economy will cause greater numbers of people to commit white-collar crimes, such as embezzlement and fraud.

PwC partner Andrew Gordon told GAAP web that “sales targets seem ever more out of reach, bonuses are under threat, and people’s reputations and livelihoods are at stake. Together, these can be powerful motives for individuals to cross the line.”

The white paper predicts an increase in specific types of fraud: data theft by criminal organizations, “rogue traders” in corporate finance departments, and fraudulent mis-reporting of business numbers to make companies appear better to investors. The paper also sees more Ponzi schemes and fraudulent investment schemes collapsing as investors try to cash out.

So criminals caused a bad economy which is causing more criminals? That sounds a little simplistic.

Of course, the economy didn’t go south because a few Wall Streeters went around defrauding investors. The economy tanked for a lot of reasons, but mostly because lenders stopped believing they’d get paid back. Institutions with the most leverage — financial institutions particularly — got their margins called and couldn’t get new credit, a deadly combination. No amount of government stimulus would change that, without a condition that capital infusions to lenders must turn into loans. The government didn’t make such conditions, so lenders just hoarded their cash to sit out the storm. The credit market, already dying, was pretty much killed. The U.S. Congress and the new Administration have since then acted fairly consistently to prevent lenders from regaining sufficient confidence to start lubricating the economy again. In modern economics, perception is everything — if you are perceived to have liquidity, even if you are at risk, you will have liquidity (see JPMorgan Chase this time last year), but if you are perceived to be at risk even though you aren’t, your liquidity dries up (see Bear Stearns this time last year). Once lenders start perceiving that they will get their money back, things will start picking up. This crisis of confidence was caused, not by white-collar criminals, but by Clinton-era directives to make mortgages to people who can’t pay them, by borrowers and lending agents who cashed in on the resulting laxness, and by an ever growing house of cards that was destined to collapse.

So the economy didn’t go south because of criminals. Similarly, a worse economy doesn’t necessarily translate into more crimes being committed. People who would steal in bad times would have stolen in good times, too. White-collar types aren’t exactly Jean Valjean, stealing a crust of bread so their families don’t starve. No, white-collar crime requires a combination of opportunity and character traits, neither of which correlate with economic pressures.

What is true, however, is that more white-collar prosecutions are going to happen because an under-informed public and its politicians are screaming for blood. Unfortunately, we do not believe that all prosecutors out there understand the complexities and realities of the financial world well enough to accurately sift the guilty from the merely unlucky. Some innocent people are going to get caught in this ever-widening net.