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Monday, December 15, 2008

Legal education bubble?

Staggering year-to-year price increases fueled by easy access to credit (partly as a result of government subsidization), followed by a resounding crash ... does this describe the legal academy's not-too-distant future, as well as the housing industry's immediate past?

I deliberately phrase this post as a question, because I have no particularly strong (and certainly no particularly informed) sense of this, but I'm wondering whether other people have thoughts about (1) whether legal education is (over?)due for some sort of "market correction," and if so (2) what form it might take, and (3) whether that would, on the whole, be a bad thing.

It's no secret that increases in law-school tuition, and tuition for secondary education generally have outpaced overall inflation for some time. Is this sustainable? Here are a couple of questions or considerations (others are welcome to note additional ones):

  • The usual story I hear about law schools and the business cycle is that legal education is countercyclical, at least in one regard: applications tend to go up when the economy heads south. But though a bad economy lowers the opportunity cost of going to school, you still have to pay the, um, cost cost of going to school, and maybe that will get harder now. Will the recent tightening of credit extend to law-school loans? It seems likely that government loan programs will continue, but access to private loans may become more difficult. If this happens, it might threaten the ongoing ability of law schools to increase their tuition at the rates they have done so in the past.
  • Will the downturn affect the "law sector" of the economy, thereby also affecting legal education? As Brian Tamanaha and Bill Henderson (and others) have pointed out, job prospects for many law-school graduates were less than stellar even before the recent economic difficulties. Will prospective law students increasingly conclude that the costs of the degree are not worth the benefits?

If it seems likely that there will be some sort of impact on the legal academy, then what form(s) might it take?

  • Will all, or most, law schools be affected in roughly similar fashion, or will there be starkly different effects on public v. private; or based on geography; or "top tier" v. "lower tier" (whatever those terms are thought to mean); or relatively rich v. poor schools (might correlate with previous category); or independent schools v. those affiliated with a larger university; or other factors?
  • Alfred Brophy at Faculty Lounge has advanced the likelihood of reduced hiring and increased teaching loads for those who remain, and perhaps a broader shift away from a focus on scholarship and toward teaching. (He raised these issues even before the economy collapsed.) Other possible "supply side" effects: heightened (or otherwise changed) tenure standards and/or less tenure-track hiring; reduced salaries/raises/benefits; increased use of adjuncts; larger class sizes, including more "distance" learning. Which of these seem most plausible? Other possibilities?

Finally, perhaps most provocatively, if there's a contraction of some form in the legal-education market, might that be a good thing? Should government student-loan support promote, say, graduate engineering education rather than legal education? Are we producing too many lawyers? Should more students realize that the odds do not favor their obtaining high-paying employment after law school?

Few if any of these questions/issues are new, of course, but I'm curious to hear what people think.

Posted by Michael Cahill on December 15, 2008 at 04:09 PM in Life of Law Schools, Teaching Law | Permalink

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Great questions, Michael. I have long suspected that the current number of law schools - especially at the current cost of tuition - is unsustainable. While I suspect that the top two or three tiers of schools will survive (and probably also lower-tiered schools in under-serviced regions or states), there are some law schools which I can't see surviving over the next decade or two.

Posted by: RonBurgandy | Dec 15, 2008 4:13:11 PM

It was just 8 months ago that the New York legislature appropriated money for 3 new taxpayer-supported law schools in New York state.

Posted by: JoeDon | Dec 15, 2008 5:08:55 PM

The increasingly bi-modal distribution of first year lawyer salaries suggests to me that the economics of so-called tier 3 and 4 schools is increasingly not tenable. I don't believe those schools are generally candid about that. (That was an understatement of my views.) Further, it's my experience that most of those students aren't really "graduate students" in the normal academic sense of that phrase. They're there for a professional degree. Finally, the US method of teaching law (virtually) exclusively as a graduate degree has enormous impacts on the lack of diversity in the profession.

One solution would be to re-introduce the LLB, so that lower SES students can study law in undergraduate settings, just as they currently student accounting, business, etc. I know that no one relishes the thought of lecturing on black letter law to 17 year olds. But it would increase SES diversity, would align the costs of law with the economics of being a lawyer in the lower portion of the bi-modal distribution, and would enable those students to enter government, business, or law. For the bright, motivated students, they could later do a 1 or 2 year LLM, in a specialty field that suits them.

Posted by: John Steele | Dec 15, 2008 6:20:16 PM

The ABA is doing much to hurt the US legal market now by allowing "outsourcing" to India and the like of preparation of legal documents.

Posted by: Kyle | Dec 15, 2008 10:11:07 PM

I'm not so sure I agree with John Steele. I'm at a public law school in one of the least populated states in the country, and our placement rate is over 90% in 15 states (real jobs - we don't have the money to temporarily hire our own grads to inflate numbers). We also accept maybe a third of all applicants.

Granted, the salaries don't all match the bi-coastal amounts, but there is a market there. That said, if there are many schools in a small area, that might cause some congestion in the market.

Posted by: Michael | Dec 16, 2008 6:58:35 AM

Michael,

I'm glad to hear of the 90% placement rate. And if the debt load isn't a mismatch for their professional prospects all the better. Finally, if that experience is indicative of law schools more generally, there is indeed no bubble ready to burst. I'd still bring back the LLB as a second option, but if your school's experience is typical, there isn't an economic need for one. At the same time, there seem to be signs that the economics of JD degrees from tier 3 and 4 schools isn't that rosy.

Posted by: John Steele | Dec 16, 2008 10:19:17 AM

I surely hope that this commentary is incorrect, as I have aspired to enter the legal profession for a lifetime. However; I can see the point that is being made and fear that the profitability of law graduates may be diminishing. With the vast amount of students seeking to enter the field and the increasing competitiveness for decent jobs, there is definitely an argument to be made that in the very near future there will be a surplus of lawyers in the job market with no takers, much like the saturated supply of existing homes in the real estate market.

Where once lawyers were guaranteed to earn an above average wage, those salaries will now be offered to those students who are involved in engineering, computer science and environmental research. I will say that for those who seek to enter a profession centered in the public arena versus the private corporate route, may fair better in the long run. They most certainly may not make as much money, but there will always be government and there will always be need for lawyers to perform in those areas. The only issue being will it be worth the money spent to obtain a law degree only to end up with a job that pays no better than a bachelors degree.

Posted by: Blake | Dec 16, 2008 10:37:23 AM

What is the exact amount of the alleged government subsidy to legal education? Is it at all comparable to the types of subsidies offered to housing?

Also--is there any guarantee that whatever that subsidy is will be allocated to "more useful" ends? Might it just go to more Iraqs, or more tax cuts to the wealthiest, people making over $3 million a year?

Posted by: Skeptocrat | Dec 16, 2008 12:28:32 PM

"The ABA is doing much to hurt the US legal market now by allowing "outsourcing" to India and the like of preparation of legal documents. "

Posted by: Kyle

This might be the biggest factor. Assuming that most legal work doesn't have to be done in-person, there's a potential for a massive reduction in demand for US lawyers. And (second assumption) that it's quite lucrative for an Indian law student to become competant in US law, even if he/she doesn't intend to emigrate to the US, and there's a large potential law workforce, whose base pay rates would be 1/3 or less of a US-based lawyer.

Posted by: Barry | Dec 16, 2008 2:52:37 PM

I have a hunch that when competition and market forces require law schools to do more to compete for students, they do not respond by lowering tuition, but instead by offering more and larger scholarships. A $10,000 "scholarship" to a $40,000 school is psychologically somehow more appealing than a mere $10,000 cut in tuition (because the scholarship makes you think the school "wants" you and gives you inflated hopes of being at the top of your class). Thus many schools could probably get away with increasing awards to even 50% or 60% of its incoming class rather than lowering tuition across the board and fill the remaining seats with people who are willing and able to pay full price, all at a lower total cost than an across the board tuition cut.

Posted by: Joshua | Dec 24, 2008 10:41:52 PM

It's an interesting question I'm going to be starting law school in the fall. Even though I've already been accepted into 'better' schools, I think my top two choices at this point are Franklin Pierce Law Center and University of Detroit Mercy.

The reason for this is, given the downward spiral in the economy I want to be

1. In a place where I can distinguish myself academically

2. Preferably in a school that gives me some sort of training that goes beyond a standard law school curriculum.

Posted by: Sam E. | Dec 27, 2008 9:26:57 PM

wow, Sam E.--assuming you are not just a troll, you are really making a bad move. You should try to go the absolute best law school you can in order to maximize your chances of getting a job afterward.

Posted by: Anon | Dec 28, 2008 8:10:30 PM

There is no shortage of legal work, as anyone working at legal services or a public defender's office knows. All those casualties of the housing bubble could use some help with their foreclosures and bankruptcies, and their needs won't be met by outsourcing to India. An astonishing number of people are forced to defend themselves pro se because they make too much for free legal services but not enough to hire a lawyer.

There is, however, a huge mismatch between the expectations of law students and the needs of the community. It is rather difficult to work in the public sector or at a small firm if one has 80k-100k worth of school debt, but that is where the need is and law schools should be training students to work there and making it possible for them to do so without crippling debt. We need more funding for LRAP programs and perhaps the new administration might consider funding a national legal services corps where new grads could spend five years working in the public sector in exchange for forgiveness of their federal loans.

And Sam E., if Franklin Pierce and Detroit Mercy are offering you a good financial deal, and you want to work in the public sector, go for it! But if your dream job is shuffling papers for 18 hours a day in the Big Law rat race, then by all means accept the offer from the highest rated law school.

Posted by: Mary | Dec 29, 2008 3:59:53 PM

Mary, right on!

Posted by: Serena | Jan 16, 2009 11:48:01 AM

You're all scaring me.

Posted by: Dave | Mar 4, 2009 6:19:10 PM

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