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The decline of law school: Why it’s real, what’s behind it, and how it will impact the business of law

February 1, 2013

Today I want to write about recent news regarding the plunge in law school applications for the coming academic year. An estimated application decline of 20 percent from 2012, which itself saw applications drop by 14 percent from 2011, reduces the number of prospective lawyers to its lowest level since 1983 (and we have no reliable application and enrollment records prior to that date).

Let’s add a bit more context before diving into the meaning of the decline. In 2004, law schools received nearly 100,000 applications. In 10 years, the numbers have dropped almost 50 percent. Since 2010, applicants have dropped from 87,500 to an estimated 54,000 in 2013.

Law school enrollments have declined since 2004, but not to nearly the same degree as applications. In 2004, 49 percent of law school applicants enrolled. In 2013, estimates indicate that 74 percent of law school applicants will enroll.  While total number of applicants will have declined by 43 percent, total numbers of enrolling students have fallen by only 17 percent.

Image from  Some rights reserved.

Image from Some rights reserved.

What do these trends mean? I see two major implications. One concerns the ecology of legal education. The other concerns the ecology of Big Law.

Legal education first. In reality, I should just refer you to Professor Paul Campos of the University of Colorado Law School in Boulder –herehere, and here. Campos – who has tenure and so can pretty much say whatever he wants (just like law firm associates!) – argues with uncommon candor and passion about the corrupt foundations of law school education. To anyone who will listen, Campos hammers home the following points.

  • Law schools have long benefited from the perception that they are “safe” professional alternatives for unemployable English majors.
  • Law schools also have long benefited from the government subsidy of unlimited student loans to finance this safe degree path, which has allowed tuition (and faculty salaries) to explode.

However, the days of wine and roses for law schools are, precipitously, about to end.

  • In the past two decades, enrollments and tuition have soared, despite evidence that the legal profession is contracting, or at least not growing.
  • The profession is not growing largely because of the impact of technology, outsourcing, and the unwillingness of businesses and individuals to pay top dollar for legal tasks that are often clerical or rote in nature.
  • With a dearth of jobs for law school graduates, Campos argues that law schools have hoodwinked law students, via a wealth transfer to the schools from the students that often exceeds the value of the law degree.

You can fool all of the students most of the time, and most of the students all of the time. However, a small number of students will see the light a small portion of the time, and in those moments, inflection points of the sort law schools are witnessing will occur.

What does this new development mean for Big Law? One theory (my theory, so feel free to discount) is that law firms are actually the tail wagging the law school dog . While an average salary of $145,000 for first-year associates at large firms remain unconscionably high (the median income of Americans aged 25-34 is $35,000 annually, $40,000 if you are Caucasian, $30,000 if you are African-American or Hispanic), would-be attorneys are apparently slack-jawed at the prospect of returning to 2007 salary benchmarks and non-guaranteed salary increases.

Without getting teary, word is leaking out that law firms don’t actually pay these first-year associate salaries; law firm clients do. And clients increasingly realize that most first-year associates don’t know the difference between a Form 10-K or 11-K and their monthly salary and therefore refuse to pay for hours billed by these associates.

Moreover, Big Law itself has begun a gradual process of de-leveraging. Partners have long used associates as a form of “insourcing,” in a kind of devil’s bargain where associates agree to work as highly paid slaves with the knowledge that most of them will not clear the partner bar. But given the learning curve for law students who receive very little “practice of law” training in law school, and given the other forms of leverage large firms use to finance their operations through the year, it is truly not surprising that after 2008 firms have increasingly focused on cost-saving measures and in that spirit more deeply considered the value of a large pool of expensive associates when technology and outsourcing alternatives can deliver similar benefits at a far lower cost.

This de-leveraging process may prefigure similar trends in health care and financial professions, with similar impacts on medical schools and business schools.

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