Saturday, March 1, 2014

Is the Employment Market for Law Graduates Going to be Improving?

Last fall, while making a presentation at the Midwest Association of Pre-Law Advisors Conference in St. Louis, I had the opportunity to respond to the question that is the title of this blog posting. 

Is the employment market for law graduates going to be improving?  My answer was, and is, almost certainly yes, although perhaps not immediately.

I write this to offer my perspective on the employment market for law graduates in the coming years.  A number of people have written on this topic in recent weeks and months.  Bernie Burk has a very thoughtful piece analyzing the changing job market over the last three decades.  In his concluding thoughts he suggests that the decline in the number of law students will mean that the job market will be improving.  Paula Young, Debby Merritt, Matt Leichter, and The National Jurist, also have weighed in on this issue with some disagreement about how to understand the “market” for law graduates in the coming years.  Whether and how to include JD Advantage jobs in the analysis is something that is frequently contested.  Bernie Burk does a thorough job analyzing the challenges of assessing whether JD Advantage jobs should be included within his definition of “law jobs” – “placements for which a law degree is typically a necessary or extremely valuable substantive preparation; or put slightly differently, jobs that a law degree typically makes a truly substantial and significant difference in obtaining or performing.”

To avoid some of these definitional challenges, this post will focus solely on the market for full-time, long-term Bar Passage Required jobs. Initially, it will analyze those jobs in relation to all graduates; then it will look more specifically at the percentage of graduates who are likely to be eligible for Bar Passage Required jobs for whom full-time, long-term Bar Passage Required jobs likely will be available, a point on which few others appear to have focused up until now.

Class of 2013 – Little if Any Good News is Likely

In the short term, for the Class of 2013, for which job results will be reported in the coming weeks, it would not be at all surprising to see little, if any, improvement in the employment results in terms of the percentage of graduates finding jobs classified as full-time, long-term Bar Passage Required jobs.

According to NALP’s data, there were 29,978 full-time, long-term Bar Passage Required jobs for 2007 graduates, a number which fell to 24,902 for 2011 graduates, and then rebounded to 26,876 for 2012 graduates, an increase of 1,974.   According to the ABA’s Employment Outcomes data, between 2011 and 2012, the number of full-time, long-term Bar Passage Required jobs grew from 24,149 to 26,066, an increase of 1,917.  (For this blog posting, I am not going to try to reconcile the slight differences in data between NALP and the ABA’s Employment Outcomes data.)

Unfortunately, however, according to the ABA's Employment Outcomes data, this growth in full-time, long-term Bar Passage Required jobs between 2011 and 2012 corresponded with a growth in the number of law graduates, from 43,979 to 46,364, an increase of 2,385.  Thus, even though the number of full-time, long-term Bar Passage Required jobs grew by 7.9%, the percentage of graduates in full-time, long-term Bar Passage Required jobs grew only slightly, from 54.9% to 56.2%.

Between 2012 and 2013 the number of full-time, long-term Bar Passage Required jobs may increase again, but the number of graduates also will be increasing, likely from 46,364 to roughly 47,250.  (For the last few years, the number of law school graduates has averaged roughly 90% of the number of first-year students who started law school three years previously.  With 52,500 first-year students in Fall 2010, there likely were roughly 47,250 May 2013 graduates on whom employment will be reported in the coming weeks.) 

If the number of full-time, long-term Bar Passage Required jobs for the 2013 graduates reported in the ABA Employment Outcomes data grows by roughly 1,000 to 27,000, an increase of nearly 4%, the percentage of graduates with such jobs would increase only slightly to 57.1%.  If the number of full-time, long-term Bar Passage Required jobs for the 2013 graduates grows only slightly, by roughly 500, to 26,500 (an increase of less than 2%), the percentage of graduates with such jobs will drop slightly, to 56.1%.  If the number of Bar Passage Required jobs is flat, at 26,000, the percentage of graduates with such jobs will drop a little more to 55%.  Between 2011 and 2013, the market might see graduates finding roughly 2,000 to 2,500 new full-time, long-term Bar Passage Required jobs, and yet still see only 55% to 57% of graduates in such jobs because of the growth in the number of graduates between 2011 and 2013.

Classes of 2014, 2015, 2016, 2017 – An Improving Dynamic

What are the employment prospects for those currently in law school or considering starting law school in the fall of 2014?  They almost certainly will be getting better – not necessarily because there will be more jobs, but because there will be fewer graduates.

Indeed, to make this point, let’s assume that there is actually no further growth in full-time, long-term Bar Passage Required jobs between 2012 and 2017.  Assume the number of such jobs plateaus at 26,000 for graduates of the Class of 2013 and then stays at that level each year through 2017.  What percentage of law graduates over the next four years will have such jobs? 

According to the LSAC, "ABA First-Year Enrollment" has declined steadily from 2010 to the present, from 52,500 in 2010, to 48,700 in Fall 2011, to 44,500 in Fall 2012.  The ABA recently released the Fall 2013 enrollment summary noting that it had fallen to 39,675.   The LSAC's most recent Current Volume Summary, from February 21, 2014,  indicates that applicants to law school are down roughly 11% compared to last year.  Thus, it seems reasonable to project that first-year matriculants will decline again in Fall 2014.  If first-year enrollment falls by 5%, that would give us roughly 37,700 first-years.  If it falls by 10% once again, that would give us roughly 35,700 first-years.

With these estimates for the number of first-years, we can estimate the number of graduates (which, as noted above, has averaged roughly 90% of first-years for the last few years).  Even if the number of full-time, long-term Bar Passage Required jobs does not continue to rebound, but plateaus at 26,000, as the number of graduates declines over the next few years, the percentage of law graduates obtaining a full-time, long-term Bar Passage Required job, as shown in Table 1, will grow to between 77% and 84% by 2017 (depending upon first-year enrollment in fall 2014).

TABLE 1

Analysis of the Estimated Number of Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of the Estimated Number of Law Graduates from 2012-2017

   

Grad. Year

2012

2013

2014

2015

2016

2017

2017

 

(5% Dec.)

(10% Dec.)

 

(1st Yrs 3 Yrs Prior)

 

51600

 

52500

 

48700

 

44500

 

39675

 

37700*

 

35700*

 
 

Grads (90% of 1st Yrs.)

 

46364

 

47250*

 

43830*

 

40050*

 

35708*

 

33930*

 

32130*

 
 

FT/LT BPR Jobs

26066

26000*

26000*

26000*

26000*

26000*

26000*

 

% of Grads in FT/LT BPR Jobs

 

56%

 

55%*

 

59%*

 

65%*

 

73%*

 

77%*

 

84%*

 

*Denotes estimated value.

An improvement in the number of law school graduates getting full-time, long-term Bar Passage Required jobs, from roughly 55% to between 77% and 84% is indicative of an improving employment market for law school graduates.  Indeed, according to Bernie Burk’s analysis of the employment market over the last few decades, this rate of employment in full-time, long-term Bar Passage Required jobs would rival or exceed the high water mark for “Law Jobs” of roughly 77% that he identified as having been experienced by the graduates from 2005 to 2007.  (And for his purposes, “Law Jobs” included some JD Advantage jobs.)  Moreover, this assumes no growth in the number of full-time, long-term Bar Passage Required jobs; if there is even modest growth in the number of full-time, long-term Bar Passage Required jobs over the next few years, the percentages of grads in these jobs would be even higher than reflected in this chart.

 Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of Those Eligible for Such Positions by Virtue of Having Passed a Bar Exam

Even so, many may look at this and suggest the market remains less than robust given that perhaps 16%-23% of graduates in this “improved” market in 2017 will not obtain full-time, long-term Bar Passage Required jobs. While some compare the number of full-time, long-term Bar Passage Required jobs to the number of law school graduates to demonstrate why the employment market for law school graduates remains unsatisfactory, this may not be the most accurate way of thinking about the market for full-time, long-term Bar Passage Required jobs as not all graduates are going to be eligible for Bar Passage Required jobs.

Among those graduating from law schools accredited by the Section of Legal Education and Admissions to the Bar and taking a bar exam upon graduation, the National Conference of Bar Examiners indicates that over the last several years, on average, roughly 83% of graduates of ABA-accredited law schools pass the bar exam on their first attempt. 

To calculate the employment market for law graduates in the coming years who are eligible for full-time, long-term Bar Passage Required jobs, let’s assume that all law graduates actually want a full-time, long-term Bar Passage Required job and therefore take a July bar exam, and let’s assume that 83% of them pass the bar exam on their first attempt.  This should give us the maximum number of graduates eligible for full-time, long-term Bar Passage Required jobs 10 months after graduation (which will be the measuring point starting with the Class of 2014). 

Even if we assume no growth in the number of full-time, long-term Bar Passage Required jobs in the coming years and simply hold the number of such jobs at a constant 26,000, the decreasing number of law graduates will mean an even more improved employment market for those seeking full-time, long-term Bar Passage Required jobs who will be eligible for those jobs by virtue of having passed the bar exam on their first attempt, increasing from nearly 70% in 2012 and 2013 to nearly 90% by 2016 and over 90% by 2017.

 TABLE 2

Analysis of the Estimated Number of Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of the Estimated Number of Law Graduates Eligible for Bar Passage Required Jobs from 2012-2017 

Graduating Year

2012

2013

2014

2015

2016

2017

2017

 

First   Year Enrollment

 

51600

 

52500

 

48700

 

44500

 

39675

 

37700*

(5% Dec.)

 

35700*

(10% Dec.)

 
 
 

Graduates   (90% of First Year Enrollment)

 

46364

 

47250*

 

43830*

 

40050*

 

35708*

 

33930*

 

32130*

 

83% of   Graduates (NCBE Avg. for First-Time Takers)

 

38482*

 

39218*

 

36379*

 

33242

 

29638*

 

28162*

 

26668*

 
 

FT/LT Bar   Passage Jobs

 

26066

 

26000*

 

26000*

 

26000*

 

26000*

 

26000*

 

26000*

 

Percentage   of Graduates Who Might Pass the Bar for whom FT/LT Bar Passage Jobs Likely   Would be Available

 

68%*

 

66%*

 

71%*

 

78%*

 

88%*

 

92%*

 

97%*

 

 *Denotes estimated value.

Notably, these estimates probably overstate the number of graduates who will be eligible for Bar Passage Required jobs.  First, not all law school graduates want to take a bar exam as some conclude that they are not interested in practicing law as a licensed attorney.  Second, given the increasing number of law school matriculants with LSATs less than 150, one could anticipate a slightly higher rate of attrition such that fewer than 90% of matriculants graduate after three years.  Third, given the increasing number of law school matriculants with LSATs less than 150, one also could anticipate that the historical average bar passage rate of 83% might be too generous.  All of these points suggest that the number of graduates eligible for full-time, long-term Bar Passage Required jobs may decline between now and 2017 even more than is indicated in Table 2.    

Between 2012 and 2013 to 2016 and 2017, we will have gone from having nearly seven full-time, long-term Bar Passage Required jobs for every ten graduates eligible for such positions by virtue of having passed a bar exam to having nine or more full-time, long-term Bar Passage Required jobs for every ten graduates eligible for such positions by virtue of having passed a bar exam. That strikes me as an improving employment market.

Of course, this may not be good news for those who graduated in the last few years into one of the toughest markets in history.  It is not clear that this improving market will be improving for them.  But it also is not clear that this "excess capacity" will unduly constrain the opportunities available to law school graduates in the coming years.  This excess capacity already has been impacting the market, yet the number of full-time, long-term Bar Passage Required jobs obtained within nine months of graduation grew by nearly 2000 between 2011 and 2012.  That is one reason I think the assumption of no further growth in full-time, long-term Bar Passage Required jobs is probably fairly conservative. 

In addition, this may not be good news for those who fail to pass the bar exam on their first try and may have to look for jobs that do not require bar passage.  While a significant percentage of these graduates will pass the bar exam on their second attempt and may eventually find employment in full-time, long-term Bar Passage Required positions, it may take several months longer than they had desired and may require that they pursue other employment, perhaps JD Advantage employment, during the intervening months.  

Even assuming a flat market for full-time, long-term Bar Passage Required jobs, as a result of significant declines in first-year enrollment that will mean a significant decline in the number of law school graduates in 2016 and 2017, we should be moving from having slightly more than three of ten graduates who were eligible for Bar Passage Required jobs in 2012 who could not find them to having less than one of ten graduates in 2017 who likely will be eligible for Bar Passage Required jobs who cannot find them.  While individual schools and local or regional markets may have more varied results on a "micro level," on a "macro level" this should be good news for current first-year students and students considering starting law school in the fall of 2014.

Whether this improving employment situation will be enough to change the trend in terms of declining number of applicants to law school remains to be seen.  While the future may be brightening, the "news" in the coming weeks will be the report on employment outcomes for 2013 graduates nine months after graduation.  As noted above, that may be somewhat uninspiring because any increase in the number of full-time, long-term Bar Passage Required jobs may be masked by the larger number of graduates in 2013 compared to 2012.  As a result, potential law school applicants may remain reluctant to make the commitment of time and money that law school requires because the "good news" message regarding future employment prospects for law graduates may fail to gain traction if the messages about employment outcomes for recent law school graduates continue to be less than encouraging.

http://lawprofessors.typepad.com/legalwhiteboard/2014/03/is-the-employment-market-for-law-graduates-going-to-be-improving.html

Data on legal education, Data on the profession, Structural change | Permalink

Comments

This analysis is flawed in two respects.

First, it ignores the “overhang” effect. It analyzes the projected likelihood of new graduates in the 2014-17 time period finding full-time legal employment based on a comparison between the projected # of law graduates in that year with the projected 26,000 new law jobs available.

But there are a massive number of underemployed and unemployed recent law graduates who will be competing with future graduates for precisely the same jobs. Take your 2012 and 2013 numbers. There are some 20,000 excess law graduates who did not find FT/LT employment upon graduation. What will the impact of this cohort (and those that follow) be on the employment prospects for the new graduates in the 2014-2017 period?

Second, the analysis ignores the issue of cost. It states that “potential law school applicants may remain reluctant to make the commitment of time and money that law school requires because the "good news" message regarding future employment prospects for law graduates may fail to gain traction.” But dismal employment prospects are only part of the reason why large numbers of potential law school applicants are ceasing to apply.

The other reason is because the cost has surged all out of proportion to the expected return. To take one example: the University of St. Thomas School of Law. Leichter’s data indicates that tuition there increased from $24,842 in 2004-5 to $36,022 in 2010-11, an increase of 45%, or 25.62% over the cost in inflation. http://lawschooltuitionbubble.wordpress.com/2011/01/22/the-law-school-tuition-bubble-data-tuition-increases-law-school-by-law-school-from-2005-to-2011/#MN
[Total cost of attendance, however, can run around $200,000, according to the school’s own estimates.]

Naturally, this is simply one example of many (and far from the most extreme – UST deserves some praise for actually implementing a tuition freeze). Ultimately, the “good news” will only start to reach students when the cost of most law schools readjusts (through a combination of market pressures and perhaps at some point, federal student loan reform) at a much, much lower level than now. Tulsa’s decision to slash effective tuition in half (to $18,000/year) is a sign of which way the wind is blowing. Other schools will follow. That will force a vastly larger readjustment of the existing structure of American legal education than many law professors currently realize.

But it will happen.

Posted by: Disagree | Mar 2, 2014 7:33:56 AM

A third criticism to supplement Disagree's analysis.

The post assumes that the bar passage rate will be constant and 83%. The data reveal that classes, in the last 2 years, have gotten both smaller and more stupid (er, I mean less competitive). At the same time, some bar exams have become more difficult (eg Michigan). I think 83 percent in 3 years is too high. Try 73 percent in 3 years.

Posted by: Jojo | Mar 3, 2014 12:31:46 PM

With respect to Disagree’s first point, I tried to address the overhang issue in the blog posting. This is something about which we may have to agree to disagree. I assume Disagree’s point is that I am wrong to assume 26,000 full-time, long-term Bar Passage Required jobs will be available to new graduates each year given that some jobs may be taken by the 20,000 graduates from the previous year who didn't find such jobs. First, I don't think the overhang for full-time, long-term "Bar Passage Required" jobs is 20,000 in a given year, because not all graduates are eligible for Bar Passage Required jobs. If we assume all graduates took a bar exam and assume an 83% first-time bar passage rate, there likely would have been a maximum of 36,502 eligible for such positions in 2011 (83% of 43979 graduates)(with 24,149 finding such positions). That means that in 2011 there might have been a maximum of 12,400 graduates who were eligible for Bar Passage Required jobs and did not get full-time, long-term Bar Passage Required jobs within nine months after graduation. But this is where we are constrained by information limitations. We know that perhaps as many as 12,400 graduates from 2011 who were eligible for Bar Passage Required positions may not have found full-time, long-term Bar Passage Required positions within nine months after graduation, but we have no idea how many might have found such positions in the ensuing nine to twelve months (although Ben Barros' data regarding Widener graduates suggests some likely did find such jobs). So I don't think it is accurate to suggest that the overhang from one year is 20,000 for Bar Passage Required jobs. In any event, if Disagree’s overhang theory is correct, the "overhang" from 2009, 2010 and 2011, should have depressed the number of opportunities available to the 2012 graduates, and yet we know 1900 more 2012 graduates found full-time, long-term Bar Passage Required jobs as compared with 2011 graduates (26,066 as compared with 24,149). My point is, I think the 26,000 full-time, long-term Bar Passage Required jobs number -- which is from 2012 -- already accounts for competition for jobs from the "overhang" such that it is reasonable, if not conservative, to make the assumption that 26,000 full-time, long-term Bar Passage Required jobs will be available to graduates in 2014 through 2017.
With respect to Disagree’s second point, I agree that cost is a factor as well and have written about the increasing cost of legal education -- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2243957. But cost was not a meaningful constraint on applicants in 2009 and 2010. The falloff in applicants in 2011-2013 was largely a response to the growing awareness of a very challenged job market. Bernie Burk wrote about this on The Faculty Lounge in November 2012 -- http://www.thefacultylounge.org/2012/11/what-matters-most-in-legal-ed-these-days.html -- noting that What Matters Most is the lack of jobs. In my analysis of demographic changes last fall on The Legal Whiteboard, http://lawprofessors.typepad.com/legalwhiteboard/2013/11/understanding-trends-in-demographics-of-law-students-part-three.html, I noted that the decline in applicants was largest among those with high LSATs (for whom cost is less of an issue due to scholarship availability), and smaller among those with low LSATs (for whom full tuition is the norm). This suggests price sensitivity is not the only thing going on here. As you note, tuition costs are being constrained as schools like the University of St. Thomas and others have instituted tuition freezes or have cut tuition (thanks for acknowledging that) and as others have expanded scholarship programs. While I agree that costs are a factor in perhaps dissuading some prospective applicants from applying to law school, I believe the employment situation has been a more significant concern. But your point is well taken. Potential applicants to law school are engaged in a risk/reward calculus. Applicant numbers likely will flatten and perhaps start to rebound only when the rewards seem to be increasing (greater percentage of graduates obtaining full-time, long-term Bar Passage Required jobs) and when the risks seem to be decreasing (net tuition going down).
With respect to JoJo’s observation, I think JoJo may be correct that my bar passage estimate is too high. But that means there will be even fewer people eligible for Bar Passage Required jobs then I estimate.

Posted by: Jerry | Mar 3, 2014 12:51:40 PM

Jerry,

Assuming all that's true, that does not mean the "employment market for law graduates" will be improving. All it means is that it will remain stable, and there will be less competition for the constant pie. There's a big difference there.

Also, to the extent that this will be read (or is intended to be read) as a "never been a better time to enroll" post, to ignore the fact that student quality means that fewer will pass the bar ignores the fact that the cannon fodder are people who will be borrowing a ton of money and who will still end up without a FT, LT job as a lawyer.

Posted by: Jojo | Mar 3, 2014 2:17:51 PM

Jerry: "But this is where we are constrained by information limitations. We know that perhaps as many as 12,400 graduates from 2011 who were eligible for Bar Passage Required positions may not have found full-time, long-term Bar Passage Required positions within nine months after graduation, but we have no idea how many might have found such positions in the ensuing nine to twelve months (although Ben Barros' data regarding Widener graduates suggests some likely did find such jobs)."

At this point, deniers are pointing at data quite deliberately not collected by law schools (or the ABA) to assert that things are going better. We do know that for most law schools, the 'cream of the crop', those who got JD jobs right away, for the most part got jobs which pay far too little to justify the debt. Presumably, the people in the 'remnant bin' got jobs which were worse (pay, security, prospect).

Note that the crisis has been apparent to anybody willing to honestly look for pushing five years now; how many schools have started seeking data beyond the minimum requirements?

Posted by: Barry | Mar 26, 2014 3:39:43 AM

jojo: "The post assumes that the bar passage rate will be constant and 83%. The data reveal that classes, in the last 2 years, have gotten both smaller and more stupid (er, I mean less competitive). At the same time, some bar exams have become more difficult (eg Michigan). I think 83 percent in 3 years is too high. Try 73 percent in 3 years."

It wouldn't surprise me, but:

1) It implies that a number of schools are quite deliberately seeking and accepting students who have miserable chances of even legally qualifying for the jobs for which the schools allegedly train them.

2) The job prospect:cost ratio remains extremely low for these people, even given substantial tuition cuts.

3) The other students at those schools will now bear a burden of graduating from a school which clearly regards itself as a 'diploma mill'.

Posted by: Barry | Mar 26, 2014 3:42:05 AM

Adding on to jojo - there will be a higher failure rate to pass the bar, due to *deliberate* lowering of standards for the purpose of financial gain. I'd call this unethical.

Posted by: Barry | Mar 27, 2014 11:00:49 AM

Jerry: "I noted that the decline in applicants was largest among those with high LSATs (for whom cost is less of an issue due to scholarship availability), and smaller among those with low LSATs (for whom full tuition is the norm). This suggests price sensitivity is not the only thing going on here. "

Or, the students with the higher LSAT's tend to have a whole host of socieconomic advantages, which (a) gives them a better idea of the cost-benefit tradeoffs, and (b) better alternatives.

I'll gladly wager $100 that the students with low LSAT's going into tier 3 and 4 schools are far less informed of their prospects than the high-scoring students going into the top 20 schools.

Posted by: Barry | Mar 27, 2014 11:02:52 AM

Post a comment