Associates v. Staff Attorneys, and Another Example of Thomas Cooley Reasoning

Crain's Detroit has an interesting article about the trend in large firms to move associate positions to lower-paid staff attorneys (and, occasionally, to move work from staff attorneys to partner-track employees). It gives a nice overview of the differences between the two, why firms prefer one or the other, why they switch, etc. It's fair, even-handed, and informative, probably because it was written from the business side and not by some hack academic.

But at the end of the article sits this odd remark from Thomas Cooley dean John Nussbaumer:

[R]ecent graduates are under increasing pressure to consider alternatives to partner tracks if they want to enter private practice. But he is convinced that trend is cyclical and the tide will turn again soon.

Keeping in mind that about 10,000 Americans will turn 65 every day for the next 19 years, he said: "That group includes the majority of current equity partners. The median age of attorneys today is 52 years old," he said.

"So while the short term is rough, we think the long-term picture is those people retire in increasing numbers. And they won't be retiring from second-tier or career associate positions."

Yeesh.

Is there a written rule that partners are replaced on a one-to-one basis? No. There's no preordained ratio of partners-to-proletarians in the legal community. Sure, when partners leave the profession, their clients have to go somewhere, and so there's a pool of available business that younger attorneys may take.

But recent large-firm behavior suggests the big boys aren't too worried about a leadership/partner-class drain, and are perfectly fine consolidating the ranks of the elite. And this leaves out the rise of non-equity partnership as an alternative way for firms to build loyalty and keep clients while consolidating the real wealth.

As an aside, to even get in those positions, one almost always has to have an associate position with the firm or build up a practice worth taking. In other words, why is a Thomas Cooley dean even thinking about these things?

Furthermore, have they even sat down to do the math on this?

Let's assume that 10,000 people will, in fact, hit 65 every day for the next 19 years. Let's further assume that the lawyers per capita rate is currently 1 per 285 and (for giggles) let's assume that the per capita number is a constant across all ages. Let's also assume (for even greater giggles) that attorneys, along with the rest of the population, will retire or die at an average age of 65.

10,000 people x 365 x 19 = roughly 69 million retiring adults. Of those 69 million, roughly 240,000 would be retiring licensed attorneys.

Currently, there are about 45,000 people graduating law school every year, with approximately 28,000 full-time jobs that require a J.D. available. In all likelihood, these available jobs fully account for work that trickles down as a result of a partner retiring, but for the sake of argument, let's say it doesn't. Let's pretend that the current number of job openings reflects only economic growth and non-partner departures and that the 65-year-olds Mr. Nussbaumer speaks of are a completely separate phenomenon.

The overage is currently about 17,000 a year. The vacancies created by retiring baby boomer partners would be 240,000/19 = roughly 12,000 a year. There'd still be an overage of 5k (>10%) per year, i.e., there'd still be an oversupply, and all its attendant problems, and there'd still be no rational reason for Thomas Cooley to exist.

And that - 95,000 extra attorneys with no place in the economy - is the best case scenario, barring drastically reduced enrollment. I imagine the attorneys-per-capita ratio may be lower for the 45-65 crowd than it is for the 25-45 crowd (I'm not sure where he's getting his 52 = median data; maybe practicing and practice-eligible?). And the number of boomer partners - few of whom will likely retire at 65 - is lower still. And all this, again, ignores the idea that the current labor market already factors in aging and departing attorneys quite well. Successful large firms aren't stupid, and they aren't just going to sit by and watch a generation retire without protecting the firm and the existing partnership, nor are they going to call up a Cooley grad and give him a share because they need a warm body in an old partner's office.

Nussbaumer does, however, exhibit a common argument by the interested educators: that it's all cyclical; that when the boomers retire, someone has to be in their place; that current graduates should all be optimistic for eventually getting their pickings off the money tree, etc.

Bull. We're already producing enough graduates to absorb boomer retirement and then some (like 25% extra). We could shut down all law schools for two whole years and still be in fine shape without any question. Likely much more, as there are a lot of non-practicing JD holders who have been shifted into other professions.

Growing Demand for Minority Lawyers?! Say What?

According to the Orlando Sentinel, Florida law schools are fretting drops in minority enrollment.

Scholars say more minorities need to study law at a time when many are pursuing careers in health sciences and business.

There's a growing demand for minority attorneys, as many members of the public seek lawyers in criminal and civil cases who look like them and can relate to them through cultural backgrounds and life experiences.

In addition, law firms want to diversify so they can better compete globally and build trial teams that can make effective cases before racially diverse juries.

I have little doubt that there's a real demand for attorneys with multicultural language skills. But the barrier there is purely communicative, and may actually inhibit access. It's not merely ethnic or racial.

It's really, really stupid to claim that there's a "growing demand" for a racial subset of a profession when the profession as a whole is producing a 40% excess every year without proof of abnormal consumer behavior.

I'll concede that people would prefer to be represented by people who look like him, and I'll also concede that given candidates with equal qualifications, firms in many areas would take a minority for diversity reasons.

But there's scant proof that either (1) minorities bypass legal services that they would purchase if they had a minority to fill their need or (2) minorities pay more for services by someone who looks like them. In other words, my casual observation is that the value of minority representation is greatly overvalued by the media and the academic elites who have no real conception of what actually happens at ground level. It's an ivory tower fantasy; in fact, in some cases, I would suppose minorities would want a white representative in court if they truly feel the court is prejudiced. And nevermind that a 40k-a-year "shit"law lawyer has more in common with most blue-collar minorities than an east coast elitist biglaw washout, but I digress...

The point is that there really isn't a "growing demand" unless a minority could theoretically open up shop and immediately siphon off business merely by being a minority who looks like his clientèle. Given the current legal climate, I just can't see that happening. No unsourced article premised on interviewing unnamed law school administrators about the unspoken wishes of a population can change that.

Sure, in an ideal world, the bar would reflect the population and people could choose among experienced lawyers of all racial and socioeconomic compositions to find the perfect person for them. In reality, we live in a world where experienced, competent attorneys happen to be disproportionately white and male. New entrants, minority or not, have an uphill battle going against that establishment, and consumers know the difference, or find out rather quickly. Minorities may find it easier to nab associate positions at bigger firms, but it's not like corporate clients are going to change firms because someone found a black guy to hire, which means there isn't any more job security for minorities than the white males. Both have to pull their weight. And let's not forget that minorities are coveted by most corporations if they have the right business credentials.

To me, telling minorities to give up business and healthcare to study law is nothing short of irresponsible. Healthcare has signs that it's a durable career of the future. Law will still be around, but it's the weakest and least versatile of the three areas. Any non-white/Asian minority who can score higher than a 160 and get into a top 50 school, I would encourage to go to law school if they wanted to be a lawyer and could find a reasonable tuition price. But no way, no how, should "weaker" parts of the applicant pool be heading to law school on the supposition that there's an untapped market out there that wants a minority face to represent them. For a kid who gets a 150 LSAT, minority or not, law is a bad idea. There's no two ways around it, and fantastical dreams of ivory tower six-figure dorks can't change that.

My opinion on this would change if the article actually bothered to have statistics that minorities were in demand in the labor market. Instead, it does nothing but spout admissions figures at Florida law schools, as if that really matters. Hopefully, no one will read the "growing demand" line and actually take it to mean "growing demand" in the economic sense.

Law in Nebraska Crowded; Creighton Downsizing Law Class

Remember when Prof. Sara Stadler pompously suggested that Emory law students pack the wagon and head for Nebraska?

Well, as it turns out, ain't no jobs there! From the Omaha-World Herald:

Current students say the competition is fierce even for summer clerkships, internships and other steppingstones to post-graduation employment.
...
[S]ome students who graduated at the top of the [U. of Nebraska] class of 2011 are still hunting.
...
Area lawyers said Omaha's legal job market hasn't been as hard hit as in other areas. Although they still make most of their hires from area law schools, law firms are getting more applications from across the country as new lawyers scramble to find jobs.
...
Omaha lawyer Hal Daub...said he would not discourage students from seeking law degrees, which he described as a versatile education that prepares students for a variety of careers.

Nonetheless, Creighton's strategy has merit, Daub said.

“For a small state, we are graduating way too many attorneys. There just haven't been the opportunities that students thought they would have four or five years ago.”

Emphasis mine. Obviously, Daub is a mouthpiece/idiot for suggesting that someone go to law school for the "versatility" of the degree, but I take him at his word that there is overproduction with a whopping two law schools in the state.

The article's main point is that amidst this atmosphere, Creigton is lowering their class size by 13-15%. As I gave hesitant applause to the New York schools who did the same thing, I salute Creigton for acting somewhat responsibly and forgoing almost $600k in revenue even as they could fill every seat.

The article goes on to state that the Universities of Iowa and Nebraska have responded to the lack of jobs by beefing up their career services staffs. I have no idea what the bleep that's going to accomplish in actually creating jobs, but I suppose it's something. Maybe they can improve contacts with non-legal employers, but frankly I'd rather see them slice down their class sizes as well.

Nebraska is a fairly insular place, as far as U.S. states go. People live by UN-L football in the fall, and I imagine the the state school's network mops the floor with anything else. Omaha has a respectable business climate, but it's big enough for the top national schools to have a serious influence.

The fact that there are top graduates from Nebraska who can't find full-time work is scary. Of all the "guaranteed" resumes, I would think finishing near the top of a state flagship where there are no other big-name options would be just below doing well at a T-14. If I were from the state, I'd rather be at the top of the class at Nebraska, Iowa, Wisconsin, Kentucky, Tennessee, etc. than be at the top of similarly-ranked private schools.

I'm also curious how this will affect Creighton's USNWR rank. In theory, it shouldn't. I mean, if you went to Creigton and ranked 60th/155 or 60th/135, what the hell is the difference to employers, or your employment prospects? You'll sit through the same class, same teachers, etc. But the LSAT and GPA medians may rise a tick or two, and the student-teacher ratio may drop. And the after-graduate employment percentages may rise. They're currently ranked 127th. Let's see what happens when a flawed ranking system encounters shaving from the bottom.

From Profession to Factory Worker: the Rise of the Contract Attorney from the WSJ

The Wall Street Journal has an interesting article today that should be mandatory reading for anyone considering law school, although it's nothing new for those already in the know. It's about contract attorney/doc review gigs and how experienced attorneys have turned to these temporary gigs to pay their bills.

This new "third tier" of the legal world illustrates the commoditization of the legal profession, which once offered most new entrants access to prestige and power, as well as a professional lifestyle. It also shows how post-recession belt-tightening is permanently altering some professions.

For 10 to 12 hours a day—and sometimes during graveyard shifts—contract attorneys such as Mr. Aponte sit silently in a big room, at rows of computer monitors. Each lawyer reads thousands of documents online and must quickly "code" every one according to its relevance in litigation or an investigation.

Supervisors discourage talking and breaks are limited. The computer systems count each lawyer's speed...

About 10% of all private practice jobs accepted by last year's law school graduates were reported as temporary, a steady increase from 5.4% in 2007...

The article notes that many of the 3rd-party companies have seen surges in their business this year from large white-shoe firms that used to actually hire more associate attorneys (or summer associates or clerks) to do much of this grunt work. The article's only mistake is thinking this is a recessionary phenomenon. It's not - doc review has been growing since before the recession.

And consider, young law aspirants, that the ever-expanding pool of unemployed attorneys will continue to drive wages down in these monotonous, soul-crushing, factory-type environments. That 40-50k cited in the article (note: that's not even worth the law school tuition price) will likely drop as a function of market dynamics. Oh, and don't forget that what they're doing is easily off-shorable, moreso than all the factories that easily packed up and abandoned the U.S. in the 70s. (for more on outsourcing, see this recent post from Brett Clark at Minnesota Lawyer).

No one in their right mind would spend three years of their life and a six-figure investment to do this type of work. Yet it was the destination for a few thousand graduates of last year's class, and will likely be the destination for even higher numbers until the the Indians can do it. And those are graduates who get to be counted as "employed."

For the [n]th Time, This is Not Recessionary

Prowling through some other non-"scamblogger" legal blogs, I continue to see (mostly older) attorneys claim that the so-called "lost" generation of law graduates, including at least the '08-'10 classes (I would claim more) is somehow purely a function of Great Recession economics.

I beg to differ.

First, I'd like to hope in the wayback machine and take you to the blog Barely Legal, a pretty decent, honest blog run by two University of Illinois students in 05-07ish and no, despite the title, it's not about teen porn or statutory rape (note: with this sentence, my number of hits just skyrocketed). Anyway, I would like to point out these posts:

June 24, 2006: Don't Believe Us? Think We're Just Cynical?, where they cite a Wall Street Journal article explaining bimodal distribution, including the fact that many JDs never find gainful legal employment.

March 26, 2007: The Plural of Andecdote is Data, where they cite the hard statistics to show that there are 670,000 JDs not working as attorneys, noting "[e]ven the national bar association is telling you to be prepared to do something else with your life."

April 2, 2007: Warning Signs, where they note the high number of law students and graduates who cannot find any type of legal employment, including free internships. "[I]f no one is letting you work for free, read the writing on the wall. Even less people will be willing to pay you to work."

The financial crisis and recession did not being in earnest until mid-to-late 2007 (recession "officially" began in December 2007). Bear Stearns did not happen until March of 2008 and Lehman and the mini-stock market crash did not being until September of that year. Despite the housing bubble issues, most financial pundits were not foreseeing the steep declines as of May 2008, and most employers did not take reactionary action until mid 2008:

As you can see, initial jobless claims in early 2007 were virtually as low as they'd been since 2001. So why were these two students at a top 30 USNWR law school - and a place which my experience tells me places fairly well in Chicago - having all kinds of feedback that law graduates and law students were having a hard time finding private sector work?

Because the recession is not the real culprit, that's why.

Which brings me to today's real topic. The NALP has released some of its numbers for the Class of 2010 at 9 months. Of 41,156 law graduates who reported data, 9.4% were completely unemployed at 9 months. 2.9% decided to go back to school. Only 44.6% of graduates are employed in private practice, which makes one wonder how the schools will manage to skew those salaries up over $100k.

But this data isn't entirely helpful in isolation. Let's assume for the time being that the legal market is more or less dependent on private practice and that government positions, clerkships, and public interest positions are a constant. I composed the following chart culling data from the NALP's "summary of finding" sheets from 2001-present:

Year	Entry-Level P.P.	Excess
2001	17976	19711
2002	18246	20330
2003	18387	20487
2004	18407	21611
2005	19458	23214
2006	20347	23573
2007	20603	22915
2008	20511	23076
2009	20149	23852
2010	18325	24997

The second column is the total number of entry-level private practice attorney jobs assumed from the numbers. As you can see, the market itself appears to be identical in size to the private practice market that existed in 2002-2004. Demand for private practice entry-level attorneys apparently did grow in the 2000s, but only at around 10% or so.

What really happened is that law schools began pumping out graduates in a far greater excess to what the moderate increase in private practice demanded. The third column in the chart is the difference between private practice positions and the total number of law school graduates. As you can see, that number increased by almost 20% during the stretch between 2001 and 2006.

Since we think of things in percentages when it comes to employment, that excess is what makes the hiring market so awful. Sure, government and public interest hiring has slowed down, but the increased demand for those positions is largely due to private practice just not having the demand for all of them. The system simply cannot absorb an increase of 500 new attorneys every single year compared to what the economy (private sector) naturally demands by its own growth. If you want to know why every major American city has a backlog, start there. Then add in that many of these hired (especially at large firms) are spit back onto the market after 3-5 years independently of any extra-legal economic conditions. Same with doc reviewers.

The grand point here is that the recession is absolutely not the main reason the legal hiring market is dismal right now. The conditions that led to this glut of entry-level attorneys was evident in the 2001-2006 span, when law schools boosted enrollment by roughly 20%.

Heck, let's assume the recession never happened. Guess what? The excess would be still be so high as to make the entry-level market difficult. It became worse between 2001 and 2006. Why would that trend have ceased?

I'm not saying that the recession has nothing to do with the job market. Obviously, if there 21000 entry-level private practice gigs instead of 18000, the market would be better. But that doesn't change the fact that the main culprit is that ABA accredited law schools started churning out an increasingly-higher excess to the needs of private practice year-over-year before the recession even started. That's the real problem.

Already, one can see that the problem of lawyer supply is unique. There are signs that the job market is improving slightly across the board. But I can tell you from the ground level, that's not really the case for the legal sector. There may be moderate numerical improvement, but if there are 50 fish fighting for a single piece of food instead of 53, it's hardly a practical gain. This is just what happens when you regularly draw in far more input than the market can bear on the other side over a long period of time.