How the Economy Has Created a Crisis in Legal Education

In the good old days (circa 2000), when the economy slipped into even a near-recession, let alone a full-blown one, law school applications soared.  The thinking was that if you couldn’t get a job in the business world, you could certainly find one with a law degree.  Thus college graduates would turn away from MBAs and other normally popular graduate degrees and flock to law schools in times of economic strife.

So, with the deep recession that hit in 2008 and with the continuing economic stagnation that has become the norm since, you’d think that law school applications would be up.  Think again.

Legal education is in crisis, and no law school is immune from it.  Here’s why:

When the economy crashed in ’08, big businesses took a big hit.  As it became apparent that the depth of the crash was profound and that getting out of it would be anything but a quick fix, corporate boards began to  look at ways to cut costs.  The spike in unemployment was the first result, as layoffs for “non-essential” employees rose dramatically.  But for most businesses the savings that resulted were not enough to keep companies afloat (or to keep profits at levels that kept shareholders happy).  So, other cost-saving measures were considered, and one that became readily apparent was the legal fees paid regularly to many of the nation’s biggest law firms.

In many instances, those fees were in the form of monthly retainers paid to firms just to keep them “in the loop” on corporate issues.  Most CEOs considered those retainers money well spent, assuming that having legal counsel available at all times was good business (keeping the corporation out of possible legal binds in decisions that management made).  Many of the nation’s largest law firms banked on those retainers almost as much, if not more, than the litigation they would be hired to defend or prosecute for business clients.

A second part of the plan many businesses adopted was to reduce the amount of litigation they engaged in.  Litigation is costly.  The bigger the case, the costlier it is.  Thus, many businesses began to seek non-litigious resolutions to disputes that in the past would have ended up in court battles.  Again, the result of this cost-saving approach was to reduce the need for and expense of law firms.

But law firms are also businesses.  The bigger ones are big businesses.  And when the demand for their services diminished, so did their revenues.  As a result, they also looked to ways to save money, to cut costs.  And one way to do so was to reduce the annual hiring frenzies that would result in hefty six-figure entering salaries for top graduates from the country’s top law schools.

In fact, this adjustment by the big law firms in the country took a very short time to effectuate.  By 2010, many firms were putting the hires of third-year law students they had made in 2009 on hold, and new hiring beyond those promised jobs often stopped entirely.  While most big firms are still hiring, they are doing so in much smaller numbers than they had before this adjustment set in.  And without those high-paying Big-Law jobs available, top law school graduates began to look for good paying jobs in smaller firms and in government positions.

But at the same time that big business was cutting way down on its need for lawyers, government agencies and those smaller firms, also because of reduced revenues (remember government spending was also cut to try to balance state and municipal budgets), also needed to find ways to save money.  And, again, in many instances, lawyers were deemed expendable.  Thus, many potential jobs for law school graduates have disappeared (or been far more scarce) across the board in the last four years.

Word travels fast, especially, it appears, in bad economic times.  And so, as readily-available jobs for new attorneys dried up, so did the interest many undergraduates had in a career in the law.  As a result, law school applications began to drop as recently as three years ago.  But a second factor has caused them to drop far more significantly.

That fact is the confluence of the rising cost of a legal education and the bad press that the traditional law school model has been getting.  As to the first of those points, the facts are irrefutable.  Law school is expensive.  Average tuition alone now runs around $40,000 a year even at many second tier ABA law schools.  (Top tier schools, the ones that used to provide the tickets to those nice $150,000 starting salaries, are closer to $50,000 a year.)  That means that many graduates are looking at indebtedness of anywhere from $150,000 to $200,000 when they graduate (not counting whatever debt they graduated from college with).

It’s one thing to have sizable debt if your income can handle it; it’s quite another if you aren’t even sure you’ll be getting a decent paying job after you get your license to practice.

The bad press for legal education has primarily been focused on the alleged worthlessness of the degree awarded at the end of the three years of study.  The traditional law school model, consisting of the Socratic Method and the reading of innumerable appellate court opinions, has been criticized as failing to prepare students for practical work in the law.  In this regard, the old joke about the law school valedictorian from a top law school, who, on graduating, had never seen the inside of a courtroom or drafted a contract, is not far from the truth.

To their credit, many law schools are scrambling to deal with this perceived deficit, offering innumerable clinical courses and providing varied experiential sessions in their basic courses.  And, pushed by organizations like the American Bar Association and top law firms, that old joke may not ring so true for students graduating even as soon as this year.

But the bloom is decidedly off the rose.  This year, law school applications are down nationally by 40%, and the farther down on the U.S. News rankings a law school is, the weaker its applicant pool tends to look.

Some law schools are destined not to survive this crisis.  Others will get much smaller than they have been.  Many will reduce senior staff and tenured faculty positions and move to using adjunct faculties and lower-paying support staff.

The irony is that those students who do attend these law schools, because of all the changes being made in their curriculums and teaching methods,  will probably end up getting better educations and being better prepared to practice law, albeit they still may not find jobs that provide them with enough income to support the debt service they will incur in getting their degrees.

The greater irony is that although paying jobs for new attorneys are scarce, the need for attorneys throughout our society is probably greater than it has even been.  But that’s another story for another day.