Will The Lawyer Surplus Be Good News For Consumers?

As discussed in this New York Times article by Catherine Rampell, survey data show that in every state except Wisconsin and Nebraska (plus D.C.) more lawyers are passing the bar exam each year than there are "annual job openings" for lawyers in those states. In many states, the  lawyer surpluses are large (click on the chart to enlarge):

There's at least a couple things screwy here. First, the D.C. statistics tell us nothing. Few people take (and pass) the D.C. bar because it makes more sense to be barred somewhere else and then waive into D.C. (in light of D.C.'s very liberal rule on waiving in). So, the number of jobs in D.C. will always exceed the number of people who pass the D.C. bar exam regardless of the health of the legal job market in D.C. This same phenomenon may screw up the stats in other states as well.

Second, what does the survey mean by "annual job openings" for lawyers? Does it mean jobs at private law firms and goverment? What about jobs for lawyers in businesses? Does the survey include "openings" for lawyers who pass the bar and go into law practice for themselves? The system of law school accreditation, law schools' decisions to limit the size of their classes, and the requirement that lawyers pass a bar exam before being licensed to practice law -- all of which are signifcant anti-free-market barriers to entry -- artificially keep the supply of lawyers lower than it would otherwise be. So, why is there a surplus of lawyers at all? Shouldn't there be a shortage of lawyers?

In any event, if there is a substantial surplus, that's bad news for law graduates saddled with large debts who cannot find jobs. But it may be good news for consumers who should be able to hire lawyers at lower prices. Are legal fees declining?

Comments

[Mold Removal In Toronto]

The good news is that by following Marc's five-step plan you can outrun the werewolf, pull a ... in the minds of consumers.

[Bankruptcy San Diego]

As a bankruptcy lawyer in San Diego I can definitely tell you that the flood of new attorneys starting their own bankruptcy practice is causing bankruptcy attorneys fees to go down. Novice attorneys, who sometimes don't know what they are getting themselves into or even what they are doing, are charging ridiculously low rates, which has the impact of forcing the more experienced lawyers to at least partially bring their rates down to close the gap created by the unreasonably (and often miscalculated) low rates.

[Lawschooltuitionbubble.wordpress.com]

And for some reason my links were excluded:
http://lawschooltuitionbubble.wordpress.com/original-research-updated/law-graduate-overproduction/
http://www.bls.gov/oco/ocos053.htm
ftp://ftp.bls.gov/pub/special.requests/ep/ind-occ.matrix/occ_pdf/occ_23-1011.pdf

[Lawschooltuitionbubble.wordpress.com]

Brian, to answer your questions.

(1) You're right about bar passage rates being a poor measure of attorney oversupply, and many critics, myself included, quickly pointed out that Wisconsin's alleged shortage is due to its law schools' graduates' ability to obtain a Wisconsin license without taking a bar exam. The ESMI should have just compared graduates to job openings instead. Fortunately for them, I already did that three months ago using BLS and state government data.

(2) The BLS in its Occupational Outlook Handbook calculates the growth and replacement rates for specific occupations including lawyers. It does include self-employed lawyers. Here's the BLS's in various industries between 2008 and 2018. State governments, including D.C. and Puerto Rico but excluding South Dakota, calculate the same numbers. I can't speak for EMSI, but the government assumes full employment in the target year 2018. What surprised me is that EMSI's projections are more charitable than mine: it found more than 260,000 lawyer job openings via growth and replacement over the next 10 years while the BLS calculates 240,400 and state governments 197,400.

The reason there isn't a shortage of attorneys is that the ABA law schools have been over-enrolled for decades. Simply because there are barriers to entry doesn't entail a shortage, hence my blog's title. The barriers restrict the total number of graduates relative to applicants (though this year is projected to be an all-time low), but those barriers have no bearing on whether there are job openings for them when they graduate. This is because law schools take on none of the financial risk created by the legal sector's volatility.

As for prices, the only thing I can say to that is that BEA legal sector deflator data show that the price of legal services has been increasing faster than inflation for a few decades, so I suspect prices are going to drop.