We lack the experience and vocabulary to describe what is happening in the entry-level legal job market.
- Overall employment: 88.6%, up from 87.5% in 2016.
- Bar passage req’d jobs: 71.8%, up from 67.7%
- Private practice jobs: 54.4%, up 1.5%
- Median salary: $70,000, up $5,000
- Law firm median: $117,000, up $13,000
- Hiring in 500+ lawyer firms: 4,606, up 368 jobs
These favorable statistics account for the press release headline “Class of 2017 Notched Best Employment Outcomes Since Recession.” Similar headlines followed in the legal press. See, e.g., “Median salaries for new law grads jump to $70K as BigLaw boosts hiring of newbie lawyers,” ABA Journal, Aug. 2, 2018; “Job Market for Law Grads ‘Surprisingly Strong,’ NALP Finds,” Law.com, Aug. 1, 2018; “Law grad salaries rise as big firms up their hiring,” Nat’l Jurist, Aug 3, 2018.
A simple, positive story, right? The NALP materials contain other other facts, figures, and observations that reveal a much more complex market. However, they can’t be reduced to pithy takeaways that are both accurate and helpful. To truly understand these data, we have to invest quite a bit of additional time and effort.
The four charts below are designed to partially bridge this gap. (Charts can be downloaded on Slideshare.)
Chart 1. Jobs in private practice continue to decline
Drawing upon the NALP press release and select findings, the news reports cited above all emphasize the increase in BigLaw hiring. In Chart 1, the supporting data are inside the orange circle.
Yet, when the Class of 2017 is viewed in a longitudinal context, the most striking feature is the continued decline in the total number of private practice jobs. Granted, jobs are down, at least in part, because the supply of entry-level talent is down. Some employers hire more when talent is plentiful and cheap. However, it is not accurate to say that law firm hiring has rebounded from the recession. The recession was 10 years ago, yet the number of private practice jobs is lower now than at any time since the beginning of the recession.
Those of us in legal education need to understand why this is happening. See Post 057 (solving difficult problems require accurate understanding of root causes).
Chart 2. “Good news” is produced by fewer grads
As shown in Chart 2, over the last seven years, law school has become a lot less attractive to prospective law students. The class of 2017 had 34,922 graduates, which is the lowest level since 1982.
The higher employment rates for the Class of 2017 are due to smaller classes rather than an increase in the total number of jobs. The complexity of this job market can be seen in the first paragraph of the Commentary and Analysis written by NALP’s executive director, Jim Leipold:
[Good news:] The employment outcomes findings for members of the Class of 2017 are surprisingly strong. Most notable is a bar passage required employment rate that jumped more than four percentage points from the previous year, and a private practice employment rate that has now increased for six years in a row. [Complexity:] Undergirding the strength of the employment outcomes, however, is a smaller class and not more jobs. For the fourth year in a row the employment rate has been shaped by a smaller number of jobs and a smaller graduating class size. The employment rate has risen because the falloff in the size of the graduating class has been larger than the falloff in the number of jobs secured. Notably, like the two classes that preceded it, this class secured fewer private practice jobs than any class since 1996.
This is important information, but what exactly are we supposed to do with it? It’s great that a higher proportion of students are getting better employment outcomes. But does the continued slide in law firm jobs require some type of collective action or response? If so, who would make this call and what would they advise? Unfortunately, we have no ready answers. This is our conundrum. Cf. Post 056 (discussing likelihood that law is entering a period when we will need lawyer-leaders to handle very difficult organizational and industry-wide problems).
Based on fall enrollments in 2015-17, we can forecast with reasonable accuracy the graduating classes in 2018-2020. All of them are likely to be smaller than 2017. Thus, in terms of employment rates, we can expect three more years of “good news.” We should use that time wisely.
Chart 3. Relationship between law school debt and lawyer salaries
Chart 3 shows the relationship between law school debt and starting salaries, which are useful proxies for cost and perceptions of future earning potential. Since 2010, average student debt has rapidly outpaced entry-level salaries. This divergence is the simplest explanation for the massive drop-off in law school enrollment.
Fortunately, we are finally at a point where debt loads are headed downward while median salaries are tilting upward. The remaining gap, however, remains very large compared to the early to mid-2000s. Until these lines are brought closer together, those of us in legal education are going to struggle to grow our enrollment. This is very hard work, as it requires increasing the value of legal education — in the eyes of students and employers — without increasing our base costs. In short, this is a design problem. A good number of law faculty understand this; hence the growing emphasis on innovation. See, e.g., Law School Innovation Index.
Chart 4. BigLaw will not save us
One of the NALP findings latched onto by the legal press was the increase in hiring among 500+ lawyer firms — up 368 jobs, or 8.6% from the prior year. However, the data in Chart 4 suggest that BigLaw is unlikely to power a recovery for law schools. Although the number of lawyers working in 500+ lawyer firms has increased significantly over the last 11 years (+36%), associates appear to be waning in importance. We see this through the shrinking proportion new-hires within large law firms. Why is this happening?
A partial answer is that firms are finding it harder to sustain organic growth. See, e.g., Georgetown Law, “2018 Report on the State of the Legal Market” at 14 (“Since 2008, the overall growth trend for demand for law firm services has (with certain spikes and dips) been essentially flat to negative in every year.”); MacEwen, “It’s [not] The Economy. Stupid,” Adam Smith Esq., Aug. 5, 2018 (showing large drop-off in annual revenue growth after 2008). Because many lawyers and firm managers associate size with safety, growth through mergers and lateral partner hiring has become a dominant strategy. The idea is to focus on groups of lawyers who can pay their own way in the current fiscal year.
One of the primary consequences of this strategy is that firms are relying less on associates and more on staff attorneys, counsel, and non-equity partners. See Henderson & Parker, “The Diamond Law Firm: A New Model or the Pyramid Unraveling?,” Lawyer Metrics Industry Report No. 1 (2013). First-year associates require higher salaries; more training and supervision; engender greater client pushback; and often leave before the firm recovers recruitment costs. Thus, large firms are finding ways to get by with fewer of them.
The orange trendline in Chart 4 also reveals another factor that is likely impacting entry-level hiring in the 500+ lawyer category: the number of 500+ lawyer firms is increasing. In 2010, there were 76 firms with 500+ lawyers. By 2016, the number increased to 87. A year later, it jumped to 91. Indeed, in 2007, 65.5% of the lawyers in the AmLaw 200 worked in 500+ lawyer firms; by 2017, this percentage increased to 75.5%.
Are the largest firms hiring more entry-level lawyers? Or are the mega-firms just taking up a larger share of the total corporate market? The latter trend would explain why entry-level hiring in 500+ lawyer firms is up while the total number of private practice jobs is at a 22-year low.
For many of us working in the legal field, we treat the NALP data as something we passively consume. Every year we do so without much thought or effort. This is a conditioned response based on several decades of uninterrupted prosperity. In our experience, things have always worked out, so we can count on that pattern to continue.
Yet, the practice of law is changing in very significant ways, primarily because clients are changing how they buy legal services. There will be no shortage of opportunities for lawyers, legal educators, and recent law grads who get out into the field and obtain insight into what these clients really need. Those insights will tell us what to do.
(Charts can be downloaded on Slideshare.)