Epilogue 5: recessionaires.

Wow, how about that job market?

Friends and colleagues are bravely soldiering onward but this is a truly inhospitable time to be a lawyer. To those who are considering law school, currently there, or recently out:

You can safely discount the advice experienced lawyers may offer you about the current job market. They’ve never seen anything like it and they’re not affected by it the way you are. Historically, the legal profession has been considered relatively recession-proof. Not so this time.

My prediction (and I will be happy if I turn out to be wrong) is that the legal job market is looking at a lengthy and painful retrenchment that will last beyond the end of the recession at large.

The basic issue is that the supply of attorneys is outstripping demand. Four contributors to that problem:

First: law schools are expanding the labor supply in a market that doesn’t need it. For the last 10 or so years, law schools have been churning out an increasing number of lawyers in response to student demand, not labor market demand. The legal profession has grown to accommodate some of them, but not all.

Even before this current recession started, stories were percolating about new lawyers abandoning the field because entry positions were too competitive and salaries too low.

Now, we’re having a major retraction in the legal job market, making it even more like a game of musical chairs than before: there just aren’t enough jobs for every lawyer who wants one.

Meanwhile, law schools are pumping new lawyers into the labor market at the same rate as before. I didn’t take economics in college but I believe this is called a problem of highly inelastic supply—we keep getting new lawyers whether anyone wants them or not. The necessary result will be higher unemployment among lawyers and lower wages for those who get jobs.

Second: law firms can’t absorb the oversupply. The big law firms who have historically provided a lot of the entry-level positions have done so by hiring years ahead of their needs. Many recent associates have had their starting date deferred by months. Other firms are offering new associates incentives to defer a year or more.

So even after the economy at large turns around and business picks up again for these firms, they’ll still be working to absorb their own oversupply.

Not to mention, big firms could also historically rely on large turnover to create spaces for new attorneys. But turnover rates depend on the availability of other options. So if 3rd and 4th year associates aren’t getting called by headhunters, they’re not leaving their firm jobs. And if they’re not leaving, that’s a seat that’s not available for a new attorney.

Finally, firms have boxed themselves in to an inefficient cost structure by offering huge starting salaries to associates. That will also hamper their ability to create positions for new attorneys because they’re struggling to pay the ones they’ve already got.

Third: government can’t absorb the oversupply. Government employs a lot of lawyers. For instance, the Los Angeles District Attorney’s office employs over 1000 lawyers. That’s comparable to some of the biggest private firms in America.

But the pace of government hiring has slowed dramatically because of a) budget cuts and b) lower turnover.

Fourth: older lawyers are staying in the labor pool. Not a lot has been said about this issue but it seems inevitable that it will have an influence.

Retirement portfolios have been demolished in this bear market. People who thought they were near retirement are putting off their retirement plans. And people who are actually retired are going back to work to supplement their income.

This is true across the labor force; why won’t it also be true for lawyers? Lawyers who would have exited the labor force in better times will now stay in. The labor pool just got larger still.

Perhaps this all sounds a little gloomy and grim. In one sense it is, but a young lawyer will do themselves more of a disservice to ignore reality. In the long term, everything will be fine. In the short term, it’s apt to be tough sledding.

So what do you do when the sledding is tough? A few suggestions.

1) If you’re thinking about going to law school, think harder. Many prospective law students have imagined that a law degree is an insurance policy—“at worst, I can always get work as a lawyer”. That may have been true in the past, but it ain’t true now. The labor market is competitive and will stay competitive for a while to come. The natural result will be fewer jobs and lower pay.

“Oh, but a law degree is a worthwhile credential in any field.” No. Non-legal employers are not going to pay you a premium for your law degree. It’s not economically rational to spend three years and $100K on a law degree so you can get the same job you could’ve gotten without it.

2) If you’re in law school, be creative and open-minded about your employment options. There are a lot of legal jobs that are not in big firms, though law students gravitate toward the firm jobs because they’re the lowest-hanging fruit. As that fruit gets picked clean, students will have to look elsewhere. Start the process while you’re still in school. Seek out lawyers and firms who need help but who aren’t at OCIP. Cultivate those relationships. It’s going to be a lot harder to do once you’re out of school, you’re paying rent, and you have to start making loan payments.

3) If you’re recently out of school and looking for a job, differentiate yourself. There’s more competition now in the labor market. And the essence of competition is differentiation. If your pitch to prospective employers is “I got good grades and I don’t drool on my shoes”, that’s not going to cut it. Neither is “I really want this job because you have a job available and I really need a job”, which is what most cover letters boil down to.

Your challenge is to stand out in this crowd. I’m not talking about printing your resume on purple metallic paper. I’m talking about showing a prospective employer why they should hire you and not the next guy or gal. Give them a substantive reason why you are really more qualified, or more interested, or likely to be a better bet. Yes, you are a special unique snowflake, but nobody’s going to notice in a stack of 200 resumes unless you clearly bring it to their attention.

Good luck everyone.

8/26 UPDATE: A story in today’s New York Times echoes many of these points. You heard it here first, folks. One current student says he saw law school as a “green pasture of stability, a more comfortable life ... It was almost written in stone that you’ll end up in a law firm, almost like a birthright.” Tip for my readers: Don’t be this guy.

9/25 UPDATE: An admirably candid concurrence from the chairman of gigantic law firm K&L Gates:

In addition to layoffs, law firms have dramatically cut their hiring of law school graduates. Do you think many college graduates today should think twice before they head off to law school?

Yes. The business model of the U.S. law school doesn’t quite make sense to me. Law schools will bring you in from college and educate you, but they will encumber you with six-figure indebtedness at a tender age.

The assumption was that there was no problem, because law firms like K&L Gates would pay that off for you. And that is where the wheels are falling off.

I’ve heard that law school applications are actually increasing. We will be pouring tens of thousands of young people into a market that I suspect is not going to be able to absorb them at the remuneration levels that would have justified them taking on that debt.

/p>

1/17 UPDATE: Big story in today’s NY Times. The Great Recession may be over, but the Great Legal Hiring Freeze-out will continue.

03 Jul 09

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matthewb @ ucla
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