Gatekeeping and the Economic Value of a Law Degree (Part 1)

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7 Responses

  1. Derek Tokaz says:

    Two important gatekeepers you didn’t mention are clients and firms. Law schools, the ABA, and bar associations are gatekeepers to obtaining a license to legally practice law. Clients get to decide if you’re actually going to practice law.

    A lot of people have pointed out that the current legal market has created a paradox; there are thousands of unemployed and under-employed law school graduates, and an underserved middle class. One explanation is that it doesn’t make sense for a fresh law grad to give up a steady paycheck at Starbucks (and health insurance) just to take one or two small matters and then face total unemployment after. There’s a minimum threshold of clients you need for hanging up a shingle to make sense. But, there’s another explanation from the client’s side.

    From the client’s perspective, hiring a lawyer does not automatically create value. Being licensed to practice law doesn’t give the lawyer some magical power to bless a document. What adds value for a client is the lawyer’s knowledge, skills, and experience, and the fresh graduate is lacking in these areas. Even if the fresh grad is offering some bottom of the barrel rate, say $20/hr, the client could reasonably decide that the costs outweigh the benefits.

    This seems especially likely to be the case when you consider how much better educated the population at large is, and the vast amount of free or low-cost resources that are available for the middle class potential-client who wants to go the DIY route. The client probably also understands the long-term benefits of going the DIY route. If you take the time to learn how to write a will yourself, then you don’t need to hire a lawyer a second time when you change it five years down the road.

    Then there’s the firms (and I don’t just mean big firms, but firms of any size). Firms are the major source of the knowledge, skills, and experience that lawyers need acquire to be useful to clients. The law schools get to decide how many JDs are put on to the market, the state bars decide how many get licensed, but the firms get to decide (more or less) how many become skilled lawyers.

    I know many professors have talked about how increasing regulation (and its increasing complexity) will mean more demand for lawyers in the coming years, but you have to consider who exactly is more in demand. If the law becomes more complex, that means it’s harder for a fresh grad to be useful to a firm. Maybe before it took 1 year of on-the-job training to be somewhat competent, but if the changing nature of the law means it takes 2 or 3 years, fewer firms will want to pick up the cost of training the next generation. In the short term, it makes much more sense to give extra work to your mid and senior associates and just pay them larger bonuses. And, with how firms try to use PPP to lure rainmaking partners, the short term benefits can easily win over long term stability.

    So, if on one end the law is becoming too complex for young lawyers to be useful, and on the other end it’s simple enough for clients to handle it themselves, we could be looking at a very important structural shift.

    PS: Does anyone have any data on the underserved middle class? Whenever I hear about it, it’s always just assumed to exist.

  2. Couldn’t current law degree holders could work to insulate themselves from exogenous forces without extending that insulation to would-be lawyers? The more interesting question to me isn’t whether the law degree’s value is stable, but what factors are causing the value to fluctuate (or not). Looking forward to Part 2’s discussion of the gatekeepers’ measures and how they’ve affected would-be lawyers in recent history. Especially curious about how those past measures have led to structural shifts in access to the practice of law, i.e., law school.

  3. @Derek Tokaz: I also thought it odd that Prof. Sheppard didn’t mention clients & firms, but took the “etc.” at the end of his short list to mean he would be adding to the list in Part 2.

    P.S.: Does anyone have any reading recommendations re: websites like LegalZoom or LawDingo?

  4. cas127 says:

    To me, that admitted *40%* JD-but-not-practicing-lawyer figure is the forest-lost-for-the-trees part of the whole subsequent rather-in-the-weeds analysis (pro and con S/M).

    Can somebody point me in the direction of a detailed analysis of this 40%?

    What specific careers do they end up in that still manage to generate a premia? At what median salaries by job?

  5. Barry says:

    Derez: “From the client’s perspective, hiring a lawyer does not automatically create value. Being licensed to practice law doesn’t give the lawyer some magical power to bless a document. What adds value for a client is the lawyer’s knowledge, skills, and experience, and the fresh graduate is lacking in these areas. Even if the fresh grad is offering some bottom of the barrel rate, say $20/hr, the client could reasonably decide that the costs outweigh the benefits. ”

    This is very important:

    1) You can’t practice law as a part-time job, unless your other job is one you can postpone with no notice because you got a client have to be in court at 8AM the next morning (and then will have to schedule days in court).

    2) An inexperienced, unconnected lawyer is very dangerous; you might pay a steep price for his/her learning curve, whether it’s a criminal case, civil suit, contract or will.

  6. Barry says:

    “What specific careers do they end up in that still manage to generate a premia? At what median salaries by job?”

    Law schools work very hard to be ignorant of these people.

    As for the premium, imagine that you’ve spent three years (and the price of a house) on a professional degree, once which people reasonably assume would lead to a job ***in that field***. After one, two, three, four or five years either scrounging for odd jobs or trying to make a run of the legal profession, you look for a ‘real job’ outside of it.

    Imagine the handicaps you’d be under – after all, you took serious professional training, and couldn’t get a job/a real job in that field. If people don’t know better (and they don’t), you’d look like a failure. That would lock you out of many positions, and you’d be trying to get these jobs at age thirty or older.

  7. cas127 says:

    Barry,

    I agree entirely.

    But a brief skimming of the S/M paper (I haven’t read the whole thing yet) suggests that they dispose of the fate of *40%* of the profession (that part *not actually *in* the profession…) with a footnote and non-granular waving in the direction of the SIPP data.

    Where can the detailed SIPP records be found? Have S/M made a data set available?

    It shouldn’t be too hard to generate a table detailing the end careers of the non-lawyer 40% of JDs (with median salaries).

    Have S/M generated such a table or just published the aggregated (and therefore impossible to analyze) median for *all* JDs?

    I think the latter (perhaps I am mistaken – anybody have a cite/URL?) and I am *very* dubious as a result.

    It is very hard to see 600,000 JDs as CEOs and hedge fund managers…