Belly Up to the Bar

Technological capacities and socio-economic forces have been the defining vectors of history. Systemic change explains the rise and fall of nations even more than the historical figures who serve as the agents of that change. Could Western Europe have colonized the less-sophisticated indigenous peoples of the Americas without, as UCLA Professor Jared Diamond might say, “Guns, Germs and Steel”? But even on a constantly eroding basis, the micro changes in our social structures have an aggregating effect that can alter the entire value proposition of a powerful nation. I’d like to write about one small segment of that change, the need for legal representation in the United States, and how that reflects the bigger picture.

There was a time when parents would explode with pride as their son or daughter completed a juris doctor, a coveted law degree, and then passed the bar examination to practice in a particular state. Today, saddled with six figures of student loans and increasingly unable to find a job within the legal industry, a whole pile of JDs are moving back with mom. The statistics tell it all. National Association for Legal Career Professionals released a survey (of over 41 thousand 2010 law grads taken nine months after graduation) on June 1^st that noted the worst legal job market since 1996. With an unemployment rate of 12.4%, above the national average, a lot of grads could only find jobs outside of their chosen field (“Want whipped cream with that latte?”):

– Just 50.9 percent of employed graduates obtained a job in private practice, down five percentage points from 2009, 15 percent are in business, 11.5 percent are in other government, 9.3 percent are a judicial clerk, 6.7 percent are in public interest 3.7 percent went into academia and 1.3 percent are in the military.

– 68.4 percent of graduates said they took a job that required they pass the bar while 10.7 percent said a juris doctor was preferred.

– Median starting pay dropped by nearly 13 percent for all jobs and by 20 percent for law firm positions.

The bigger question is whether these changes are simply the result of the recession – in which case employment patterns will return to the higher rates if the recovery ever reaches its promised goal – or the product of underlying systemic changes in global supply and demand. While undoubtedly the recession serves at least as an accelerant and reduces the pool of clients able to afford legal services, there are strong indications that the actual demand for traditional legal services will not return to past practices. Writing for the July 1^st ABA Journal, William D. Henderson, Rache l M. Zahorsky explain: “The golden era is gone, but this is not because the law itself is becoming less relevant. Rather, the sea change reflects an urgent need for better and cheaper legal services that can keep pace with the demands of a rapidly globalizing world. The Great Recession—a catalyst for change—provided an opportunity to re-examine some long-standing assumptions about lawyers and the clients they serve.”

Henderson and Zahorsky explain that from the perspective of complex government regulation and trans-border corporation activity, the need for attorneys has never been greater, but since most firms generate work at the individual consumer (vs. coprorate) level, their generalized practices have not changed even as demand for such services has ebbed, in part from new Internet self-help alternatives and in part because the cost of representation is decreasingly affordable to most people. With law school tuitions soaring above the inflation rate over the past several decades, probably driven by both demand and the economics of the highest rungs of the profession, lawyers’ rates have moved up proportionately. Unfortunately, consumer income has not kept with such increases.

Looking at the numbers, it is clear that the systemic changes had already begun before the recession: “According to payroll data collected by the U.S. Census Bureau, the multidecade surge in law firm employment hit a plateau in 2004. Between 1998 and 2004, total law firm employment grew by more than 16 percent, or 169,000. Yet between March 2004 and March 2008, several months before the Wall Street meltdown that initiated an unprecedented wave of law firm layoffs, the nation’s law firm sector had already shed nearly 20,000 jobs… By overgeneralizing how well the big firms were doing, we failed to notice a slow but fundamental economic shift affecting the majority of lawyers, who are solo practitioners or in small-to-medium-size law firms…

“According to Fred Ury, a former president of the Connecticut Bar Association and a trial lawyer based in Fairfield, Conn., those mainstream lawyers had been feeling the pain for a while…‘The biggest problem,’ says Ury, ‘is that ordinary citizens cannot afford to hire a lawyer. The bread and butter of small firm practices are criminal defense work, wills and trusts, leases, closings and divorces. Yet in Connecticut, 80 to 85 percent of divorces have a self-represented party because most families can’t afford to hire one lawyer, let alone two. Nearly 90 percent of criminal cases are self-represented or by a public defender because families can’t scrape together a retainer.’… Ury, who has practiced in a small firm for nearly 35 years, predicts the problem of unmet legal needs, if not solved by lawyers, ‘will be solved by technology.’” Henderson and Zahorsky.

You can multiply this story across hundreds of job sectors across the United States. You can argue that American labor is just too expensive by global labor standards, but eventually, there is an overriding pressure – the actual value proposition behind inflation where currencies normalize labor costs over time – for salary structures to find an equalizing balance over time. Take for example the specter of cheap Chinese labor perpetually decimating America’s competitive advantage. The June 27^th Time Magazine (Business Section) reminds us that Chinese labor costs have been rising an average of 12% per year from 2000 to 2009 (and continue to rise at a rate much higher than anywhere in the West) and that by 2015, the “productivity corrected” Chinese wage will have risen to 69% of the U.S. average wage rate.

Our labor market, no matter how insulated and isolated we believe or want it to be, is completely driven by global factors beyond our control as well as by technological and socio-economic changes that are simply part of the human experience. Those who fight change the hardest will inevitably wind up on the bottom of the pile of obsolescence, where the corpses of the ill-prepared always wind up. To embrace change is to opt for the road of maximization. It’s just so hard to put into practice.

I’m Peter Dekom, and change is always difficult to process, particularly for those who are older with decades invested in now obsolete skill-sets.