Do We Need Government Intervention to Reduce the Number of Lawyers?

Attorney Mark Greenbaum has a widely quoted column in the LA Times arguing that there is a glut of lawyers in the marketplace, and that the American Bar Association should combat this trend by reducing the number of accredited law schools:

Remember the old joke about 20,000 lawyers at the bottom of the sea being “a good start”? Well, in an interesting twist, thousands of lawyers now find themselves drowning in the unemployment line as the legal sector is being badly saturated with attorneys.

Part of the problem can be traced to the American Bar Assn., which continues to allow unneeded new schools to open and refuses to properly regulate the schools, many of which release numbers that paint an overly rosy picture of employment prospects for their recent graduates. There is a finite number of jobs for lawyers, and this continual flood of graduates only suppresses wages. Because the ABA has repeatedly signaled its unwillingness to adapt to this changing reality, the federal government should consider taking steps to stop the rapid flow of attorneys into a marketplace that cannot sustain them.

From 2004 through 2008, the field grew less than 1% per year on average, going from 735,000 people making a living as attorneys to just 760,000, with the Bureau of Labor Statistics postulating that the field will grow at the same rate through 2016. Taking into account retirements, deaths and that the bureau’s data is pre-recession, the number of new positions is likely to be fewer than 30,000 per year. That is far fewer than what’s needed to accommodate the 45,000 juris doctors graduating from U.S. law schools each year….

The U.S. Department of Education should strip the ABA of its accreditor status and give the authority to an organization that is free of conflicts of interest, such as the Assn. of American Law Schools or a new group. Although the AALS is made up of law schools, it is an independent, nonprofit, academic — not professional — group, which could be expected to maintain the viability and status of the profession, properly regulate law schools, curtail the opening of new programs and perhaps even shut down unneeded schools.

I. The Data on Lawyers’ Wages.

Pity the poor lawyers whose wages are being “suppressed.” Based on Greenbaum’s account, one might think that many lawyers are scraping to get by at best. According to the Labor Department, however, the median annual salary of lawyers was over $110,000 in 2008, and even lawyers at the 25th percentile of pay in the profession made some $74,000 per year. Despite the recession (which began just before 2008), this is up slightly up in inflation-adjusted terms compared to the median in 2000 ($88,000, which translates to about $109,000 in 2008 dollars). Note that these are median salaries, not means, so the figures aren’t being inflated by the very high pay of a few elite lawyers at the top of the distribution.

Even if lawyers’ pay were to go down significantly, they would still be near the top of the income distribution, and would still be making more money than liberal arts graduates without science, engineering, or math skills could earn in most other fields. Obviously, the present recession has lowered wages and increased unemployment among lawyers. But the same can be said for virtually every other profession. The bottom line is that most lawyers are extremely well off, and don’t need any special government assistance to prop up their incomes.

II. The Demand and Supply of Lawyers is Not Fixed.

Greenbaum’s argument also relies on several economic fallacies. First, he assumes that the number of jobs for lawyers is fixed and insensitive to price. In reality, of course, an increasing number of lawyers will, other things equal, lead to a decline in pay, which in turn would lead to increased hiring. Of course, other things may not be equal. After all, the demand for lawyers is driven by the scope and complexity of law. Given the growth of government, the expansion of regulation of many types, and the increasing complexity of most areas of law, it is likely that the clients will have more need of legal services over time. Thus, it’s possible that the number of lawyers could increase significantly even as lawyer pay continues to rise.

Greenbaum’s second error is his implicit assumption that potential law school applicants are indifferent to expected costs and benefits. If the return to legal education drops, it is likely that fewer people will apply to law school, and some current lawyers will leave the profession. As with most other fields, market prices give people roughly accurate information on the demand and supply of labor. There is no need for the ABA or the federal government to try to regulate the supply of lawyers. Market competition will do that (and would do an even better job if not for the legal restrictions on entry into the profession discussed below). Indeed, ABA or federal government planners will probably do a far worse job than the market in trying to determine how many lawyers we need. Central planning of the legal profession is likely to encounter the same information problems that bedevil other types of central planning.

III. The ABA Seeks to Reduce the Number of Lawyers, not Increase it.

Finally, Greenbaum contends that the ABA has a “conflict of interest” that leads it to accredit too many law schools. The truth is the exact opposite. The ABA is an interest group representing lawyers. Like members of other professions, lawyers have an incentive to limit entry into their field in order restrict competition and increase their own pay. To say that the ABA has an interest in increasing the number of lawyers is much like saying that UAW workers at GM and Ford have an interest in increasing the number of imported Japanese cars. And indeed, the ABA imposes dubious accreditation requirements that make it very hard to start new law schools. At the state level, bar associations restrict entry into the profession by forcing would-be lawyers to pass bar exams that test enormous amounts of information that most lawyers don’t actually need to know to do their jobs. It’s also worth mentioning that the ABA and state bar associations artificially reduce the number of lawyers by requiring lawyers to spend 3 years at an ABA-accredited law school in the first place. Many lawyers could probably perform reasonably well even after just one or two years of legal education, or after an apprenticeship with a firm. The latter was the standard path into the legal profession in the 19th and early 20th century. Abraham Lincoln was one of many who entered the profession by that route, even though he had almost no formal education of any kind.

For very similar reasons, Greenbaum is wrong to assume that the AALS is free of conflicts of interest. After all, the AALS is an organization composed of existing law schools, most of which don’t want to see new competitors enter the industry.

Far from accrediting too many law schools, the ABA and state bar associations are running a cartel system that has the effect of driving up the cost of legal services. The poor especially often find it difficult to pay for basic legal services.

It’s understandable that lawyers would like to reduce competition in their field so that their pay might go up. People in most other professions probably feel the same way. The rest of us, however, should take a skeptical view of such special pleading (actually, the rest of you, since I’m a lawyer myself).

CONFLICT OF INTEREST WATCH: I’m sure someone will argue that I’m just saying this because, as a law professor, it’s in my interest for people to believe that going to law school is a good deal. Maybe so. But note that I advocate several reforms that are definitely not in the interest of law professors, such as allowing people to join the profession through apprenticeships, eliminating the legal requirement of spending 3 years in law school, and so on. More broadly, I favor greatly reducing scope and complexity of American law, which cuts against the longterm interests of both lawyers and law professors. As I argued back in October, the best way to safely reduce the number of lawyers is to reduce the number of laws.