Thursday, July 29, 2010

One Lawyer for every 172 people -- What does it mean?

Previously, I used ABA stats for the number of JDs awarded annually since 1963 to calculate that since 1973 the average number of new lawyers produced by the law schools is enough to sustain having a lawyer to population ratio of one lawyer for every 171.9 people.  Forty years is a long span, so let's just assume that the current lawyer-to-population ratio is one for 171.9 people.  What are the implications of that number and how should a prospective law student interpret it?

In other posts I have shown that only 53.8% of all lawyers produced in a 40 year span from 1969-2008 work in the legal profession and that it is a very good assumption that the percentage of lawyers produced in the past 10 years who were able to find work in the legal profession may be less than 30%.  Of that 30%, the percentage of new lawyers who were able to find jobs that provided compensation commensurate with the costs of their legal education--jobs at large firms, medium-sized firms, high quality small firms, and quality government positions--career-building jobs, is probably much less than 30%.  (A new graduate might find a job at "shit law" earning $30,000/year and would count as part of that 30%, but that is not a successful outcome.)  Those studies alone should be enough to convince prospective law students that going to law school is probably a foolish investment.  Additionally, what can we imply about the value of a law degree using the statistic of one lawyer for every 171.9 people?

According to the Bureau of Labor Statistics, about 26% of all lawyers are self-employed either as partners at law firms or as solo practitioners.  (I assume that this 26% number refers to 26% of the 759,200 people employed as lawyers in 2008 and not 26% of everyone who has a JD.)  This implies that 74% of those 759,200 employed lawyers work for other lawyers or for the government.  So, about 26% * 53.8% = 13.99% or about 14.0% of everyone with a JD either works as a partner at a law firm or as a solo.  Let's assume that half of those people work as solos, or 7% of everyone with a JD.  Let's also assume that 5% of the 1,141,328 people with law degrees (produced over the 40 year period from 1969-2008) work at non-legal jobs where their law degrees add tangible value to their work and where they are paid commensurate with their investment in legal education.

This means that if all of the lawyers who could not find work at law firms, non-profits, with the government, or in non-legal positions that make use of their legal education still wanted to work as lawyers (which, presumably, a great many would) then our nation would need to support 680,260 solo practitioners.

(7% + 46.2% - 5%) * 1,412,328 = 680,742

This works out to a wannabe-solo-lawyer to population ratio of 1 to 450.9.

306,947,000 (2008 U.S. population estimate) / 680,742 = 450.9

So, in order for everyone who graduates with a law degree to benefit from having gone to law school, every 451 U.S. citizens needs to support one lawyer as a solo.  Is that possible?  Ask yourself, when was the last time you personally needed a lawyer?  When was the last time someone you knew needed a lawyer?  Did they need a lawyer's services every year?  Once every ten years?  Once or twice in a lifetime?

Let's assume that your average person will need a lawyer three times in their life to handle matters that can be billed for $2000 after charges for incidental expenses and that the average U.S. lifespan is 78.7 years.  This means that on average, a person will need a lawyer for a $2000 matter once every 26.23 years.  So, 450.9 people is enough to provide a lawyer with 17.19 $2000 matters per year, or $34,380 of gross income each year without benefits that will suffer a 15% social security tax.  Some of that money will be needed to pay for overhead such as advertising, the costs of an office, bar fees, CLE fees,  and malpractice insurance, etc.  If the cost of overhead and the additional 7.5% social security tax is $1000/month, then a lawyer could take home about $22,380/year (without benefits).  Given the exorbitant cost of attending law school today, In order to obtain a sufficient return on one's investment, a lawyer would probably need to gross about four times that, or about $89,000 without benefits.  You can obtain different results using the same methodology while making different assumptions.

This is all just mental masturbation and it is probably a silly post that fails to provide significant insight.  The point I am trying to mathematically demonstrate is that having 1 lawyer for every 172 people means that a great many lawyers will never obtain a return on their investment, especially when going to law school could cost you $120,000-$185,000 and 3 years' worth of opportunity cost.

4 comments:

Nando said...

Most people go to lawyers, grudgingly. It is not the same as going to the barber, doctor, dentist or mechanic. People will get those services done, because they are more pressing and frequent.

On the flip side, people LOVE free legal services. They can't get enough of those. Mention a retainer, and you will see a look of disgust - followed by quick footsteps out the door.

But then again, you have asshat associate professors of law telling lemmings that fully half of first year attorneys can EXPECT to make $72K.

http://thirdtierreality.blogspot.com/2010/07/profiles-in-intellectual-dishonesty.html

AJ said...

I don't think I could even find 172 clients in my lifetime.

AJ said...

FC,

Thanks for being an author to my blog. I encourage you to post as much as you want for extra exposure. No need to give me a heads up. Just go for it.

AJ

Anonymous said...

It's not much better for engineers.

The big corps are shipping jobs to India and bringing in foreign engineers to drive wages down, and if you're over 40, forget it!

This country is going to hell in a hurry. The corporations need to be neutered!

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