Thursday, August 26, 2010

45,000 New Lawyers every year and the Rate of Attorney Overproduction

It's possible that our nation only needs 16,245 new JDs per year, or at most 19,000 In that case, the law schools are pumping out 177% or 137% more JDs each year than we need.

If the law schools are producing 45,000 new lawyers per year, what is the rate of lawyer overproduction? Earlier I pointed out that BLS stats show that only about 759,200 people are employed as attorneys. Of course, that stat does not tell us how many have worthwhile jobs; many could be starving solos, low-paid document reviewers, or working low-paid part-time gigs.

Let's assume that the number 759,200 represents only 90% of "happily employed attorneys" with the other 10% having happily found jobs outside of the legal profession that pay $75,000 or more per year.  In that case, over a 40 year period of time, we need about 843,555 attorneys.  Now let's assume that 15% of those 759,200 people who are counted as "employed" attorneys are working in crappy jobs such as sporadic, low-paid temporary document review, low-paid part-time work, and struggling solos.

(759,200 / 90%) - (15% x 759,200) =  843,555 - 113,880 = 729,675.

We're about where we started.  For the sake of argument, let's just say that our nation's economy can happily employ 759,200 attorneys.  Besides, even if you are "happily employed outside of the legal profession" in all likelihood your job doesn't require or make much use of your legal education, in which case it was a waste of time and money.

At a rate of 45,000 new lawyers per year, how long will it take to replenish the 759,200 lawyers that our nation's economy actually needs or at least can employ with appropriate compensation?

759,200 divided by 45,000 = 16.87 years.

Assuming that a lawyer would want to work for 40 years, we are producing:

40 divided by 16.87 = 2.37 new JDs for every lawyer job available.

This means that our nations law schools are producing an excess of 137% more lawyers every year than what our nation needs, or almost two-and-a-half times more new lawyers than we need.  Conversely, our nation only needs about 19,000 new attorneys per year (45,000 divided by 2.37 = just under 19,000).

Assuming that our nation's population is 310 million, ideally we only need one lawyer for every 408 people.  Previously, I calculated that our nation has about one attorney for every 172 people.  Dividing 408 by 172 gives us 2.37.  This isn't profound; it just shows that my calculations are internally consistent since the number of 172 can also be obtained by dividing 310 million by 45,000 x 40.

For shits and giggles, let's discount attorneys who are "happily employed outside of the legal profession" and regard them as having suffered a loss of 3 years worth of time and law school costs.  In other words, let's just consider how many lawyers our nation really needs and can employ at compensation at least commensurate to the cost of becoming a lawyer.  If 85% of the 759,200 counted as employed by the BLS meet that criteria, then our nation's economy can support:

759,200 x 85% = 645,320 attorneys.

645,320 divided by 45,000 = 14.34 years.

Assuming that a lawyer would want to work for 40 years, we are producing:

40 divided by 14.43 = 2.77 new JDs for every lawyer job available.

This means that our nations law schools are producing an excess of 177% more lawyers every year than what our nation can employ as lawyers at a rate of pay commensurate to their educational investment, or almost two-and-three quarters times more new lawyers than we need.  Conversely, our nation only needs about 16,245 new attorneys per year (45,000 divided by 2.77 = just under 16,245).


Anonymous said...

Not to be rude, but I went around repeating the general point based on Jr. Deputy Accountant's blog, and see now that your whole point falls apart without the assumption of a 40-year tenure.

That assumption is meaningless. Lawyers don't work that long on average; nor do they typically "want" to, as you keep saying. So, it takes more JDs to fill the pipe.

This whole analysis falls somewhere between misleading and meaningless.

Frank the Underemployed Professional said...

You're not being rude. Questioning my assumption is legitimate and it's an issue worthy of debate. In my posts I have pointed out that I am making that assumption and that it is an assumption.

I think that the 40 year assumption is reasonable since the majority of law students enter law school immediately after finishing their undergraduate degrees, in which case they would graduate at age 24 or 25. Age 65 seems like a good age at which to assume retirement since that's when full Social Security benefits kick in.

Certainly, many successful lawyers will retire before age 65 and many will continue to practice past age 65. Many more will have compelling financial reasons for continuing to practice. Many of the JDs who were unable to find work in the legal profession might also need to work past age 65.

Most of what I have been reading in the newspapers or hearing on the radio or elsewhere suggests that, if anything, people are retiring at later ages today.

I can't say for certain how many years your average JD will remain in the workforce, but 40 years seems like a pretty reasonable assumption and it's a nice, round number. The actual average may be more or less than 40 years, but it's probably not too far off the mark.

This discussion raises an interesting question. Given that law student loan and undergraduate loan debt have increased significantly over time, will this increased indebtedness result in JDs delaying retirement longer than they otherwise would? If the employment situation for lawyers and JDs who work as non-lawyers has worsened and/or worsens over time, will it result in JDs postponing (or wanting to postpone) retirement?

Anonymous said...

I disagree with the argument that the point falls apart if you don't base the tenure on 40 years.

Change 40 to only 30 years on the job and just assume EVERYONE will retire 10 years early and you still have twice as many lawyers as needed.

i.g. 30 divided by 14.43 = 2.07 new JDs for every lawyer job available which is 107% more than needed.

We still have about 1 extra lawyer for EVERY job available.

Even more interesting is I think as incarceration costs exceed what the nation can afford more lax drug laws will go into effect over the next couple of years and less of a "need" for lawyers will become evident.

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