The Perils of Being Overqualified

Paul Campos notes that employers are perhaps more diligent than ever in weeding out overqualified candidates:

I see this all the time in the legal world: people find that getting a JD actually hurts their job prospects, not just because they can’t get jobs as lawyers (48% of the national class of 2012 didn’t have real legal jobs nine months after graduation), but because, despite self-serving claims of legal academic administrators and faculty that a law degree is “versatile,” most non-legal employers consider a law degree either a negative or a flat disqualification for a job candidate. (Perhaps the most stark example of this is provided by paralegals who quit good jobs to go to law school, then discover that employers won’t hire people with JDs to do paralegal work).

The first time I heard about a candidate being rejected as overqualified was back in 1979, in the film Kramer vs. Kramer. I was young enough at the time to be puzzled by the idea, although I came to appreciate why employers would hesitate before hiring an employee they thought might jump ship as soon as something better came along.

But the J.D. problem isn't just one of overqualification - most employers outside of the field of law (or the music industry) don't see the J.D. as a qualification. So you're both overqualified, in that you have a graduate degree that in the view of many should result in your easily earning a six figure income, but underqualified, in that your degree is seen as having absolutely nothing to do with a position outside of the field of law. When you're trying to explain and argue how your degree relates to the job for which you're applying, the odds of getting the job will typically hover between "slim" and "none".

The (Bad) Economics of Legal Practice

I've been kicking around some reactions to a discussion a while back at LGM about the realities of simply "hanging out a shingle" if you're an unemployed lawyer, but a more recent post Paul Campos provides a somber economic context for would-be law firm start-ups:

In 1989, legal services accounted for approximately $157 billion, in 2005 dollars, of US GDP. In 2011 that same figure (again in 2005 dollars) was $156 billion. Over this time GDP increased by 68% in constant dollars, which means that, as a share of the economy, the legal sector shrank by approximately 41% over the past two decades....

The most striking contrast between the situation in law and medicine is, that while economic demand for legal services has, relatively speaking, been contracting radically (note to law school administrators: economic demand = people having enough money to pay for something they’re willing to use that money to pay for), that for medical services has gone through the roof. Between 1980 and 2008, the proportion of American GDP devoted to the health care sector increased by an astounding 77.8%.

The legal industry had a bit of a boom in the late 1980's, followed by a recession in the early 1990's. It may be that 1989 was a peak year, which would make it a weaker point of reference for comparison. But the gist of Campos's statistic is consistent with my own experiences, and what I hear when I talk to (very) small firm and solo lawyers - more lawyers are completing for work, from a pool of clients who are less and less able to pay for those services. In the community where I practiced, in the late 1980's pretty much anybody could come up with a retainer for a lawyer for a divorce or misdemeanor case. By the late 1990's they were borrowing from friends and family or maxing out the cash advances on their credit cards. These days, according to the lawyers I've spoken with, a typical prospective client has no savings and no remaining credit, and their extended family is equally tapped out. And a lot of the clients who can still afford to pay a retainer are bargain hunting.

It's not that you can't do it... and if you're of the mindset that "the time to start a business is during a recession", the legal industry is largely in recession. But in states like Michigan, for small, local firms and solos serving "ordinary people", that recession has been the 20+ year process suggested by Campos's statistic. Getting started in an environment where you have to both get clients who might prefer somebody more experienced or (perhaps and) cheaper, and where even after (and perhaps because) you've proved your skill you'll have a difficult time getting referrals worth taking from other lawyers in the community? How much of an uphill battle are you prepared to wage? And, frankly, love of the law doesn't pay the bills - if you have that much entrepreneurial spirit, why not direct it at something that is likely to return a greater value?

Don't Go to Law School....

Just don't.

Okay, if you're admitted to one of the twenty or so "top ten" schools and are in the upper half of your class, or if you're admitted to one of the ten or so "top five" schools, even better Harvard or Yale, although your future is not assured there's a good chance you'll end up getting one of those @70 hour/week, $150,000 jobs that everybody supposedly wants. But... are you sure you want that? And if you don't, how well do your wishes line up with your projected debt load? That job or career you want - is there another way to enter the field or to get a job that's "close enough" to being a lawyer that doesn't require the law degree? Because if we're talking public service, a lot of those jobs don't pay lawyers much (or any) better than they pay non-lawyers who perform similar tasks.

Back when I started law school, my very first classroom experience was an 8:00 AM contracts class with Professor J.J. White. To put it mildly, not all of the students in my section liked Professor White. But if half of my professors had inspired me to work as hard, I would have learned about five times as much law by the time I graduated, he tested based on knowledge of the law and legal principles as opposed to your ideological alignment, and he seemed to put more effort into preparing for his classes than most of the students. He was also a tremendous platform speaker and, when I first passed by him in a hall, I was surprised that he wasn't a foot taller. I had the opportunity to briefly work with him on a CLE course, about ten years after I graduated, and he displayed a level of passion and perfectionism that not only exceeded that of a typical top speaker, I think his passion significantly exceeded that of the lawyer who was planning the course.

Professor White would at times share his wisdom with us. "You are all fungible", he advised, noting quite correctly that most law firms view and treat associates as a commodity. He liked to tease the "limousine liberals" among us that although they were sure that they would be working public interest jobs after law school, for most that notion would be end after their first, highly paid summer associateship. I had a couple of friends who, over the course of their first summer, shifted positions from, "Maybe other people will chase the money, but not me", to "He was right". That was twenty years ago when law school only seemed expensive. Now, if you're a typical law school graduate, it seems that the choices are to put your hands out straight in front of you to be fitted for the golden handcuffs or, if you can't find a highly paid job, be grateful that we don't have debtors prisons in this country.

Paul Campos, a law professor and critic of what has happened to law school education - with costs spiraling up, job opportunities limited, and many law schools seeming to be intentionally misleading incoming students about placement and probable salaries - describes reality for a current law school graduate:

In any case, let’s consider what’s going on not just in the American economy as a whole, but in the legal sector. Over the last twelve months the legal sector has added a total of 4,800 jobs. Keep in mind that at best perhaps 70% of these jobs have been filled by attorneys, since the sector includes all support personnel (paralegals, administrative positions etc.). So we can estimate that there are about 3,000 more attorneys employed in America today than there were a year ago.

Now a certain number of people who were working as attorneys a year ago aren’t today, because they’ve died, retired, moved into other lines of work, or have simply become unemployed. The BLS estimates the total annual “outflow” from the profession to be about 13,000 people at present. So that means that about 16,000 lawyer jobs have been filled over the last 12 months by people who weren’t working as attorneys at the time they moved into these jobs.

Note this does not mean that 16,000 new law graduates got real legal jobs, since some unknown number of these jobs were filled by unemployed attorneys who moved back into the legal work force. It’s true that the 2011 NALP stats claim that 25,654 of the nation’s 44,258 2010 law graduates had a full-time job requiring a law degree nine months after graduation. For quite some time now I’ve been trying to explain why that (atrocious) 42% functional unemployment rate for new lawyers is actually seriously understated.

Campos links to an ad for a full-time associate position, expected to pay $10,000 for the first year of work - and that the ad elicited "32 applications from law school graduates within 24 hours of being posted on a law school’s web site". I recall a few years ago, having a lawyer tell me that when she needs complex issues briefed she posts an ad on craigslist and can often find experienced lawyers who will take the work as independent contractors at $15/hour. Campos notes, "23% of barred attorneys in Alabama made less than $25,000 [!] last year".

The practice of law is a tough profession to enter. Your first job will likely have a strong influence on the rest of your career. If you get a coveted clerkship or are hired by BigLaw, you're probably okay. If not, no matter how good a lawyer you are, your upward mobility is likely going to be limited by your ability to bring business to a prospective employer. And even if you have an impressive client list, if it's in thew wrong practice area you may find yourself limited to an "of counsel" relationship (although it does seem that in recent years more large firms have softened on the notion of which areas of law they "won't practice"). It doesn't matter how good you are as compared to lawyers who work in the firm, or that you match or exceed their potential, if you have the wrong pedigree you're going to be on the outside looking in.

If you have a family full of lawyers and know what the practice entails, you can enter law school with your eyes open. If they are going to guarantee you a job and salary when you graduate, all the better. If your notion of legal practice comes from watching TV shows, even though you "know" that the depiction is romanticized, you may want to try working at a law firm in some capacity before you choose to attend law school. You will likely find that law is a lot less glamorous, interesting and lucrative than you believe. And you may find your passion (subject to the aforementioned caveat that, if you can pursue your passion for a similar salary without paying for a law degree, you should consider that alternative path). But law school is now far too expensive for you to attend a middle or lower tier school simply because you don't know what you want to do with your life, or because law "sounds interesting" or you believe you'll be entering a prestige profession.

I told my brother not to go to law school. He wasn't really listening, went anyway, and through some good luck and timing ended up working at a defense firm with a pretty good salary. You too are entitled to roll the dice. What I'm really saying is, consider your alternatives and proceed with your eyes open. With about 16,000 true law jobs available for about 44,000 new law school graduates, and (as the numbers make inevitable) a lot of last year's grads still trying to find work, consider your drive, your connections, and the likelihood that you'll actually enjoy a real-life legal career. You have a lot of options before law school, but afterward the odds are you're going to be weighed down by your significant debt load (not to mention three years of opportunity cost).

The Debt Deal as Continuing Political Theater

Paul Campos attempts to find a silver lining in the debt deal, but in so doing he reminds me of how seriously we take this type of political theater. Although there are some who argue that the deal harms the President, it would appear that his primary goal was to make sure that there was not a repeat performance of this debacle prior to the 2012 election. But then what?

The 2012 election will have one of two outcomes: Either Obama will be reelected or a Republican will become President. Do you recall the noise that Ronald Reagan made about Jimmy Carter's deficits before taking the nation's debt to unprecedented levels? Do you recall G.W. "joking" that he hit a "trifecta" and was thus free to deficit spend as he pleased, while Dick Cheney argued that deficits don't even matter? If President Obama does not win reelection, we'll return to Republican business as usual. The Republicans in Congress will set aside their obsession with balancing the budget in favor of attempting to buy votes. Serious cuts in Medicare? In Social Security? Budget cuts that may drag down their President in 2016? Get real. We're more likely to get the proud announcement of an unfunded, multi-trillion dollar "Medicare, Part E."

But what happens if President Obama is reelected? Then we are again faced with one of two realties: Either the Democrats control Congress, or the Republicans control one or both chambers. Realistically speaking, it's going to be the latter. The Republicans, with all of their sound and fury about government spending and the need for budget cuts, agreed to this deal to postpone identifying the actual cuts for two reasons: First, they couldn't identify and agree upon enough cuts to hit the arbitrary figures they kept tossing around, and second because they wanted to avoid having to take responsibility for cuts that will inevitably be very unpopular with motivated blocs of voters. Recall, the principal targets for Republican budget cuts are Social Security and Medicare. It's possible that they will insist, through the latest iteration of a deficit commission, that deficit reduction occur only through budget cuts. It's possible that, through lockstep partisanship and obstructionist tactics, they'll force a budget cutting bill through Congress. It's even possible that the President would sign the bill. The Republicans will then have to go to the polls attempting to blame obviously partisan, Republican-driven cuts on the other party's outgoing President. I don't see that the voters at issue are going to fall for that one.

Oh, and the special interests? Health insurance companies, long-term care facilities, doctors and hospitals, all of whom profit enormously from the status quo (even as they squawk about the alleged inadequacy of Medicare reimbursements)? You expect them to sit quietly by the sidelines as the Republicans slash hundreds of billions of dollars out of Medicare and the ACA? This Congress cannot bind future congresses - if they don't like the constraints of this legislation, they can and will change it. And the pressure to do so will be intense.

Here's something else to ponder: The best possible outcome would be for this new deficit commission to succeed where prior deficit commissions failed, and to actually come up with a viable long-term plan for the budget and economy that could be supported by both parties. Right now the left is expecting that the commission will principally target entitlements, something that is inevitable given that entitlement growth is significantly higher than inflation, while doing too little to generate new revenues (i.e., raise taxes). If it's impossible to come up with a fair and sensible plan to get Medicare spending and spending growth under control, we're doomed. We can wait and hope for a miracle, but there's no reason to believe that we're going to produce a new form of medical treatment or a new approach to medical care that is going to transform the bleak financial picture arising from the cost of treating chronic medical conditions and terminal disease, of "old age". But as we all know, it's not going to happen. Given a choice between responsible governance that could cost them reelection and running the nation into a brick wall, most members of Congress will choose the latter.

So this commission will fail and the Republicans in Congress will plot their next move not on policy but on elections and reelection: Who is in the White House, how much of a price will they pay for cutting entitlement spending, will it serve them better to return to their "business as usual" of running up the nation's debt to heights they know to be unsustainable (then complain and obstruct in their usual fashion when a Democrat is elected to clean up their mess). For a Republican President, after all, two wars, a recession and a national disaster (e.g., the collapse of the financial industry) is anything but cause for austerity - it's a "trifecta".

The Economics of Law School

Good for law schools, good for the universities they subsidize, but... perhaps not so good for students.

For years, it made economic sense for smart, ambitious 22-year-olds to pay the escalating price for a legal diploma. Law schools have had a monopolist’s hold on the keys to corporate lawyerdom, which pays graduates six-figure salaries.

But borrowing $150,000 or more is now a vastly riskier proposition given the scarcity of Big Law jobs. Of course, that scarcity hasn’t been priced into the cost of law school. How come? In part, it’s because schools have managed to convey the impression that those jobs aren’t very scarce.

Law schools don't want students to understand the realities of the job market, because if prospective students understand that they will be borrowing well into the six figures to enter a job market in which most of them will earn salaries in a range similar to what they would have earned without the law degree, they'll consider other options. I expect that the long-term financial picture for law graduates remains better than the short-term, but if you don't get a job with a sufficient salary during your early years of practice and leave the field you'll get less, perhaps none, of that long-term benefit.

New York Law School's dean defended reporting a median graduate salary of $160,000 for 2009 alums to U.S. News and World Report,

He noted that the school takes the over-and-above step of posting more granular salary data on its Web site.

“In these materials and in our conversations with students and applicants,” he wrote, “we explicitly tell them that most graduates find work in small to medium firms at salaries between $35,000 and $75,000.”

On their website? I found this quite easily, but it suggests that the 41.5% of grads entering private practice earn "$35,000–$160,000" with an average of "$107,343", and the 26.5% entering "corporate/business" earn "$50,000–$150,000" with an average of "$86,667". If I were to extrapolate from the average salaries reported, I could reasonably infer that (including graduates entering fields such as judicial clerkships that involve a short-term sacrifice in salary in exchange for an anticipated income boost after the clerkship ends) the average graduate was earning just about $90,000 per year.

I also found this via Google, and the (not exactly front-and-center) statement:

The salary range for law graduates varies greatly. [For salary stats, visit: www.nyls.edu/employmentstats.] Large law firms offer the highest salaries, and in recent years their starting salaries were between $145,000 and $160,000. These are the highest paying entry level jobs for lawyers and, not surprisingly, the most difficult to obtain. Typically only the very highest ranked students in the class obtain these jobs....

A recent study of New York Law School alumni who graduated between two and four years ago showed their salary increases in their second and third jobs. First salaries in the $40,000 to $60,000 range were the most common (46 percent), but that shifted with the graduates’ second and third jobs to the least common (20 percent). At the same time, salaries in the $60,000 to $90,000 range grew from 22.5 percent to 35.5 percent. Salaries in the range above $90,000 grew from 26 percent to 40 percent. All of these job changes occurred within four years of graduation.

I found this article via Paul Campos, who is quoted in the article,

“I’m 100 percent convinced that Matasar believes in his reformist agenda,” says Paul F. Campos, a professor at the University of Colorado at Boulder School of Law and a Future Ed attendee. “But all reformers discover that they can’t change a system by themselves. And by trying to survive in the current structure, he has ended up participating in the perpetuation of its most indefensible elements.”

Is he talking about law schools... or Congress? Alas, he's talking about human nature. At LGM, Campos adds some thoughts:

One result of these trends [in tuition] is that the 84% of 2010 UM Law grads who borrowed money during law school graduated with an average debt of $112,133. (That class matriculated when tuition was nearly $10,000 per year lower, so the entering class of 2011 is likely to average close to $150,000 in law school debt when it graduates three years from now)....

All this has been taking place at a time when the number of jobs for law graduates whose salaries justify six-figure debt loads has dropped sharply. Meanwhile, legal academia has barely begun to grapple seriously with the issue of who (other than independently wealthy people and partners of well-paid spouses) is going to be able to afford to take public interest legal jobs, the vast majority of which pay salaries that will not allow today’s average law school graduates to service their educational debts while at the same time paying for even a modest life style. (Note that the figures on law school indebtedness do not include undergraduate or consumer debt).

Law professor salaries are, of course, higher than ever.