The National Law Journal's Law School Review

The Hard Business Problems Facing U.S. Law Faculty

[By William Henderson, Indiana University Maurer School of Law]

U.S. Legal Education is in the midst of a large, structural transformation.  This structural shift is driven by a confluence of factors, which includes three significant trends:

1. The decline, or plateau, of the traditional time and materials legal services model
2. The politics of law school finance
3. A new generation of legal entrepenuers that are turning some aspects of law into process-driven products and services.

The trends above are going to require law schools to change.  In what way?  We can lower our cost structure, but that would only address some of the challenges.  The only viable strategy is to retool.  This entails rethinking what we teach and how we teach so that the value of the legal education--for students, employers, alumni and the public at large--is commensurate with our operating costs. 

Institutional change is extraordinarily difficult.  But I think it is extra hard for law schools. Law faculty have little or no experience making high stakes business decisions, yet we control curriculum and appointments, which are the areas that need major rethinking.  Talk is cheap--and we specialize in talk.  Like any other industry undergoing structural change, we need to objectively assess our situation and be prepared to take decisive action despite painful tradeoffs and imperfect information.  For law faculty, our biggest risk factors are indecision and denial. 

As I write these words, I can practically hear the skeptical sighs of my fellow professors. I am describing the world as I find it, not as I wish it to be.  This is about making sound business decisions, not winning a debate.  Here are the basic facts and analysis that we ignore at our peril.

1.  Decline of Traditional Legal Services Model

For most of the twentieth century, there was a large imbalance between the demand for sophisticated, specialized lawyers and the available supply. Law firms benefitted from this imbalance because their clients were willing to pay for the training of law school graduates—there was no other potential sourcing solution. By the early 2000s, the shortage of sophisticated legal technicians had become a surplus, arguably exacerbated (but not caused) by the reluctance or inability of lawyers to retire. 

This imbalance between supply and demand is now reducing the number entry level jobs for law school graduates.  Further, clients are increasingly shifting the cost of training law graduates onto law firms—a financial burden the law firms are reluctant to assume.  Government, public interest, contract attorney positions cannot compensate for the changes taking place in the law firm sectors.  These systemic changes in supply and demand significantly cloud the short, medium, and long-term employment prospect of law school graduates.

Law Schools are not in Crisis

Many law professors would be disgusted at hearing that culinary institutes—which charge $30,000 annual tuition for two-year Associate degrees—advertise 97% percent employment rates for recent graduates when many of the grads counted as employed are working as fry cooks at fast food restaurants in positions they could have obtained without the degree.  What if culinary institutes, to boost their advertised employment rates, hire a bunch of recent graduates in temporary part-time positions to clean up and wash dishes.  On top of that, what if culinary institutes routinely claim that recent graduates earn $60,000 or more, although only a fraction get that pay, while most grads earn $30,000.

I don't know whether culinary institutes are guilty of any of this, which would be brazenly unethical.  I do know, however, that law schools across the country have done things like this systematically for years.  Conduct we would find unacceptable in others has been normal operating procedure for law schools.

To kick off this discussion the National Law Journal asks, "Are law schools in crisis?"  We should be clear: law schools are NOT in crisis.  Although a number of law schools shrank their entering class in 2011, enrollment at most law schools remains near all time highs, and tuition is sky high, especially at private schools.   Law schools have more resources than other university departments.  Law professors are paid far more than other professors and earn more than most lawyers.

The real crisis is suffered by our recent graduates, who find themselves burdened by mountainous debt, with limited employment opportunities.  Nearly 90% of graduates have law school debt.  The average debt for the class of 2010 was $92,500 (not including undergraduate debt).  To comfortably manage the monthly payment on this debt, a graduate needs to earn $120,000; if she could squeeze expenses, a salary of $86,000 might suffice.  On a salary below that the monthly debt payments would be tough to make (in addition to taxes, rent, transportation, food, etc.).

Now consider that, according to NALP, only 64 percent of the class of 2010 secured full time lawyer jobs, with a median salary of $63,000.  At least half of the graduates who landed lawyer jobs earned far less (twenty grand less) than the minimum salary required to manage the average debt.   And let us not forget the more than one third of graduates who failed to land full time lawyer jobs at all.

As high as the average debt is, many law graduates are worse off.  According to a recent poll, nearly one third of current law students expect to graduate with at least $120,000 debt.  The 2010 graduating class of Cal Western had an average debt of $145,000 (88% of class).  The graduating class of Thomas Jefferson had an average debt of $137,000 (95% of class).   Few of these graduates will earn enough to manage their monthly payments.  Law schools are graduating a slew of economic casualties.

Thousands upon thousands of law graduates have debt far above what their salaries can bear.  Meanwhile, law schools are doing fine, thank you.

Brian Z. Tamanaha