Law schools and the law of supply and demand

By Published:

If law schools were publicly traded companies and you held some in your portfolio, I would be strongly advising you to sell. Fast.

Here’s a quick review of some recent news concerning the US legal education industry and the legal profession it is purportedly preparing its graduates to enter.

I don’t know about you, but I look at these and similar accounts and I see a bubble just waiting to pop, or a system on the verge of a crash. This isn’t about the recession or the financial crisis anymore; this is about a serious misalignment between the industry that trains new lawyers and the marketplace that employs them. (Canada, by the way, is headed merrily in the other direction, with three new law schools set to open shortly; whether this is a sprint towards a cliff is a subject for another day.)

What we’re seeing here is the law of supply and demand applied to the law. The future legal marketplace is going to require fewer, differently skilled lawyers than it has during the past several decades, so this market recalibration should really come as no surprise. The market is telling law schools: we don’t need all these new lawyers, and we definitely don’t need the skill sets you’re giving them. Law schools aren’t listening, because they can’t: the production of traditionally credentialed graduates has become the reason for their existence and the core of their business model. Companies whose products are no longer in demand either find new products or go out of business. I see extremely few law schools capable of changing their product lines.

That’s one side of the coin. Here’s the other: shrinking demand for lawyers is not the same thing as shrinking demand for legal services. If anything, the overall legal services market seems poised for strong growth over the next decade or so. This isn’t only because an increasingly global, complicated and cross-connected world will have an equally increasing need for legal help to navigate it successfully. It’s also for two other reasons:

  • Many legal tasks that no longer justify the expertise of a lawyer to do them must still be accomplished, but at better-aligned prices.
  • The latent legal market, left untapped by generations of lawyers and law firms, is ready to explode, as the DIY law trend illustrates.

This is real demand, and it can be met by low-cost lawyers, foreign lawyers, quasi-lawyers, para-professionals, corporate providers, and automated systems. At the moment, there is a relatively limited supply of these entities. But just as the changing market is punishing old suppliers like law schools, it will reward new suppliers such as virtual law firms, legal process outsourcing companies, freelance and contract lawyer organizations, e-discovery specialists, automated document assembly programs, consumer-friendly legal kiosks and outlets, and many other options still at the embryonic stage. These are the directions in which the investment funds triggered by the Legal Services Act will flow, not (for the most part) into law firms and most certainly not into law schools.

Historically, demand for legal services has meant demand for lawyers, and the legal education industry evolved to reflect that. In future, demand for legal services will be met by a greater diversity of providers with different training and new skills, crossing previously sacrosanct lines of status, geography and even technology. That’s what’s really going on here: an old supply chain is breaking down, and a series of new ones are rising to replace it. Place your bets accordingly.

Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Print Friendly

6 Responses to “Law schools and the law of supply and demand”

  1. Patrick Vuleta

    The law school situation annoys me no end.

    This Forbes article on knowledge work looks at how (among other fields) law schools are putting graduates into huge debt while not preparing them for the new economy: http://blogs.forbes.com/michaelellsberg/2011/05/10/teen-knowledge-work/

    Those who didn’t go to law school are actually winding out ahead of those who went because they thought it would be a secure future.

    If not unethical, then it’s out of touch, with disastrous consequences.

    Stories like this that remind me why I’m on the side of innovative service providers.

  2. Daniela Osborne

    As a law student myself, this was rather disturbing reading. Saying that though, I was asked by our law student representatives to write a paper on whether the law degree was fit for purpose. As were several others. Illustrating the concerns educational bodies, certainly in the UK, have regarding the law degree. They are taking the concerns of the industry as a whole on board.

  3. DiligenceEngine

    Good piece. We think (and hope, as a new legal service provider!) you are right about a good future market for new legal service providers. New legal providers should have a significant impact on lawyer jobs at the low and middle ranges of the market. But advances in legal practice do not necessarily mean less lawyer jobs at the high end of Biglaw we’re familiar with. More efficient legal practice can drive more transactions, which should require lots of lawyers at all levels. For more, see our post on this piece: http://blog.diligenceengine.com/will-the-future-legal-marketplace-need-less-l

  4. Bergeron Clifford

    This article has some very interesting data. I wonder if the big drop in applications to law schools is caused by the economical situation or by the fact that less than 50% of graduates actually find a full time job in the legal field. I would say it’s a little bit of both, but very interesting observation non the less.

  5. William Henderson

    Spot on, unfortunately. What is happening is really amazing … and yes, scary, to those of us paying attention. bh.

Leave a Reply

  • (will not be published)

 

Post Categories