Will the Competition Close?

December 29th, 2013 / By Deborah J. Merritt

As law school enrollment continues to fall, industry experts have started to speculate about how many schools will–or should–close. Law schools themselves have a great interest in this. Some are worrying if it will happen to them. Others wonder whether the closure of competitors will ease their own distress.

The latter line of reasoning concerns me. Over the last few years, I’ve heard both academics and practitioners suggest that, once the market closes the weakest law schools, all will be well for the remaining 50, 100, or 150 schools. This analysis, I’m afraid, is too simplistic for the market we face.

As I explain below, at least five forces will keep most law schools in business. Many of these schools will be smaller than they were in 2010, with fewer students and smaller faculty/staff rosters. They will, however, survive–and will compete aggressively for students, employer connections, and new resources. That outcome offers mixed comfort for law schools. Some will do relatively well in this new competitive environment; others will limp along in a much leaner state.

For students, employers, and clients, this outcome is promising–more positive, actually, than the prospect of wholesale law school closures. The competition among law schools will make them much more responsive to students and the workplace. Over the last two years, many schools have already lowered effective tuition, changed curricula, and cultivated stronger relationships with employers. These changes, I predict, will not be short-term solutions that we discard “after the market shakes out.” Instead, they are the beginning of a fundamental shift in legal education that will be fueled by ongoing competition among schools.

The market works, but it will follow a peculiar path in legal education. Rather than closing a large number of law schools, the market will incite aggressive competition among schools that have been told by their universities: “We’re not going to close your doors, but you have to sustain yourself financially.”

Why Won’t Law Schools Close?

Law schools undoubtedly have been graduating more JD’s than the US economy needs. Students have gotten wise to that fact, and law school applications have plummeted. Why, then, won’t the weakest fifty–or one hundred–law schools simply close? That’s what would happen in many industries. Higher education, however, has several features that will keep most law schools alive.

1. It’s very hard to close a public law school. Most observers agree that each state will want to preserve at least one public law school. Those schools offer access to legal education for state residents, a supply of locally trained legal talent, and a certain measure of prestige. Very large states might rationally maintain a few public law schools to fill those needs.

What about all of the other public law schools–the second, third, or fourth schools in a state? A rational legislature might close some of those schools in response to dwindling demand for JD’s. Most of these schools, however, reflect strong regional interests within the state. Some reflect differing racial or ethnic populations. Do you think Ohio will close its law schools in Cleveland, Toledo, and Akron, telling those students to apply to the higher ranked public schools in Columbus or Cincinnati? That command would elicit the same reaction as Marie Antoinette’s famous exhortation to let the peasants eat cake.

If a public law school exists, it has strong political forces behind it. Public law schools, I predict, will close only if the political dynamics of a state have changed so much that its constituency no longer enjoys political clout. They will not close simply because the demand for JD’s has declined.

2. Law schools have powerful alumni. Recent graduates may be suffering in the marketplace, but most schools have at least a handful of wealthy and/or politically connected alumni. At both public and private schools, these graduates will pressure the board of trustees, president, provost, development office, and others to maintain the law school. At public schools, these alumni will also weigh in with the legislature and higher education system.

It won’t take many alumni to keep a law school open–especially since these alumni often matter to the full university. Some of them contribute money to other departments; others have careers that reflect well on the university as a whole. Still others are connected to community leaders, government officials, and business moguls who matter to the university. Universities will not want to alienate these alumni.

3. Law schools are part of a product line. Businesses sometimes maintain an unprofitable product as part of an overall marketing strategy. A product may build brand loyalty, or complete a product line, even though it does not generate profits of its own. Drugstores, for example, sell a full range of medications–not just the most profitable ones.

No university teaches every subject, and there are many superb universities without law schools. The universities that already have law schools, however, think of them as part of the product line. Top research universities (those ranked very high or high in the Carnegie classification) pride themselves on their comprehensive research programs. Those universities are likely to maintain existing law schools as part of their commitment to comprehensive research.

Law schools located at other universities, ironically, may be even less likely to close. At those universities, which grant fewer doctorates and attract less research funding, the law school may represent a larger percentage of the university’s research activity and academic reputation.

4. Law schools are cheap academic units to operate. The first three forces would have limited impact if law schools were expensive to maintain. No university will hemorrhage dollars to sustain a law school. Law schools, however, are remarkably cheap academic units.

We don’t require laboratories or expensive equipment. Our students use simple classrooms, and our faculty conduct their research with desks, modestly powered computers, and an internet connection. Our faculty earn high salaries, but they are no longer soar as high over the rest of the university; check out medical, business, and engineering salaries–as well as the ones paid to star professors in the arts and sciences.

We offer sizable scholarships to attract top students, but we rarely offer full tuition waivers plus living stipends–the gold standard demanded by top graduate departments. We employ some writing instructors and clinical faculty, but those numbers are tiny compared to the armies of composition instructors, math instructors, lab supervisors, and other teaching assistants required in other parts of the university.

Even our clinical education is cheap. Colleagues from Dentistry and Veterinary Medicine visited me recently and were puzzled when I told them that my office was located in the law school’s clinic. “This can’t be a clinic,” they exclaimed, as they looked at a few offices, computers, tables, and a conference room. I reminded them that lawyers don’t need x-ray machines, MRI’s, or sanitizing equipment–much less stables, food, and handlers to care for our clients.

We think of law schools as expensive because we have set our tuition so high. And, of course, we are more expensive than other units in some ways: we usually don’t charge for our clinical services, and we don’t attract the multi-million-dollar grants and contracts that grace other departments. On balance, however, we are very cheap departments for a university to maintain.

5. Law schools can reduce their costs. As icing on the cake, there is still plenty of room for law schools to reduce their costs. Other parts of the university–particularly the arts and sciences–have been cutting budgets for a long time. Most of their doors remain open, and law schools have a long way to go when it comes to trimming budgets in the face of market pressure.

Tenured faculty are expensive, but they retire or take other positions. Some public law schools are benefiting from state-wide pension changes that are luring faculty into retirement. Schools don’t have to replace all of these departing faculty–especially if enrollments fall–and they won’t. For the faculty who remain, salary increases will be lower and teaching loads may increase.

Law schools will also discover that they can make do with fewer staff, fewer conferences, less travel money, and smaller libraries. Expenses that once seemed essential to satisfy faculty, secure prestige, and fight for US News rank will seem less essential when schools have to meet reduced budgets. Extras don’t matter as much when the first priority is to stay in business.

Budget cutbacks won’t affect a few highly ranked schools, which may be able to continue business as usual. But cutbacks will occur at schools throughout most of the law school hierarchy. My point here is that there is plenty of room to cut law school budgets, and that our competitors will choose that course rather than quietly go out of business.

The Bottom Line

A few law schools, especially stand-alone ones, may close their doors in the coming years. Most law schools, however, will remain open. Their universities will tell them: “Stay in business, but cover your costs.” This will be tough to do at a time when applications are declining and students are increasingly price sensitive. To balance budgets, schools will cut costs, modify curricula in ways that appeal to students and employers, build stronger relationships with employers, and seek new sources of revenue. All of this will happen, not in a stop-gap manner while we wait for the old days to return, but as part an ongoing, highly competitive environment. Most schools will survive, but the happiest and most prosperous ones will be the ones that appeal most to students and employers. In its own way, the market will speak.