Declining Enrollments

November 24th, 2013 / By Deborah J. Merritt

On Friday I posted a projection of when the number of JD graduates might decline sufficiently to match available jobs. The calculations were very rough, based on assumptions tendered by others. However one varies the assumptions and calculations, though, one message is clear: Declining law school enrollments offer some hope to prospective lawyers, but bad news for law schools.

Successive Declines

First-year enrollment declined 7.2% between fall 2010 (52,488) and fall 2011 (48,697). The following year, in fall 2012, it declined another 8.7% to 44,481 students.

We don’t yet have statistics on the number of first-year students who matriculated this fall. We do know, however, that the number of applicants for the current 1L class declined to 59,426, a 12.3% decline from the previous year. Projecting an 8% decline in matriculants for this year, therefore, seems appropriately conservative. Using that estimate, about 40,923 1L’s are currently preparing for law school finals.

Three years of successive decline add up. In fall 2010, law schools were dreaming of revenues based on 52,488 entering students per year. Now we are looking at 40,923. That’s a decline of 22.0%–more than one-fifth in three years. Those empty seats, of course, generate no JD tuition.

To match graduates to available jobs, moreover, we still have a long way to go. The Class of 2012 found only 30,453 full-time, long-term jobs that required bar admission or benefited from a JD. Assuming a 10% attrition rate, as I did in Friday’s post, we could enroll an entering class of 33,837 JD students each year to generate an ongoing supply of 30,453 graduates per year.

That number of first-year seats represents a whopping 35.5% decline from our peak first-year enrollment in 2010. If the market is pushing law schools toward an equilibrium in which the number of graduates approximates the number of openings for full-time, long-term, law-related work, legal education faces a dramatic decline in JD enrollment.

Will It Really Be That Bad?

These calculations may be unduly pessimistic for at least two reasons. First, they assume that job openings stabilize at 2012 levels. Opportunities could increase; indeed, many legal educators hope that they will. I would be cautious, however, about assuming significant growth. The above calculations already include “JD advantage” jobs, which serve as fallback positions for at least some graduates. Even if the number of jobs for licensed lawyers increases, those jobs may simply substitute for JD advantage positions. That will be good news for the graduates taking those jobs, but it won’t change the overall number of law-related openings for graduates.

Second, law schools may continue to benefit from optimism bias among prospective students. Employment rates may not need to reach 100% for full-time, long-term, law-related jobs; applicants might return to law schools as those rates reach 70%, 80%, or 90%. Employment needs to rise only to the point at which individual applicants think that they will succeed.

Changes in the quality of law positions, however, may counterbalance any optimism bias. Staff attorneys, contract attorneys, and document reviewers have replaced many conventional associates. Law firms and clients have little reason to reverse that trend; these lower-paid, less secure workers perform their tasks quite adequately. The 2012 count of law-related jobs includes many of these positions, and numerous signs suggest that these jobs will continue to displace more secure ones. Even if the entry-level hiring market expands, applicants may not respond to a 70% chance of becoming a document reviewer.

No one can predict exactly when the number of law school graduates will match the number of entry-level jobs making use of those grads’ JD coursework. On balance, however, it seems that first-year enrollments will have to decline considerably more–perhaps to as few as 34,000 students–to reach that equilibrium. Law schools haven’t enrolled that few 1L’s since 1970, when there were 146 accredited law schools.

Could It Be Worse?

Could the numbers be even worse than the ones calculated above? Could the market push first-year enrollments even lower before the numbers stabilize? Sure. There are at least two ways in which my projections may be overly optimistic.

First, I include JD advantage positions in my count of jobs that will satisfy prospective law students. Although some students seek those jobs after law school, others take them only as placeholders. According to NALP’s 2011 Jobs & JDs report, 46.8% of graduates in JD advantage positions were seeking other work. [These reports are available only in hard copy, and I don’t have the 2012 report at hand, but the figure is likely similar.] As prospective students become more savvy about the legal job market, they may discount the availability of JD advantage jobs. Most of these jobs are open to BA’s. If a college senior wants to do compliance, paralegal, or human resource work, why not go directly into the job market?

Second, the entry-level job market may get worse. The last two years have produced some signs of minor improvement, but those years have also been marked by law schools funding their graduates, career services staff exerting heroic efforts, and alumni pitching in to hire graduates during the critical counting period. How much of the improvement in employment rates stems from those efforts? How long are those efforts sustainable?

Stiff competition, meanwhile, continues to characterize the market for legal services. Law schools have graduated a lot of un- and underemployed lawyers during the last five years. Those graduates continue to swell supply, allowing employers to pay lower wages and offer more contingent work. Competition from foreign lawyers, compliance managers, and other educated non-lawyers persists. Technology will continue to reduce the number of lawyers needed to complete many tasks.

Yes, we will always need to lawyers to perform both sophisticated work and in-person counseling. But there are already a lot of lawyers out there in the market. Being realistic about the current oversupply, together with ongoing trends, it’s possible that there will be fewer full-time, long-term positions for entry-level lawyers going forward.

Uncertainty cuts in both directions, and the current market for lawyers is very uncertain. It is possible that attractive entry-level employment for JDs will fall even below 2012 levels.

Implications

As prospective law students obtain more information about legal employment, the market is working for them: Some are seeking opportunities in other fields, leaving more jobs for their peers who are fully committed to law. This is good news for both the students who choose law school and those who pursue other paths. But for law schools, the prospects are sobering. Enrollments are unlikely to return to 2010 levels; indeed, they are most likely to continue falling. How should schools respond?

Some schools are expanding their LLM programs and targeting foreign students. Others are polishing their JD programs in ways that they hope will give them an edge over competing law schools. If some schools close or shrink enrollments, there will be more students for surviving institutions.

But this is also a good time to rethink the framework of legal education. As I have argued before, a three-year JD offers too much education (at too high a price) for many jobs. At the same time, it provides too little training for other positions. We need to unbundle legal education, much as lawyers have disaggregated legal services, to provide education that better matches workforce opportunities.

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