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Too Many Lawyers and Too Much Work

The American legal community is facing a dilemma. There is a surplus of law school graduates looking for work and unable to find employment as lawyers, while, at the same time, a large percentage of the middle and working class are unable to obtain legal services at a price they can afford. Basic supply and demand theory posits that there should be an adjustment in price so that the excess lawyers will find work providing services to those people who can only afford to pay less. However, there seems to be a price below which lawyers would rather not work as lawyers, but would rather earn their living elsewhere. As a result, there is point on the demand curve below which the underserved public remains underserved.

What are the causes of this apparent unwillingness of lawyers to work below a certain level of compensation? A review of the literature reveals several factors.

First, is the high entry costs to enter the profession. In almost all instances a lawyer needs a four year college degree and then three years of law school. In addition to the time and effort needed to get these degrees, it also costs a great deal of money. According to the popular press, the average law school graduate has about $100,000 of school debt at the time they graduate. Thus, in addition to having to get a reasonable return on the investment made in obtaining the degree, the graduate has a minimum earning requirement just to service the debt.

Second, is the level of compensation available in other lines of work. Because of the high entry requirements, lawyers are highly educated (or a least highly degreed). As a result, they meet or exceed the entry requirements for many other fields of endeavor. Also, law school teaches skills that can be transplanted to many occupations other than law. In fact, according to the popular press, a significant number of law school applicants do not intend to practice law, but want to use the training to further their careers in other fields. If, after a search, a graduate cannot find work as a lawyer at an adequate compensation, there are other opportunities for remunerative work elsewhere.

Third, is the integrity of the profession. Given the training and skill necessary to be a lawyer, legal services have a certain intrinsic value. According to economic theory, if a lawyer has a day without prospect of income but with fixed expenses, any income should be acceptable – so why not prepare an estate plan for $50. For one, the lawyer would now have set a new “going rate” for such work, which would adversely affect the market going forward. But in addition, there is a price so low that it appears to cheapen the value of all the work that becoming a lawyer and practicing law entails. It is a psychological floor.

So where does that leave us in solving our dilemma? It seems that much of the underserved community will remain underserved no matter how many lawyers are graduated. The next column will discuss some possible solutions.