Friday, May 1, 2015

Jobs for Attorneys


Standard Occupational Classification #23-1011 Lawyers

SOC Definition -- Lawyers #23-1011 Represent clients in criminal and civil litigation and other legal proceedings, draw up legal documents, and manage or advise clients on legal transactions. May specialize in a single area or may practice broadly in many areas of law. Examples of common names in use include Attorney; Real Estate Attorney; Corporate Counsel; Public Defender.

There is a famous line in Shakespeare. "First thing, kill all the lawyers." We have to be glad no one is talking that way now but not everyone feels happy with the modern day legal services industry. People would appreciate lawyers more if they would think about the different legal specialties: bankruptcy, divorce, crime, personal injury, medical malpractice. As we can see lawyers spend their professional life in the middle of somebody else’s argument. Bickering, wrangling, hectoring fill their days. And who ever tries to shore up their morale? Even the winning plaintiffs can be hostile. “I should’a got a better settlement.”

Arguments and other legal business employed 603,300 as lawyers in 2014. Jobs are up since 2000 when jobs were 489,500. The annual average job increase equals 8,127 per year since 2000 at a growth rate of 1.50 percent. The Bureau of Labor Statistics is forecasting job growth for lawyers at 7,480 per year through 2022 with a growth rate of 1.19 percent a year.

It is important to know that only lawyers working as lawyers in jobs at establishments are counted in the totals above. Lawyers can maintain bar membership, but if they work as managers or in another occupation their job will not be counted as a lawyer. A 51 percent majority of employed attorneys work in the Legal Services industry, another 18 percent work in government with small percents scattered in many other industries working as in-house counsel.

The totals above do not include lawyers working as self-employed attorneys in their own business. They have to be counted separately because the Bureau of Labor Statistics checks all their employment numbers with the unemployment insurance rolls. The self employed with no payroll do not have to be in the unemployment insurance system so they cannot be checked and counted in establishment employment, but have to be counted separately. The self-employed census estimate is 166,218, which brings the total of lawyers doing lawyer’s work to 769,528.

Job openings for establishment jobs give a better measure of new hiring than job growth. Job openings are job growth and the number of net replacements. Net replacements count people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be job growth. Job openings for lawyers are forecast to be 19.6 thousand a year through 2022.

The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual wages by 2080 hours.

The entry wage for lawyers in the national market equals the 10th percentile reported as $55,400 in 2014. The 25th percentile wage equals $75,630. The median wage is $114,970, the 75th percentile wage equals $172,540 and the 90th percentile wage is $187,200.

The wages of lawyers have not kept up with inflation during the last decade. For example, to have the buying power of the 2006 median wage of $102,470 in 2014, the lawyers wage would need to be $120,329.10. In stead it was $114,970, a 4.45 percent decrease in the real wage for those six years.

The wages of lawyers have not kept up with inflation from 2013 to 2014. For example, to have the buying power of the 2013 median wage of $114,300.00 in 2014, the lawyers wage would need to be $116,154.20. In stead it was $114,970.00, a 1.02 percent decrease in the real wage for those six years.

Back in Abe Lincoln’s day, Abe and other aspiring lawyers studied the law working in law offices and learned through the mentoring system. Now we have three years of postgraduate law school and the summer bar exam. This system helps keep people out of the work force a full seven years and generates jobs in law schools.

The National Center for Education Statistics (NCES) reports degree data for law schools as well as the American Bar Association (ABA). Both report recent law school degree totals for 205 accredited law schools to be in the 46 thousand range. The ABA reports 43,979 degrees for 2011, 46,364 for 2012 and 46,776 for 2013. Degrees can be compared with job growth and openings. With 46,776 law degrees in June 2013, the last year of complete degree data, the ratio of relevant JD degrees to openings equals 2.39, or 46,776/19,600, assuring a large surplus of qualified candidates to fill job openings.

The ABA also reports current tuition for accredited law schools, which tends to be in the $30,000 range, but varies widely. Some tuition is under $1,000 such as the University of Dayton with reported tuition of $910, while at prestigious Yale tuition rings in at $43,750. High law school tuition has the potential to make law school quite profitable, but colleges including law schools do negotiate reductions for especially promising students.

The difference in tuition puts significant but different financial pressures on graduates. Investing three years worth of $43,750 tuition at 4 percent a year would generate $276,665.80 after 20 years. Current interest rates are less than 4 percent but long term stock market returns are higher so 4 percent represents a defensible middle of the road return. It will be necessary to earn $19,574.57 a year more in wages to justify the tuition investment, again over 20 years and discounting the additional wages at 4 percent interest and annual compounding. Thanks go to Excel spreadsheet functions for these calculations.

Graduates of the high priced and well known schools like Yale and Stanford can find jobs in the largest law firms at salaries of $140,000 to $160,000, which is enough to make the three year investment in tuition payoff quite well. Large law firms pay better than smaller law firms, typically at least double small ones. Recent data show 21 law firms have more than 1,000 attorneys and a couple have over three thousand, but there are typically no more than 300 United States law firms with more than a hundred attorneys.

While the newly hired associates at large law firms can expect $140 to $160 thousand salaries, their numbers are small compared to the number of graduates each year. Large law firms can be expected to employ 60-65 thousand associate attorneys, the number varies some year to year, but that represents no more than 10 percent of jobs for associate attorneys.

The 10th percentile wage of $55,400 should be thought of as a realistic entry wage for new law school graduates. The lower entry salaries for most of the graduates makes the law school payoff more uncertain. A safe calculation should compare three years of law school tuition with any increase in salary based on a wage of $45 to $65 thousand. As of 2014 it is quite possible that law school can be a bad investment.

To be a lawyer representing clients before a court requires admission to a state bar association and the payment of bar dues. Some lawyers decide to practice law in several states but that requires passing more bar exams and paying bar dues to multiple state bar associations. Bar association dues are like the union dues paid by machinists or electricians who have to demonstrate their skills to belong to the International Association of Machinists, or International Brotherhood of Electrical Workers.

People in associations with common skills, like bar associations for lawyers, have successfully cultivated a different image for themselves than the public perception of people in unions like machinists or electrical workers. Machinists and electrical workers join a union. Lawyers support a prestigious professional association, but lawyers, machinists, and electrical workers have an identical set of needs and goals.

Each has a need to assure that people who enter the practice of law, machinist, or electrician have a common set of essential skills. Imposters are bad for practitioners and consumers alike, but the time and expense learning the skills of a lawyer, machinist, or electrician has to be covered in higher wages. Partly higher wages give the incentive to learn new skills, but incentive alone is not enough. That is because not everybody can afford the time and expense it takes to learn a skilled profession unless they can pay for the investment later with higher wages.

The median wages reported for lawyers are among the highest median wages in the Occupational Employment Survey. Physicians are generally higher, and a few other occupations like chief executive and selected actors and entertainers. Trouble is lawyers who are already lawyers have two reasons to limit entry. In addition to maintaining high skills those already qualified and licensed have the incentive to prevent too many new entrants from lowering wages.

In America, law courts do not allow partial license that would let someone represent others in divorce law, or real estate law, or other legal specialty. The requirement for a three year law degree, the bar exam and bar dues as prerequisite to represent anybody amounts to a one size fits all lawyer that limits the number of lawyer jobs. Comparison with court practices in other countries might show that America’s restrictions are not necessary, except to limit entry and keep earnings higher for lawyers.

Law firms usually charge clients by the hour with charges of $300 an hour or more, which limits legal access to the well-to-do and corporations and government, but it also limits jobs. The Legal Services industry employment in all its occupations has remained at about 1.1 million since about 2002 with a 20 year record of slow growth. Actually it is .72 percent a year since 1990; .36 percent a year since 2000; -.75 percent for last year 2013 to 2014; the worst record among professional service sub sectors. America needs jobs, more legal services and a broader approach legal representation could help.

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