The economics of choosing to go to law school
There comes a point in every person’s childhood where they ponder if law is the right profession for them. Many go on to pursue this track and hold onto the notion of becoming a lawyer as their dream, without understanding what the practice of law entails. If we think about the extent of which popular media distorts our impression of lawyers, this really isn’t that hard to believe. From best-selling novels such as To Kill a Mockingbird, to popular TV series like Suits, and even hit video games like Phoenix Wright: Ace Attorney, we are continuously exposed to false representations of the ‘glorified’ lawyer. Along with a plethora of other reasons, this has induced a huge spike in demand for placements in law school compared to just a few decades ago. Universities have capitalised on this demand by either accepting more students or opening their own law schools; the University of SA have just recently opened their School of Law in 2008 . Now with 36 law schools in Australia alone, pumping out thousands of graduates every year, the competition to attain the status of the lawyers in fiction is fiercer than ever. Is it an economically-sound decision to choose to go to law school – this is the question I will be attempting to answer throughout this article.
Firstly, it should come as no surprise to anyone that there is a colossal oversupply of law students relative to actual law jobs available. The market for law took a huge hit in the wake of the GFC, with firms drastically reducing their intake of junior associates and clerks; some even froze recruitment altogether. This reduction of vacancies in response to the reduced demand for services extends to not only corporate law firms, but also to investment banks and accounting firms, other areas where lawyers find work. Compounded by the fact that there are approximately 28,000 law students in a population of 22.62 million – that is, 1-in-every-808 people is studying law, it is no wonder that future prospects for law grads aren’t particularly bright. Statistics have shown that of 1313 graduates surveyed between the end of 2010 and 2011, almost two-thirds were unable to find work as lawyers within four months of finishing their degrees. Heather King, La Trobe University’s director of undergraduate studies, says:
“It’s a well-acknowledged fact that 40-50% [of law grads] will not end up in a traditional law practice…law firms are not taking on the same numbers of supervised workplace traineeship positions…there’s intense competition.”
The sad truth of the matter is unless you attend a top law school, have stellar grades and boast outstanding extra-curricular achievements, the chances of finding employment in a medium-tier firm is slim at best, let alone top-tier. While it’s true that the number of law school entrees have fallen 3.4% in the last year, this is far too little to compensate for the excess of qualified and unemployed law graduates still searching tirelessly for a job.
Now let’s consider the situation if you were one of the top dogs of your class and secured yourself a job after graduation. You’d expect to be paid handsomely for all the hard work and labour you invested into however long years spent in law school? Apparently it’s not quite as high as one might think. According to statistics gathered from the ALSA, the Australian Law Students’ Association, the starting salary for male graduates is $55,000, while females earn a modest $50,700.  Gender inequality aside, this figure is not at all remarkable when compared to the starting salaries of other bachelor degree graduates.
Note however that these figures aren’t indicative of the salaries of law graduates who find work as lawyers, since only about 50% of a graduating class ever end up working in the law sector. The students who are fortunate enough to be recruited by top-tier law firms would be paid substantially higher – but at what cost? Let’s assume that a first-year associate of a top-law firm earns 100k a year. This sounds rather impressive, until we break down where this money comes from. For the large corporate firms where you will find these six-figure starting salaries, almost 2,000 billable hours per year is the requirement from their associates. These are the hours that you can bill directly to a client, not the hours you are in office. According to author Tucker Max, a JD graduate from Duke Law School, a ‘smart attorney with a solid work ethic typically takes about 10 hours in the office to accrue 7 billable hours’.  This amounts to a minimum of approximately 2,700 real hours worked, equivalent to working 7.4 hours a day EVERY day of the year. Under our earlier assumption of 100k a year, this is equal to earning $37 an hour. There are many other careers which earn similar amounts or more without needing to sustain 100k in debt or 3 years opportunity cost.
The logical conclusion one might infer from reading thus far would be that it is not an economically-sound decision to go to law school. While I’m not advocating that this is certainly the case, the argument for it is rather compounding. Nevertheless, it would be remiss to deny the factors which influence our decision that cannot be measured statistically. The extent of which we desire to become lawyers is ultimately what counts the most. The question that you should ask yourself before you go to law school is, “why do you want to go?” In the face of making an economically-irrational decision, if your answer was a resolute “I want to become a Lawyer”, then Law School is the still the right decision for you.