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When the going gets tough, the tough go to law school. For most of the past decade, as America crawled out of the Great Recession, law school applications overall were in decline, and we had little reason to think they’d bounce back any time soon.
And then, as is so often the economic story these days, along came COVID-19. Law school applications leapt 13% this year. The industry hadn’t seen that kind of increase in interest since 2002. To put it in perspective, in 2002 Lebron James was still in high school, Amazon stock was under $20, and there was only one movie in what would become “The Fast And The Furious” franchise. This is a jump worth noticing.
Whether this increase is a good or bad thing is a matter of perspective.
We’ve Seen This Story Before
The first great boom of law school applications took place during the early 2000s, peaking in 2004. Part of the rush was likely the surge of demand for legal services that had pushed first-year associate salaries to dizzying heights. But we were also experiencing the economic hangover of the dot-com bubble crashing, the great accounting scandals of Enron, WorldCom, and Arthur Andersen, and the uncertainty of a post-9/11 world. When the world looks crazy and uncertain, law school can seem like a great place to hide out for a few years, let things settle down, and earn a high-paying degree in the meantime.
The Great Recession of the late-2000s and early 2010s had the same effect, once again driving new students into the safety of academia while letting the uncertainty of the broader world shake itself out. Whereas the prior law school boom had caught the industry somewhat by surprise, this time law schools were ready and more than happy to meet the demand. New schools had been founded around the country, and average tuition costs had soared to take advantage of the high wages graduates were commanding. What’s wrong with paying $200K for a law degree if you can knock that bill out with your first couple years of bonuses?
The law school industry appeared to be in a bubble that, if not popping, at least had a slow leak. The numbers of people sitting for the LSAT or applying for admissions dropped steadily over the 2010s, and marginal schools struggled to fill their seats with qualified applicants. Over a dozen law schools closed from 2008 forward, and many others have struggled to maintain their ABA accreditation amid increased scrutiny and several highly publicized scandals. Some for-profit law schools reportedly paid some graduates who it knew were unlikely to pass the bar to not take the exam.
Ballooning tuition meant the math on law school wasn’t as attractive as it once was. In one 2018 poll, only 23% of law school graduates said their education was worth what it cost. The law school industry seemed headed for a long, painful, but necessary course correction into some combination of fewer new graduates, fewer schools, and lowered costs of attendance.
Why The Pandemic Set The Law Schools On Fire
The major drivers of the last bouts of two law school admissions mania are all present in the COVID-ified economy. On the one hand, the traditional uncertainty-driven flight to graduate school appears to be in full force. There seem to be at least three other major drivers of the law-school uptick.
First, the practice of law is as attractive as it’s ever been. Law firms have been shocked into modernity, meaning working from home or the coffee shop are more practical realities than ever before. For Millennials and Gen Z members, this new brand of non-stuffy law is enticing — and it certainly brings more stability than that start-up housed in WeWork.
Second, the market is on fire. Demand for associate talent at firms is outstripping supply. Anyone who’s tried to hire a transactional or real estate lateral lately will tell you how difficult and expensive market demand has made that prospect. Starting salaries have soared above $200K and firms are routinely throwing large signing bonuses at top talent. You can imagine college-aged stars reading about all of the money firms are throwing at lawyers and imagining how that could help wipe out their student loans.
Third, the past several years have brought more than their fair share of social and political turbulence. Regardless of your political beliefs, there has been plenty happening in the domestic and international scenes, with law at the epicenter, to inspire people to get their JDs in the hope of making the world a better place.
Are We Actually Learning?
But if law schools were still market-correcting their way out of their last bubble, and a whole bunch of air just got pumped back in, what does that mean for the next few years? Will this rise in law school applications be a good thing or something else?
There are reasons to be optimistic. For one, the market for legal services seems prepped to handle an intake of new suppliers. Associate salaries were creeping up again even prior to COVID-19, suggesting the demand is currently there to support these new applicants. Add to that a surge in pent-up M&A activity, and there seems to be an appetite among large law firms for more lawyers.
But demand was there the past few times we hit this boom-bust cycle, until suddenly it wasn’t. The Great Recession pulled the rug out from under thousands of newly unemployed young lawyers who thought their future was set, and the glut of new graduates who came out over the following years found fierce competition for scarce jobs. All the pain that was experienced correcting from the previous bubble seemed like it was settling down, but now we may be setting our younger generation up for more.
We should also be concerned that this new boom will be an excuse for law schools to ignore the lessons of the previous bust. Any hope there might have been of the cost of school stopping its astronomical rise is likely out the window. Attendance at a top-flight law school can run over $300K between tuition and cost of living, but if all the seats are still full, why would schools ever lower the cost? Getting that high-paying law firm gig after graduation is more crucial than ever. An unexpected downturn could do more damage to a new graduate or to our industry than we’ve ever experienced before.
What Does All Of This Mean?
The thing about booms and busts is, for all the thrash and volatility around them, the fundamentals of our industry still hold true.
To law firm leaders, I’d urge caution and common sense. Don’t go hiring associates if you view them as expendable if demand decreases tomorrow. If you treat lawyers like commodities, it will catch up with you; your firm will pay a price. Find your needs, fill them with good candidates, and then commit to helping those candidates grow into tomorrow’s profitable partners. No one is expecting you to know the future or to throw economics out the window, but you shouldn’t proceed with a plan of mass downsizing at the next downturn. Give associates somewhere to grow and live, not just bill. Remember, these are real people with lives — not just vessels for pumping out billable hours.
That same call for caution and common sense applies to law school applicants. Ours is a great profession that I’m proud to say is becoming open to more people from all walks of life than ever. The practice has changed in so many ways in the past few years, generally for the better, but you should understand that passion and writing a good brief is not enough. In today’s world, entrepreneurship and self-advocacy are essential. If you’re ready to hustle hard and craft your spot in the world, there’s no better place to be.
James Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore Craig. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. As a practitioner, he and his colleagues created and run a tech-based plaintiffs’ practice and business model. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.
