HIGHER ED BUBBLE AND LAWYERS PART 1 – Readers of Instapundit are well apprised of the higher ed bubble, and especially the law school version. My book is called Glass Half Full, and I swear the last third of the book is optimistic, but the first chunk lays out the current wave of bad news for lawyers and law schools.
The easiest way to describe it is with my favorite graph from the book. I love this graph because it tells you everything you need to know about the business of law over the last 45 years. Every year since 1967 the IRS has collected and released data about the tax returns of two different groups of lawyers: solo practitioners and law firm partners. The categories are a little wonky, because “law firm partner” includes two person partnerships in Ames Iowa and wall street mega firms, but this type of longitudinal data is a goldmine even if it has a few warts. Here are the different earnings (in nominal terms) from 1967 to 2012:
The first thing to note is that life has sucked for solo practitioners for years. The press treats 2008 as the start of the downturn for lawyers because that is when BigLaw started to hurt a little, but if you’re an “ordinary” lawyer you’ve been swimming upstream since at least the 1980s. Adjusted for inflation, in 1967 American solo practitioners earned an average of almost $75,000. In 2012 that number had fallen to $49,130, a 34% decrease! Most of the erosion has come in the last 25 years.
And $49,130 is not the starting salary for those lawyers. It is the average income of all of the 354,000 lawyers that filed as solo practitioners in 2012, including those that had practiced law their whole lives. In 2009 the Alabama Bar Association polled their members on their earnings. 37% of Alabama lawyers earned under $50,000 and a shocking 23% earned under $25,000 a year! Almost a quarter of the lawyers surveyed, who had practiced for an average of 15-20 years, earned less than $25,000. To put these numbers into perspective, the average starting salary of a 2012 college graduate was $44,000 and the median household income in the U.S. was over $51,000. Blech.
Yeah, I know, boo hoo for the poor lawyers, but still. These lawyers are on the front lines of the higher ed bubble: they went to law school (and paid an ever growing amount of tuition) on the understanding that lawyer unemployment was low and that lawyers earned, at a minimum, a healthy middle class income. Not so true these days.