According to the Law School Admissions Council, applications to law school were down 20 percent in 2012 compared to 2011, and down 38 percent if we take 2010 as the reference year. This is a very dramatic drop, and according to a recent New York Times article, this is likely to lead to the smallest graduating class since 1977.
Are prospective students justified in avoiding law schools? While it is hard to give a full analysis of the cost and benefit of law school, CareerBuilder’s Supply & Demand and Compensation Portals allow us to look at job and compensation trends from 2010-2012, which is precisely the period over which applications to law schools fell so dramatically.
Using the Supply & Demand Portal, we can see that the number of attorney jobs has been fairly stable over the past two years:
On the other hand, the supply of attorneys looking for jobs has been steadily increasing, as shown by the graph below:
When the supply of lawyers goes up and the demand stays pretty stable, the result is an increase in the labor pressure, meaning that there are more job seekers for each available job opening. This is illustrated by the graph below.
The increase in the labor pressure was particularly marked in the second half of 2011, and this may in part explain the 20 percent decline in law school applications seen between 2011 and 2012: As prospective students hear about the difficulty of finding jobs as an attorney, they are probably getting cold feet.
Basic economic theory also tells us that when labor pressure increases, compensation tends to decrease. When there are more job seekers competing for the same number of attorney jobs, they are at a disadvantage in negotiating over salary. Consistent with this story, when using the compensation portal, we find that while the average compensation of attorneys was $88,662 from 2010-2012, this drops to $83,489 if we focus on only the last six months of that period.
Using CareerBuilder data, we can show that the market for attorneys has deteriorated during this time period, with more candidates chasing roughly the same number of jobs. This has also likely led to a decrease in compensation. These trends make law school a less attractive proposition from a financial standpoint and can contribute to explain the spectacular drop in applications to law schools registered in the past two years.