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Deal Professor

Law Schools and Industry Show Signs of Life, Despite Forecasts of Doom

Credit...Harry Campbell

Law school enrollment has plummeted to the lowest level in decades. If a bottom has been reached, is now a good time to go to law school?

Some say no — not now and possibly never. The legal market, they argue, has fundamentally changed, meaning that many of the legal jobs of years past are gone forever.

Several new studies, however, point to signs of vigorous life in the legal job market, at least toward the higher end.

First, it needs to be recognized that the recent decline in law school enrollment is partly a problem of the schools’ own making. Some law schools have fudged the numbers on graduates’ employment to manipulate The U.S. News and World Report annual rankings. At the same time, there has been a growing awareness of law school graduates who have no job but a mountain of student debt. It is hardly surprising that there has been intense criticism from blogs and other outlets.

Students fled, and law school enrollment plummeted. In 2010, enrollment peaked at 52,488 before falling to 37,924 this year, a 27.7 percent decrease, according to the American Bar Association. Here is where it starts to look a bit better for law schools.

Early figures show that applications for this year may be stabilizing. Prof. Brian Leiter of the University of Chicago Law School predicts a “bottom.” Applications are down only 2.9 percent so far this year from last year, according to the Law School Admissions Council, and it seems as if the law school entry class is likely to stabilize around 37,000 students — or back to 1970s levels.

The smaller classes will begin graduating this year and continue to shrink through 2018. Fewer lawyers are likely to mean better first-job numbers, assuming the employment market does not keep declining.

And indeed, green shoots can be seen in the legal industry.

The top global law firms ranked in the annual AmLaw 100 survey experienced a 4.3 percent increase in revenue in 2013 and a 5.4 percent increase in profit. Bigger firms are hiring. Above the Law, a website for lawyers, recently reported a rising trend for lateral moves for lawyers in New York.

At the top law schools, things are returning to the years before the financial crisis. Last year, 93.2 percent of the 645 students of the Georgetown Law class of 2013 were employed. Sixty percent of the 2013 graduates were in the private sector with a median starting salary of $160,000. The top 10 schools have even higher employment rates for the class of 2010, and employment statistics for 2014 are expected to rise. (Full disclosure: I teach at one of those top 10 schools and so am biased here.)

This is not to say that things are all rosy. The National Association for Law Placement found that in 2013, only 86.4 percent of law school graduates were still in school or had a job, down from a 25-year high of 91.9 percent in 2010. The association also noted a shift in employment from big firm jobs to lower-paid jobs at small firms as well as to jobs that did not require a law degree.

A new study, however, provides a compelling reason to be optimistic about a career in law. Two professors, Frank McIntyre and Michael Simkovic, recently released a study of lawyer salaries from 1984 to 2013 with the goal of seeing whether students who graduated in a down economy suffered long-term negative effects.

The co-authors found that unemployment in a bad economy hit lawyers in the first four years of their career, lowering the amount of money they made relative to similarly educated people who did not go to law school. Yet law salaries can climb rapidly. In another paper, the two authors found that such acceleration in compensation results in a premium of $1 million for lawyers over their lifetime compared with those who did not go to law school. Based on this growth and the ability to eventually find lucrative employment, the two authors found that over a 30-year period, the hit from early unemployment and a bad economy fades as times get better and graduates gain experience. Indeed, the lawyers caught up so much that the two found that “timing” law school — starting law school in a bad or good economy — did not matter.

Another study released last fall by the American Bar Foundation supports the authors’ findings. The foundation’s After the JD project surveyed lawyers who passed the bar in 2000 to assess their career trajectory 10 years after graduation. The foundation found that as of 2012, lawyers had high levels of job satisfaction and employment as well as high salaries. Even graduates with low grades from low-ranked law schools had median incomes in the $85,000 to $95,000 range. This follows the fact that law firm salaries have risen by more than inflation since 1995, according to the National Association for Law Placement.

Even as signs point toward improvement, forecasts of doom for law schools continue to emerge. Dorothy A. Brown, an Emory law professor, recently wrote that “law schools are in a death spiral” and that “in three years, a top law school will close.”

Her solution is to turn away from legal scholarship and reduce professor research budgets to further lower tuition.

Never mind the fact that not a single law school has closed so far or that law schools have been racing to shed professors and staff as well as tuition. The University of Iowa, Roger Williams University, Brooklyn Law School, Pace University, Penn State and others have cut tuition, while faculty buyouts have become more frequent. Sticker price discounts on even reduced tuition are common.

Law schools have tremendous survival tendencies. I have a bet with Jordan Weissmann at Slate that not a single law school will close. So far, we have had one merger — between William Mitchell College of Law and Hamline University School of Law — which satisfies Mr. Weissmann of Slate that he has won the bet. But there have been no real closures. And so, while my crystal ball is as good as anyone’s, I’m still betting there will be no such closures, and certainly none by top law schools.

The most compelling argument against going to law school is a structural one. Yes, the job market goes in cycles and we may be at the beginning of an upswing, but, the argument goes, the market itself has been transformed.

For one, corporate in-house legal teams are growing, replacing the work that outside firms once did. Microsoft, for example, has more than 500 in-house lawyers. More significant, automation is hurting small practitioners and eating up the bread-and-butter work of big firms, like discovery review.

Big firms are quite profitable, but in exchange for the profitability, there is more hard work and uncertainty about job security, even for partners.

Still, it is hard to see lawyers going away in the United States economy. Whether or not you like it, their importance is greater now in terms of filling needs for compliance and regulation.

So, there will be disruptions, but this is likely to be a case of lawyers shifting from law firms to corporate departments and compliance becoming its own industry. Solo practice, meanwhile, will become more difficult because of automation. Again, these changes are likely to hit students at lower-tier schools harder than those graduating from the top schools.

Twenty years from now, whether the economy is up or down, there will still be lawyers, and plenty of them.

Steven Davidoff Solomon is a professor of law at University of California, Berkeley. His columns can be found at nytimes.com/dealbook. Follow @StevenDavidoff on Twitter.

A version of this article appears in print on  , Section B, Page 5 of the New York edition with the headline: Despite Forecasts of Doom, Signs of Life in the Legal Industry. Order Reprints | Today’s Paper | Subscribe

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