Downward graphThis quick article is the next post in my discussion on the state of the legal profession halfway through 2017. My last article looked at how attorneys are being hurt by actions of various State Bars. It’s important that the profession and Bar Associations embrace technological change and see it as a new avenue for delivering legal services. Instead, some State Bars are taking steps to resist change and such steps never work out well for those doing the resisting. In this post I’ll take a quick look at why demand for legal services is quickly, quickly, quickly (quickly) declining. Let’s get to it.

Earlier this year I discussed how cultural changes were reducing the need for lawyers and how technology was eliminating the demand for legal services. These articles largely focused on how quickly we’re seeing a reduction in the number of divorces being filed, the number of criminal charges being filed, and how automation is reducing the need to have an attorney for relatively simple tasks. These are issues which are going to impact solo attorneys and small firms (those with under ten lawyers). One thing I didn’t talk about earlier this year was the extent to which demand is drying up for those who practice in “big law” offices. This declining demand will not only hurt the larger national firms, it will also impact the smaller firms. The reason for this is the fact that someone who would have been an associate in a large national firm will, instead, have to open up a solo operation and create more competition for smaller offices. So small firms are being hit by declining demand in their core practice areas and they will also be hit by increased competition caused by the decline in demand for services offered by “big law.” The decline in demand for large firm services is being driven by one simple thing – automation.

The tasks which lawyers perform in large law firms are quickly being eliminated. Let’s look at a few examples. In June of 2016, JP Morgan launched its “Contract Intelligence” software. In a nutshell, the company is using AI backed software to interpret commercial loan agreements. This is eliminating roughly 360,000 hours worth of annual work that performed by attorneys and loan officers1. Another large company, McDonald’s is among the many fast food chains that are replacing human workers with automated kiosks. By the end of 2017, the company will be reducing the use of cashiers in roughly 2,500 restaurants2. This will eliminate a large number of wage & hour disputes, legal work related to workplace regulation compliance, and other legal issues (since machines don’t get tired, require breaks, or file complaints). A third example is the collapse of retail stores in the wake of online shopping. Store closings, again, lead to fewer of the legal issues generated by having a large workforce. I mention these examples because large companies are the types of clients often associated with firms in “big law.” As these companies consume fewer legal services, demand for the services of large firms will decline. This creates more competition all the way around.

Want proof of the effect of automation on the workplace? In 1997 there were 80,680 complaints filed with the Equal Employment Opportunity Commission3. Twenty years later, in 2016, the number of annual complaints had only climbed to 91,5034. So in twenty years, with a much larger population, the number of workplace disputes in the United States only increased by 13.4 percent. During those same twenty years the number of attorneys in the country increased by 38 percent5. Last time I checked, when the amount of work for someone to do only goes up by 13 percent, but you have 38 percent more people to do the work, it’s not good for the workers (the lawyers in this instance). Keep in mind that demand for other legal services (divorce, criminal charges, etc.) have also been declining during this same time frame. The facts are simple, automation is eliminating the issues which cause legal problems for large companies (labor disputes being just one example of such problems). This reduces the demand for the services of national law firms. At the end of the day, this isn’t healthy for the legal profession.

What are your thoughts on how automation, in regards to the overall economy, will reduce demand for legal services? Please chime in through the comment form below.

References:

1JPMorgan Software Does in Seconds What Took Lawyers 360,000 Hours, accessed at: https://www.bloomberg.com/news/articles/2017-02-28/jpmorgan-marshals-an-army-of-developers-to-automate-high-finance

2McDonald’s hits all-time high as Wall Street cheers replacement of cashiers with kiosks, accessed at http://www.cnbc.com/2017/06/20/mcdonalds-hits-all-time-high-as-wall-street-cheers-replacement-of-cashiers-with-kiosks.html

3 – Charge Statistics (Charges filed with EEOC) FY 1997 Through FY 2016, accessed at: https://www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm

4 – See citation 3

5ABA National Lawyer Population Survey, accessed at: https://www.americanbar.org/content/dam/aba/administrative/market_research/Total%20National%20Lawyer%20Population%201878-2017.authcheckdam.pdf