Why Law Firms Are Failing

This is the next post in my manifesto discussion on why there will be fewer law firms at the end of 2017 then there are at the time of this article. My last article gave an overview of topics this series is going to address and stressed the importance of understanding that no attorneys are immune to the changes which are hitting the profession. It’s also important to understand that the coming decrease in the number of firms, and legal sector employment, is only going to accelerate in the coming years. Those who pay attention to trends and adjust will be fine while those who don’t will be trading their shingle for a sign that looks like this:

closed sign

I’m assuming you don’t want to be hit with such a problem. Since solving a problem requires one to first understand why it exists, I’ll be using this article to explain how the lawyers and the legal profession got into this position. The rest of this series will focus on why the problems are only going to get worse and what you can do about it.

In June of 2015 I wrote on the struggles of the legal profession. That article briefly discussed the fact that the supply of legal services (meaning the number of lawyers) was increasing while the amount of work for those lawyers to do was decreasing. I also expressed my thoughts on why those trends would get worse. Well……those trends have gotten worse. Let’s dive into a deeper level of specifics, then what I discussed in 2015, regarding where we are today.

Attorneys are seeing a reduction in business and income due to the increased supply of legal services

At the time of my 2015 article the US legal services sector employed 1,122,100 people1. As of January, 2017 the sector is employing 1,124,900 people2. So in the last nineteen months the legal profession has added 2,800 jobs. From 2015 through the end of 2016, however, the profession added 14,856 more lawyers3. This results in the amount of work to perform, per lawyer, going like this:

crashing trend

and in an attorney’s looking like this:

attorney with sign

As disturbing as the numbers from the last nineteen months sound, consider some longer trends. In 2007 the legal services sector employed 1,180,000 people4. In 2007, however, there were only 1,143,358 attorneys in the US5. So the sector is employing roughly 45,000 fewer people then it did ten years ago even though we’ve added 172,203 lawyers during that time. Why are we adding so many attorneys? Well……since 2007 we’ve gone from 195 accredited law schools in the country6 to 203 today7. Now are you ready for the good news? The number of people taking the LSAT was three percent higher in 2016 than in 20158. This means that law school enrollment is likely about to start increasing after having dropped in recent years (it’s also important to understand that those “drops” in enrollment were from historically high levels).

The bottom line is that we’ve got more attorneys than ever before, more law schools than ever before, and fewer jobs. The coming articles in this series will look at why the number of jobs is going to decrease substantially from its current levels. Right now it’s time to take a look at why there’s been no job growth in recent years.

Attorneys are struggling as the demand for legal services has declined

It’s clear that the supply of attorneys is increasing. The reasons why are simple – we’re still at our peak number of law schools and enough people still enroll out of a belief that a law degree will equal the road to riches. It’s also important to understand whey the legal services sectors hasn’t been adding jobs. The reason there is no job growth is also simple – the demand for legal services has decreased significantly. I’ll dive into some specifics.

The first reason for the decline of demand for legal services is going to surprise you; it shocked the (explicatively deleted) out of me. If you turn on the nightly news you would think that crime is out of control in the US right? Wrong. In 1995 there were 15,119,800 people arrested in the US9. This was with a population of roughly 262 million people. In 2015, however, there were only 10,797,088 people arrested in our country10. So over the course of twenty years the number of arrests has dropped by five million per year in spite of the fact that we had 320 million people in 2015 (a twenty year increase of roughly 58 million). Contrary to what we see on the news (which is a rant I’ll spare you) the bottom line is that arrests in the US have consistently been going down for years. Each one of those arrests represents work for a defense attorney and a prosecutor. There are now five million fewer cases, per year, in the system for each of those types of lawyers. If you doubt these numbers then check out the references below – which are reported by the F.B.I. itself.

Another cause for the decrease in demand for legal services is increased automotive safety. I fully recognize that this is a good thing for society; this article is simply to discuss the supply and demand for legal services. Improved safety features such as anti-lock breaks, and others, have been making cars safer for years. The result of this? From 1995 to 2015 the number of US drivers who died in auto accidents decreased from 41,817 to 35,09211. Again, this decrease is in spite of the fact that the population is much larger and that many more people are on the road. Improved auto safety is reducing the work available for personal injury attorneys as well as insurance defense lawyers.

A third reason for the decline in demand is America’s falling marriage rate. In 1995 the median rate of one’s first marriage 26.9 years for men and 24.5 years for females12. By 2009 those ages had increased to 28 for men and 26 for women13. People waiting longer to get married means it is a further out period of time in which they will file for divorce. This reduces work for family law attorneys. The result of these trends and dropping marriage rates (which I won’t dive into here) is that from 1995 to 2015 the number of married couples in the US only increased by 9.7 percent. The US population grew by 22 percent during that time frame. Again, this means less work for family law attorneys.

So, from 1995 to 2015 the number of people getting arrested dropped by nearly 1/3. The number of traffic fatalities dropped substantially. And oh, by the way, marriage rates are declining which, in turn, means less work for divorce attorneys. Would you like to know what else happened by 1995 and 2015? The number of attorneys in the US increased by roughly 47 percent15. Geee…..I can’t imagine why lawyer incomes are down and firms are increasingly struggling. There are other trends which are disturbing but this article is already getting quite long.

There’s the nutshell of why so many law firms are failing and will continue to fail in 2017. The thing is that these issues are just the tip of the iceberg. Things are about to get a lot worse. My next article will be dealing with how cultural changes will greatly decrease the demand for legal services, from current levels, in 2017 and beyond.


1The Wall Street Journal: Legal Services Sector Added 2,300 Jobs In April; accessed at: http://blogs.wsj.com/law/2015/05/08/legal-services-sector-added-2300-jobs-in-april/

2Bureau of Labor Statistics accessed on February 8, 2017 at https://www.bls.gov/news.release/empsit.t17.htm#ces_table1.f.p

3ABA National Lawyer Population Survery accessed on February 8, 2017 at http://www.americanbar.org/content/dam/aba/administrative/market_research/total-national-lawyer-population-1878-2016.authcheckdam.pdf

4– See Citation No. 1

5 – See Citation No. 2

6The Faculty Lounge: Historical Data: Total Number Of Law Schools And Students, 1964-2012; accessed at http://www.thefacultylounge.org/2013/02/historical-data-total-number-of-law-students-1964-2012.html

7Wikipedia: List of Law Schools in the United States https://en.wikipedia.org/wiki/List_of_law_schools_in_the_United_States – accessed on February 8, 2017

8Above The Law: More People Are Taking The LSAT. Is The Legal Profession Rebounding?; accessed at: http://abovethelaw.com/2017/01/more-people-are-taking-the-lsat-is-the-legal-profession-rebounding/

9FBI Uniform Crime Reporting Statistics: 1995; accessed at https://ucr.fbi.gov/crime-in-the-u.s/1995/95sec4.pdf

10FBI Uniform Crime Reporting Statistics: 2015; accessed at https://ucr.fbi.gov/crime-in-the-u.s/2015/crime-in-the-u.s.-2015/persons-arrested/persons-arrested

11Wikipedia: List of Motor Vehicle Deaths in U.S. by year; accessed at https://en.wikipedia.org/wiki/List_of_motor_vehicle_deaths_in_U.S._by_year

12Infoplease: Median Age at First Marriage, 1890–2010; accessed at http://www.infoplease.com/ipa/A0005061.html

13Wikipedia: Marriage in the United States; accessed at: https://en.wikipedia.org/wiki/Marriage_in_the_United_States

14Statista: Number of married couples in the United States from 1960 to 2016 (in millions); accessed at https://www.statista.com/statistics/183663/number-of-married-couples-in-the-us/

15 See Citation No. 3

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