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U.S. Legal Sector Contracting Even as Nation’s Economy Recovers
U.S. Legal Sector Contracting Even as Nation’s Economy Recovers

Am Law Daily; March 6, 2013

"The poor job market for new veterinarians is not the much-publicized fiasco that it is for new lawyers," The New York Times's David Segal wrote in story published on February 24. Although the article's focus on the travails of an outlying, foreign-located, for-profit veterinary school undercuts Segal's comparison, its publication does provide a good opportunity to look at just how badly the "much-publicized fiasco" that is the market for legal services is doing.

The Bureau of Economic Analysis (BEA) updated its GDP-by-industry accounts last November, and the picture the numbers paint for the private legal sector isn't pretty. In fact, the first thing you might notice is that the 2.3 percent upward turn in the sector's real value-added that I wrote about last year has been revised downward to -2.2 percent, and the new 2011 rate is in negative territory as well (-1.7 percent). The legal sector, it turns out, is not benefitting from the U.S. economy's upward slog. In fact, the industry's real value-added has now fallen below its 1988 level.

While it's tempting to believe the price increases above the inflation rate over the decades is due to lawyers greedily raising their rates—or, as many people wrongly believe, the need to keep up with hefty student loan payments—it probably has more to do with income elasticity of demand for legal services. Put simply, people are more likely to spend their last dollars on legal services, not their first. People too poor to buy real estate don't need wills; people who don't get married don't pay for divorces; and people who get arrested and canít afford a lawyer use a public defender. Fabulously wealthy corporations, by contrast, can always spend money on lawyers, just not enough money to employ everyone who has a J.D. As I've written before, those who want more affordable legal services for the poor are well-advised to either pay for it out of their taxes or fight poverty directly. Forcing lawyers to do more pro bono work or shaming them into opening doomed practices simply will not work.

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