Arnold Kling  

PSST and the Legal Profession

Policies for Structural Unempl... Life in the USSA...

From the Wall Street Journal.

Mr. Aponte is part of a growing field of itinerant "contract" attorneys who move from job to job, getting paid by the hour, largely to review documents for law firms and corporate clients. These short-term jobs, which can pay as little as $15 an hour, have increasingly become a fixture in the $100 billion global corporate legal industry as law firms and clients seek to lower their costs.

My guess is that ten years from now, we will be able to discern a long-term trend to restructure legal services. Right now, however, it appears that this is part of the recession.

I think that restructuring like this tends to "clump" for a number of reasons. One is that more firms pay attention to costs during a recession. Another is that firms are averse to making a mistake. You are afraid to restructure, but when you see other firms doing it, that makes you less afraid.

One way to view the past few years is that the financial crisis of September 2008 sent a signal to firms that had been holding on to old, costly production methods that now would be a good time to try out newer, cheaper approaches. So we had a clustering of this sort of restructuring.

By the way, did President Obama just endorse PSST?

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CATEGORIES: Macroeconomics

COMMENTS (11 to date)
SP writes:

Another part of this story is that there is now a large supply of unemployed attorneys to draw from in staffing these contract attorney projects. The law schools are churning out more graduates than ever had a hope of permanent legal employment. And this has definitely been part of a long term trend, starting long before the recession. I'm not sure if a market for temporary attorney work could exist like this if not for the law school problem.

I actually did this work for 4 years. The pay is actually not that terrible if you can keep finding new jobs. I made around 100K doing this in 2007, 2008, and 2010. This is actually above-average money for a young attorney, despite what you may think. You don't make as much as the associates at the firm you temp for, but you make more than a lot of attorneys working for smaller firms and organizations.

Still, its no life. Its dead end and just as dreary as the article makes it sound. I just recently found a permanent job and got out and couldn't be happier, despite making less money now.

Tom writes:

Larry Ribstein, a law prof at the University of Illinois, has done writing about what he calls the ongoing Death of Big Law. Obviously it's difficult to say definitively, but the signs the last couple years indicate that you won't have to wait ten years to see a permanent restructuring. Of course, part of the story is as part of the professional regulation/cartelization, there are various impediments to how the restructuring of law firms may proceed, mostly related to the ability of non-attorneys to take equity positions and fee-splitting.

FP writes:

There have been quite a few articles like this over the last 2 years. It's about 8 years too late, but better late than never. The law school bubble may finally be popping.

"The number of law-school applicants this year is down 11.5% from a year ago to 66,876, according to the Law School Admission Council Inc. The figure, which is a tally of applications for the fall 2011 class, is the lowest since 2001 at this stage of the process."

That's down about 20% since 2004.

Kevin writes:

I'll second the recommendation for Ribstein's work on this topic. He has blogged extensively about this for years at ideoblog and truthonthemarket. He sees it being driven by the demand side as people become less willing to overpay for the work hours of armies of associates when they really want the experience and attention of the rainmakers.

SJC in Detroit writes:

As a lawyer and buyer of the legal services of other lawyers, I agree with comments from SP and Kevin -- check out Ribstein over at truthonthemarket.

jb writes:

Personally, I think Obama endorsed structural unemployment.

The sad, awkward truth that few people seem to be willing to acknowledge is that above-average-intelligence people are finding ways to automated away the jobs that below-average-intelligence people perform; faster than we can find new jobs for below-average people. And, lately, I see this trend accelerating.

Nate writes:

Legal advice is not a commodity. I'm not sure that I'd want someone temping and looking over documents for me outside certain small and boilerplate issues, e.g., lease agreements.

James Oswald writes:

Technological progress is always displacing some jobs, but the ATM wasn't invented in October of 2008. Why the cluster of unemployment then?

If you want to argue that structural employment is higher now due to PSST, fine, but that explains maybe 2%, tops. To explain 10% unemployment, you need cyclical forces.

Bill writes:
By the way, did President Obama just endorse PSST?

Actaully, I think he was cursing it rather than endorsing it. :)

Seth writes:

James Oswald - I thought the argument was that policy barriers to finding and establishing PSST was causing unemployment.

Bill writes:

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