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Memo to Law Students: Take the Year Off!

We commented yesterday that even “recession proof” industries like higher education are being hit hard by this downturn.  Today, we actually see the opposite.   Business is good in America’s law schools…a little too good, actually, with applications at an all time high.    But the same cannot be said of the legal profession, which is suffering with some serious overcapacity issues at the moment.

The result has been glut in both law students and first-year associates at major law firms.   Interestingly, both law schools and law firms have been using the same approach as the Spanish bank BBVA (see our prior post on BBVA) — law firms are paying some of their first year associates to take a year off, and at least one major law school is incentivizing its applicants to wait a year to enroll!

A friend of ours who is a patent lawyer forwarded us this link to Above the Law, a legal blog, which alerted us to this little excerpt from a letter written by the University of Miami Law School dean to the school’s admitted students:

 Every year our Admissions Office uses our past experience with acceptance rates to decide how many students to admit. In these economically troubled times past experience has turned out to be a poor guide. An unprecedented percentage of applicants admitted to the University of Miami Law School have accepted our offer. This will give us a larger than optimal first-year class. Accordingly we are offering an incentive to defer admission until Fall 2010…

While I would like to believe that this year’s elevated acceptance rate reflects the great sense of excitement about the Law School and its future that led me to become its new Dean, I fear that some of it may be related to the shortage of jobs in the current economy. Perhaps many of you are looking to law school as a safe harbor in which you can wait out the current economic storm.

If this describes your motivation for going to law school I urge you to think hard about your plans and to consider deferring enrollment. Law school requires an enormous investment of work, energy, time, and money. It is very demanding intellectually and emotionally. Beyond this, in these uncertain and challenging times the nature of the legal profession is in great flux. It is very difficult to predict what the employment landscape for young lawyers will be in May 2012 and thereafter. [Emphasis HS Dent]

In a moment of real candor and honesty (especially for a lawyer!), the dean of a major law school is telling an incoming class that law school is not the safe road to riches it once was, at least not in this economy.   Deans of MBA programs, were they to do a hard, honest assessment, would probably reach the same conclusion.

In a “normal” recession, highly-motivated professionals often use the downturn as an opportunity to lay foundations for their futures with a law degree or an MBA.  But in this recession, everything has been on a much larger scale, and layoffs have been concentrated more heavily in high-end service industries like finance.  The result has been a surge in young professionals with nothing to do but go back to school.  Unfortunately, many of these go-getters are likely to be sorely disappointed when their expensive investment in education fails to generate the financial returns they expected.

The next few years promise to be very difficult, even for America’s most ambitious top performers.  At least in the case of Miami’s law students, they can’t say they weren’t warned.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy