Where will tomorrow's lawyers come from?

The slow collapse of first-year hiring at law firms will reveal all the defects in our lawyer licensing system. If we want there to be a legal profession in 2050, we need to act now.

Here are highlights of four different reports into lawyer hiring trends in US and Canadian law firms over the last six months:

• “U.S. law firms pulled back on first-year associate hiring [last] fall in an effort to bolster profits.… The average number of new first-year associates at Am Law 100 firms was down nearly 17% [last] September... First-year class sizes were down an average 25% among the Am Law 200 firms, while midsize firms brought in 9% fewer first-year associates.” (Thomson Reuters Institute Law Firm Financial Index)

• “Law firms reported hiring 5,236 associates in 2023, down from 6,786 in 2022 [a 23% drop]. ‘We're moving into a new, post-pandemic phase of the associate talent market, where both firms and associates are re-assessing retention and mobility factors.’” (NALP Foundation Update on Associate Attrition)

• “A reduction in hiring of associates, income partners and others who do not have substantial books of business represent a large portion of the year-over-year change when it comes to the decline in hiring.” (Decipher Investigative Intelligence)

• “Over the first three months of 2024, lateral hiring for attorneys across all tiers contracted by 12% quarter-over-quarter. … The hiring of associate attorneys continues to see the steepest decline, with a total of 2,173 associates hired in the first quarter, representing a drop of 33% from the previous quarter and a 10% decline from the same period a year ago. In contrast, partner lateral hires surged by 67% quarter-over-quarter.” (Firm Prospects LLC)

It doesn’t take Sherlockian deduction to see what’s happening here. Law firms are growing desperate for new lines of business, but they lack either the patience or the ability to develop enough of them internally. So they’re turning once again to the free-agent market, throwing time, attention, and resources into scouting and hiring away rainmaking partners or entire practice groups (or even entire firms, if the recent wave of merger announcements is any indication) to fill the gaps.

There’s only so much leadership bandwidth in any organization, and law firms preoccupied with buying books of business can’t help but let other matters slide. One such matter, not exactly unimportant, is client service, which might help explain the recent report that the percentage of clients who’d recommend their primary outside law firms to a peer has dropped from 69% to 35% in just four years. Clients blamed “distractions,” such as looking for lateral talent and navigating the economy, for the decline in firm attentiveness. (I think “distractions” is a little unfair, but customers don’t tend to care about how difficult things might be behind the counter.)

Those reports suggest a causative link between the growing obsession with lateral acquisition and the decline in new lawyer hiring. It’s a reasonable surmise: Law firms and their demanding, obstinate, show-me-the-money shareholders have always been willing to sacrifice the future in order to feed the present. I’ve met very few senior partners willing to reduce their annual draw for the most lucrative final years of their career to help finance their firm’s future talent development. Very few.

But I think there’s something more going on here, and it’s been going on for a while. The lawyer development system is slowing down; the future talent pipeline is narrowing and clogging up. It’s not just that law firms could run out of future partners; at this rate, the legal profession risks running out of future lawyers.

Back in 2019, I wrote an article titled: “How to save the lawyer development system.” I drew readers’ attention to a chart produced by Prof. Bill Henderson showing that the number of entry-level jobs in private practice in the US had declined from 20,611 in 2007 to 16,390 in 2017 — a 20% drop over 10 years. “Large law firms brought in 139 fewer first-year lawyers in 2017 than in 2007, even though these firms’ non-first-year lawyer population grew by nearly 40% during that time (from 65,212 to 90,867).”

Law firms have long been the first port of call for new lawyers, taking in these under-skilled and ill-prepared new licensees and profitably billing their laborious entry-level efforts for as many years as they can. Throughout the 2010s, however, there was a clear decline in firms’ appetite for moulding the unformed clay that law schools and bar examiners were sending into the profession. Clients didn’t want to pay for lawyers to learn on the job doing basic tasks anymore, and law firms slowly discovered and deployed tools that could do those jobs instead.

Since I wrote that article, we’ve experienced both a global pandemic and an explosion in the capabilities of artificial intelligence. Following a post-lockdown hiring spike in 2021-22, driven by supply-chain spasms and inflationary pressures, the decline trend in new lawyer hiring has resumed and perhaps accelerated. Here in 2024, it’s time we read the writing on the wall.

I don’t think we’ll ever see law firms hire as many new lawyers as they once did. The economic case for leveraged associates is fading. The business model of law firms will shift from volume to value, from leverage to profitability, from realization to revenue. Legal technology and skilled technicians will carry out a lot of work that lawyers used to do, and the lawyer work that remains increasingly will require greater skills and sophistication than new graduates can hope to offer. Law firms will grow more profitable in the coming years, but not more populous.

I’m not saying this will be a permanent state of affairs. Historically, new technology tends to expand markets and enable the development of new types of demand — but not right away, and usually not before a significant disruption to traditional employment. It’s certainly possible that Generative AI and other technologies collectively will unlock a new and exciting legal world, overflowing with new clients bearing myriad fascinating legal challenges. But that vision is at least several years away. We have a problem right now.

Thousands of new lawyers enter the profession every year ill-prepared to provide competent services that clients will pay for. Law firms are clearly signalling they are prepared to hire and train an ever-diminishing fraction of those lawyers. The gap between what the market demands from new lawyers and what they can supply is growing.

In the short-to-medium term, this portends a rising backlog of unemployed young practitioners. In the long term, it threatens the profession’s ability to field enough lawyers sufficiently knowledgeable, skilled, and experienced to meet the market’s needs — especially as those needs become more sophisticated and complex.

What’s the solution? Simply put, we need to significantly upgrade the capacity and proficiency of newly called lawyers so they can meet the increasingly demanding standards of the legal market. New lawyers today are just about capable of performing basic legal tasks; in a few years’ time, those tasks will have been consumed by automation or otherwise routed away from law firms. If we don’t change our approach to lawyer formation, we will effectively be licensing unemployable lawyers.

Law firms and law schools, working together, might be able to address this. But law firms will act in what they perceive as their best economic interests, and they can hardly be blamed for that. Law schools will do the same, and while I’d love to blame them for that, the truth is that our lawyer licensing system created this problem by surrendering the legal profession’s gatekeeping function to independent institutions that have been very clear they owe the profession nothing.

So in my 2019 article, I called upon legal regulators to take the responsibility of standardizing, modernizing, and making fit for use the lawyer development system. “It’s time the legal profession took the privilege of self-regulation seriously by unifying, clarifying, redesigning, and transforming the lawyer development system,” I wrote.

That suggestion met with all the enthusiastic approval of a dead fish. And I get it. I understand people’s reluctance to give such an important job to organizations that, with some praiseworthy exceptions, can’t even define the elements of entry-level lawyer competence and have shown little interest in what you’d think was Job #1 for the profession’s overseers.

But I still haven’t seen a better alternative. If this isn’t regulators’ job, then whose is it? And what is their job? With governments increasingly willing to dictate new terms of engagement to the legal profession, I suggest that if regulators don’t want to deal with this, they should start preparing their offices to be occupied by others who will.

But we don’t have to give up. Forming lawyers who can provide competent service from Day One of their licensure is not an impossible task. In a follow-up article, I’ll describe an emerging structure of early-career lawyer development that focuses on self-paced learning, experiential live training sessions, and interactive exercises with real-time feedback. I’ll highlight a couple of cutting-edge bar admission programs that take this task seriously. I’ll talk about how we can grab the spinning wheel of this ship and steer it back on course.

But we can’t proceed to solutions until we recognize that there’s a problem, and I’m not sure we’re there yet. Maybe once law schools begin to shrink or close, or law firms can’t find enough experienced lawyers to become partners and leaders, or lawyers start losing market share to other professions or technologies, maybe then we’ll start to see some action. But I think that will be too late in the game.

A generation from now, I’d like the legal profession to be incredibly proficient, extremely valuable, and highly esteemed. But at the very least, a generation from now, I’d like the legal profession to be. What are we prepared to do, today, to ensure we get there?