A ‘best value’ in a tough market

Recently KU Law was honored as a top 20 “Best Value” in legal education by preLaw magazine. Law schools are honored if they meet four criteria:

  • Tuition less than $35,000 a year for in-state residents;
  • Average indebtedness of less than $100,000;
  • Bar passage rate higher than the state average; and
  • Employment rate nine months after graduation of 85 percent of higher.

We’re obviously proud of this recognition, as it confirms what we’ve been preaching about KU Law for years: that students receive a high-quality, affordable legal education that enables them to compete effectively in an increasingly ornery job market.

And just how bad is the market? While 2007 marked a 20-year high for entry-level legal employment, the national employment figure for the law school class of 2009 marked the lowest “nine-month” employment rate since the mid-1990s.

KU Law also saw its employment statistics decline during this time period. Utilizing the US News & World Report reporting methodology, 63.2 percent of the KU Law Class of 2009 was employed at graduation, and 89 percent was employed within nine months of graduation. These employment statistics will be reported to US News this fall and will appear in the April 2011 rankings issue.

Preliminary data from the Class of 2010 is illustrative of the legal market’s sluggish recovery. It was difficult for members of the Class of 2010 to find work in the summer of 2009, and many summer jobs did not produce paid, full-time offers.

The national offer rate to 2009 summer associates for entry-level positions to begin in the fall of 2010 fell by more than 20 percentage points, from 89.9 percent in 2008 to 69.3 percent in 2009. This is by far the lowest offer rate measured since NALP began collecting this data in 1993. The acceptance rate of these summer offers was 85 percent, an all-time high.

To date, about half of the KU Law Class of 2010 has reported employment.

In a tight legal market, the importance of minimizing law school debt is heightened. We mentioned Dan DiPietro’s comments on this topic in a summer blog posting, and they bear repeating in light of KU Law’s appearance in the top 20 “Best Value” list.

DiPietro is the managing director of the Law Firm Group at Citibank and visiting professor at Harvard Law School. Citibank’s Law Firm Group provides advice and services to over 650 law firms in the United States and London. The group lends to more than 200 law firms in the U.S. and UK, including over half of the Am Law 100.

At the National Association for Law Placement’s annual conference in late April, DiPietro spoke about trends in law firm profitability. The dominant theme was that 1998 to 2007 was a golden age of profitability, marked by strong growth in demand for legal services, double-digit revenue growth and client tolerance for steady rate increases. Associate attorneys were hired at a rate that corresponded to the strong growth in demand, productivity was relatively steady and the largest law firms outperformed the industry.

Over the last two recessionary years, DiPietro described six factors that combined to place enormous stress on the profitability of private law firms.

  • Client consolidation: Consider the financial services industry. Because of mergers and failing businesses, there are fewer clients doling out business to law firms.
  • Convergence and casting a wider net: For example, GE recently cut the number of law firms it employs from 400 to 200, and then again to 112. Large clients are actively seeking more attractive rate structures from their law firms.
  • Commoditizaton: Firms can become “expert” in a practice area quickly by hiring partners from other firms.
  • Heightened client demands: Clients want increased partner time but are less willing to accept high rates. This attitude has led them to cast a wider net when considering firms.
  • Intensifying price pressure: Clients are shopping for good value in all but “bet-the-company” cases.

These factors resulted in 2008-09 being marked by declining demand for legal services, rates increasing at a slower pace, profits per partner declining and the largest law firms underperforming the industry.

In closing, DiPietro noted that he has a daughter who just finished her first year of law school. As an applicant, she was admitted to a top 20 school with no scholarship, as well as a lower-ranked school with a 90 percent scholarship. She sought her dad’s advice about where to enroll, and DiPietro strongly encouraged her to enroll at the solid but lower-ranked law school where she could graduate with minimal debt.

It is DiPietro’s belief that due to uncertainty about the availability of jobs at large law firms paying six-figure salaries, it is wise for law students to get a good but affordable education that will enable them to consider the widest range of potential entry-level jobs.

Todd Rogers, Assistant Dean for Career Services