The US lawyer bubble has conclusively popped

The US lawyer bubble has conclusively popped

By Max Nisen @MaxNisen May 7, 2014

Law schools aren’t just facing a momentary downturn. The industry has to deal with the fact that the world simply needs far fewer lawyers.

Technology, a shift to flat-fee contracts from billing for time, and globalization have shifted the salary and employment math for students considering law school forever. And the impact has trickled down to law schools, particularly those schools without premier brands or support from large universities, according to an analyst note from Moody’s.

The job statistics are brutal for recent graduates of law school—graduates who often pay six figures or more for their law degree. The unemployment rate nine months after graduation for the class of 2013  was 11.2%—up from 10.6% for the class of 2012 and 9.2% for 2011 graduates.


It took prospective law students some time after the financial crisis to recognize the profession’s new reality of fewer jobs and less pay. But if the continuing drop in those taking law school admission exams (LSATs) or applying for admission to the American Bar Association (ABA) are any indication, the US lawyer bubble has conclusively popped.

Despite a generally improving economy, which might have signalled good times for lawyers in the past, the numbers of LSAT takers and ABA applicants have declined by double digit percentages for the second consecutive year, and dropped for the third straight year:


As bad as declining career prospects are for lawyers, the drop in applications to law school is even worse news for less prestigious and stand alone schools. Job placement drops off dramatically with school quality. Schools in the top quartile based on job placement saw between 84.1 and 97.5% of their 2013 graduates employed within 9 months. Those in the bottom quartile saw job placement rates under 71%.

The decline in demand is worst for those bottom quartile schools. Many are becoming less selective and reducing prices in response, which might further reduce perceptions of quality.  At standalone schools whose debt Moody’s covers, there have been substantial drops in students attending (matriculation) and an increase in the percentage of students admitted (selectivity).

If these trends continue, which it looks like they will, lower tier law schools can expect to consolidate and even close.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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