If you graduated law school after 2007 (or were practicing during the ’07 – ’09 crash), you probably know that the legal industry experienced some growing pains with a glut of lawyers and too few legal jobs. It took a few years for the incoming classes to realize the bad news but eventually the highest performing undergraduate students started abandoning law school. You’d be hard pressed to find a lawyer that doesn’t feel a little precarious about his or her job. Even partners aren’t safe.
Throw in the fact that many lawyers leave their first job within the first 2-3 years and I’d haphazard a guess that most lawyers in private practice wonder if they’ll be practicing law in 20-30 years.
But are legal jobs any less stable than other jobs in the modern economy?
I’ll admit to not having any data to back this up but I think legal jobs might be more stable than we think. Let’s see if I can convince you.
Here’s a few reasons why having a JD may give your career longevity:
- Exclusive Club. There may be a glut of lawyers but being a lawyer is still a protected position with multiple hurdles to get into the “club”. The higher barrier to entry means that you will always have a limited number of people competing for a limited number of jobs (of course if there are no jobs, this point becomes moot but demand for legal services isn’t going to disappear overnight).
- Easier entry/exit from profession. In many fields if you’re gone for 3-5 years, you’re going to have a heck of a time getting back into the field. My understanding is that medicine and technology are two prime examples where missing 5 years can be truly problematic. If the last time you developed in an iOS app was in 2012, you were building something for the iPhone 4S. I’m not convinced that the law evolves as fast. Sure, you need to keep up with your field and the latest developments but it seems probable that a lawyer who misses 5 years can find a way back into the profession if they want.
- Insulation Against Ageism. An older lawyer is often viewed as a wiser lawyer. I wonder about tech engineers making $300,000 in SF. Will they still be able to get those jobs in their 40s and 50s? That seems less of a problem in the legal field. You may not stay in a Biglaw career (or whatever you’re doing now) but you’re likely to be respected as a 50-year-old practitioner.
Compare these advantages to other career paths. Middle managers for large corporations suffer from ageism all the time. For many people who leave a job (whether voluntary or not) in their 40s or 50s, it can be a challenge to find something equivalent. This is in part because with lower barriers to entry, there are way more 20 and 30-somethings looking for a new job in a non-legal career than their are junior lawyers.
I think we all know that it’s not easy for most laborers in the market today but I’d say that there are still some institutional advantages of being a lawyer that make your career choice more secure than other options. Motivated and resourceful lawyers should be able to find jobs going forward.
If our jobs are safe and stable relative to tech entrepreneurs or the vast majority of corporate America, how does that impact our investment decisions?
For one, I think it means we can take on a little more risk. By a “little” risk I’m not talking about buying Bitcoin. I’m suggesting that if we assume that long-term equity returns going forward will only be a couple points above inflation, it means we can get comfortable with a higher equity-to-bond ratio knowing that our career provides a modest amount of income stability going forward. It means that if the stock market doesn’t perform according to our expectations, we can simply work a little longer and delay retirement (which is not necessarily an option to many people).
If we take on this additional risk, it also means that we need to be laser-focused on a few additional factors.
- Savings Rate. If you’re taking on slightly more risk in the market, we can hope those returns will materialize but we can control how much we save. Higher savings rates can effectively guarantee that you’ll “win” by reaching your retirement and other savings goals.
- Lowering Fees. Eliminating asset-based fees, lowering mutual fund fees and making sure to squeeze out every last penny from our investments is another worthy area of focus to make sure your portfolio is performing as efficiently as possible.
- Managing Taxes. Increasing tax efficiency by prioritizing retirement accounts and taking advantage of the tax code is another way to boost your returns through smart money management.
- Managing Long Term Debt. Being careful with your long term debt will also pay dividends over the course of your investing career. This means refinancing law school loans where it makes sense, paying down debt rather than keeping it outstanding and buying the right amount of house.
Despite the hardship in the legal industry, I think many of us will be fortunate to be practicing law throughout our careers (or, at the very least, will have the option to do so). This additional income stability, while not nearly as “stable” as we all thought when signing up to law school, still provides enduring advantages over alternative career paths. We should use this to our advantage by taking on equity risk while still focusing on smart portfolio decisions (saving, lowering fees, managing taxes and debt). This should be a winning strategy for most lawyers.
Let’s talk about it. Do you think legal jobs are more secure than other career paths? Have you used that stability to your advantage when it comes to investing decisions?
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Interesting take Josh. Personally, I’ve always seen legal jobs as not very secure – although I do think that most people will eventually be able to find their way in a legal job of some kind with enough time. Even friends of mine who didn’t have much lined up back in 2013 have, at this point, found their way into small/mid-size firms or some sort of government job.
The exclusive club thing – I’m not sure how much of an exclusive club we have just because law is the one professional graduate school that basically requires no pre-reqs to get into and that literally anyone can get into on a whim.
When you look at jobs like MD, DDS, Pharmacy, Optometry, etc, you basically can’t get into those programs unless you’re actively thinking about it while you’re in school. My wife, as you know, is a DDS, and she majored in Violin Performance while in undergrad, but had to make the active choice to take all of her science pre-reqs while she was a sophomore or junior in order to be able to even apply to dental school. In contrast, if she had wanted to, she could have just stumbled her way into law school like a lot of us do when we graduate and realize we have no skills.
Myself, I actually found out that I “wanted” to be an Optometrist in my senior year of college after going in for an eye appointment at the mall, but found out that I’d basically have to take an extra 2 years of undergrad just to get my science credits.
You do make a good point though about being able to jump in and out – although I guess that remains to be seen. I’ve jumped out of traditional legal practice myself, and I wonder if I’d be able to jump back in. Interestingly, we have a state judge here in Minnesota that just recently got appointed that spent 5 years working at Westlaw as an account manager, then jumped back into a county attorney’s office for a few years before making her way into a judgeship.
Great comments – Josh and Panther!
I agree with Panther’s comments that the “exclusive club” aspect is pretty much not there. It is much better for medicine, pharmacy, etc.
With regard to jumping in and out, I don’t think that it is fair to compare at the “profession” level vs. the “job” level. For example, those middle managers will still probably be able to get something in the tech field/profession – only for much less money. Similarly, with lawyers if we want to do a job-to-job profession rather than “field”, it becomes easy to see that a partner who gives up their book of business and takes 5 years off and then shows up 5 years later with no business is probably not going to be welcomed back. You really can’t jump in and out of a law firm job. Conversely, a lawyer who jumps in-house and then shows up 5 years later with $5M/year in business from the company will certainly be welcomed back.
Also, I have personally seen a LOT of ageism in the profession. 40s and 50s are prime time, but lawyers that are known to be old or have an old appearance are often at a disadvantage when pitching business – and are thus at risk. Potential clients often use code words like wanting “more innovative and dynamic representation”. Once an older attorney’s business level drops, the compensation goes down and they might be asked to leave. Additionally, in-house decision-makers seem to prefer attorneys that are their own age. This is an advantage in marketing as you become 40 or 50, but as you get into your 60s, the in-house decision making is transferring to a younger set, and then generally connect better with attorneys more their own age. Some people might want to call this “ageism”, but it is really more “client preference”. Conversely, again, if you are 100 years old and bring in $5M/year in business, then again just about any firm would want you.