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Analysis of the Legal Profession and Law Firms (as of 2007)
 

Number of US Lawyers >>Top
  1. There are between 760,000 (BLS) and 1,100,000 lawyers (ABA) in the US.
    • The precise number is uncertain.
    • The lower number comes from surveys by the U.S. Bureau of Labor Statistics and attempts to reflect lawyers currently earning income from legal practice. 
    • The higher number comes from the ABA – a similar number has been reported by the ABF and reflects attempts to reflect all active lawyers based on Martindale-Hubbell listings.
  2. That is roughly 1 lawyer for every 300 people in the US (US Census).
  3. That is roughly 1 lawyer for every 140 people employed in the US (BLS).
  4. The ratio of lawyers/jobs was flat for most of the 20th century and then rose dramaticallyafter 1970, roughly doubling between 1970 and 2000.  That increase (of 100% over 35 years) is similar to increases in the share of service and knowledge-based jobs in the US economy since 1970.  (Wyatt and Hecker 2007)
  5. The growth of lawyers is constrained by the output of US law schools.
    • The number of law schools has grown, but more slowly than the ratio of lawyers/jobs.  In 2007, there were 196 ABA-accredited law schools, compared to 144 in 1970, an increase of 36% (ABA).
    • The number of law school graduates has grown, faster than the number of law schools, but again, more slowly than the ratio of lawyers/jobs.  There were roughly 44,000 graduates of accredited law schools in 2005, compared to 30,000 in 1975 and 36,000 graduates in 198, an increase of roughly 50% over 30 years (ABA).  (Numbers for the early 1970s were depressed by Vietnam.)
    • Among the “elite” US law schools (so designated in Blau and Margulies 1974-75) (Harvard, Yale, Stanford, Chicago, Columbia and Michigan), there has been no growth in the number of graduates:  there were ~5,800 full-time JD students at those schools in 1970 (Nelson 1994) and there were ~5,800 full-time JD students in 2007 (ABA).
    • There are roughly 11,000 law teachers (AALS).
    • Average student / faculty ratios have declined over the last 30 years, by about a third (ABA).  In 1978, the ratios ranged from an average of 20 for small schools to an average of 30 for large schools; in 2007, it ranged from 14 for small schools to 17 for the largest schools.  Thus, the number of law teachers has been growing faster than the number of law students.

Where Lawyers Work >>Top

Using the BLS number for the number of US lawyers, the places that US lawyers are employed are as follows:

  1. AmLaw 50: ~43,000, or 6% of US lawyers (AmLaw). This takes the total number of lawyers at AmLaw 50 firms reported by the American Lawyer and multiples it by 83%, which is the average number of lawyers in the NLJ 250 (also reported by the American Lawyer) that are located in US branch offices.
  2. Rest of NLJ 250: ~70,000, or 9% of US lawyers (id.).
  3. Other law firms: ~182,000, or 24% of US lawyers (this takes the ABF estimate for all lawyers in law firms of 2+, multiplies that by the total number of lawyers in law offices reported by the BLS, and subtracts the US lawyers estimated in the NLJ 250). The reason for doing this is that BLS classifies law firm partners are “self-employed,” i.e., lumps them with solo practitioners.
  4. Solo practice: ~271,000, or 35% of US lawyers (this takes the ABF estimate of the share of lawyers in solo practice and multiplies it by the total number of lawyers in law offices reported by the BLS) (id.);
  5. Government: ~120,000, or 16% of US lawyers work for the government, split roughly 1/3 each for federal, state and local (BLS).
  6. Business: ~65,000, or 8% of US lawyers – this takes the BLS estimate for lawyers in “management” of companies and adds the BLS estimate for lawyers employed by companies, then deducts the BLS estimate for lawyers working for public interest, education, and interest groups. Excluding lawyers in “management,” which BLS treats as a separate job category, BLS estimates that the following industries employ the largest numbers of lawyers in-house:
    • insurance (11,000),
    • employment (i.e., temp agencies and contract lawyers) (4,000),
    • investment banks and securities brokers (4,000),
    • manufacturing (4,000), and
    • commercial banks (4,000).
  7. Education: ~13,000, or 2% of US lawyers – this takes the BLS estimate for lawyers working for educational institutions and adds the roughly 11,000 law professors reported by the AALS.
  8. Interest groups: ~3,300, or 0.4% of US lawyers – this represents what BLS reports for business, professional, labor, political, and similar organizations.
  9. Public interest organizations: ~2,400 lawyers, or 0.3% of US lawyers – this takes the numbers reported by BLS for social advocacy organizations, social assistance organizations, charitable organizations, and civic and social organizations.

Aggregate Law Firm Revenues >>Top
  1. Law offices (law firms and solo practitioners) generated ~$180 billion in revenues in 2003 (US Census).
    • Law office revenues represent ~18% of the professional service sector and 4% of the overall service industry.
    • Law office revenue greatly exceeds the revenue of other specific categories of professional services firms, including:
      • management consulting firms (~$89 billion),
      • CPA firms (~$53 billion), and
      • ad agencies (~$26 billion).
    • Law office revenue in 2003 roughly equaled the revenue of Wall Street (securities broker/dealers).
  2. From 1998 to 2003, law office revenues grew at a rate of 7%.
    • The recent law office revenue growth rate exceeds growth rates over that period for professional service firms overall (6%) and the services industry as a whole (6%).
    • It also exceeded the growth rate over that period for broker/dealers (2%) and CPA firms (4%).
    • On the other hand, law office growth rates were exceeded by rates for management consulting firms (9%) and ad agencies (8%).
  3. Law office revenue growth has been steady, showing increases in every year 1998-2003.
    • This contrasts with broker/dealers, which had strong revenue growth 1998-2000, and then lost revenue 2000-02, before rebounding modestly in 2003. Other professional service firms have also shown continuous growth, but at rates that vary more from year to year than law offices.
    • But rates of growth in law firm revenues were higher in the past. Abel (1989) reports numbers from the Census Bureau for 1967 to 1982 that imply annual growth rates of 14% or more. Thus, lawyers are earning more than in the past, but at a declining rate over time.
  4. If law office revenues have continued to grow at a 7% annual rate since 2003, they would have totaled $230 billion in 2007.

Aggregate Law Firm Profits >>Top
  1. Law offices earned ~$51 billion in aggregate pre-tax profits in 2003 (US Census).
    • This number is simply the net of law office revenues and “expenses,” which excludes capital expenses.
    • Thus, profits would be lower if reported in accordance with GAAP, and so this aggregate profit number cannot be compared directly to profits reported by, for example, public companies.
  2. Law offices earned considerably more aggregate profits in 2003 than:
    • CPA firms ($13 billion).
    • Management consulting firms ($9 billion).
  3. Law offices had profit rates (profits/revenues) of 40% in 2003. This was higher than:
    • CPA firms (32%).
    • Management consulting firms (12%).
  4. If law offices earned a 40% profit rate in 2007, they would earned ~$92 billion in 2007.

Share of Top 50 Law Firms >>Top
  1. In 2007, the AmLaw 50 employed ~43,000 lawyers in the US (AmLaw).
    • This represents 87% of the ~49,000 lawyers employed by the AmLaw 50.
    • The 87% figure for US lawyers in the AmLaw 50 is derived from the NLJ 250, which reports lawyers by branch office.
  2. Thus, in 2007, the AmLaw 50 employed roughly 6% of all US lawyers.
  3. This compares to numbers reported by Nelson (1981), re-reported in Abel (1989) [Table 45] for the following years:
    • 1950: ~2,000 lawyers in top 50 firms, 1% of 212,000 US lawyers;
    • 1979: ~9,000 lawyers in top 50 firms, 2% of 515,000 US lawyers.
    • Thus, the concentration of US lawyers in the top 50 US law firms tripled in the last 30 years, after doubling in the prior 30 years.
  4. In 2007, the AmLaw 50 generated revenues of $56 billion (AmLaw) and profits of $22 billion.
    • AmLaw 50 revenues would represent ~25% of estimated revenues for US law offices in 2007.
    • AmLaw 50 profits would represent ~24% of estimated profits for US law offices in 2007.

In-House Corporate Law Departments >>Top
  1. The top 200 corporate law departments in US companies employed ~27,700 lawyers in 2006 (InsideCounsel).
  2. The largest corporate law departments in US companies in 2006 were:
    • Citigroup (1,500 lawyers) and
    • GE (~1,200 lawyers).
    • The next three largest were insurance companies:
      • Liberty Mutual (~775 lawyers),
      • State Farm (~720 lawyers), and
      • Allstate (~700 lawyers).
    • Exxon was sixth, with 600 lawyers.
  3. The largest corporate law departments have been growing over the past decade, but at a slower pace than the largest corporate law firms.
    • In 1997, the 200 largest law departments had a total of ~19,400 lawyers, and thus grew by a total of ~8,300 over nine years, for an average annual growth rate of 4.8%.
    • In 1997, the AmLaw 100 had a total of ~42,600 lawyers, and in 2006 the AmLaw 100 had a total of ~70,100 lawyers (AmLaw), and thus grew by a total of ~27,500 lawyers over nine years, for an average annual growth rate of 7.2%.
    • Put differently, in 1997, the AmLaw 100 had 2.2x as many lawyers in it as the 200 largest corporate departments; by 2006, the AmLaw 100 had 2.5x as many lawyers in its as the 200 largest departments.

Change in the Top Law Firms >>Top
  1. The AmLaw 100 (the 100 law firms with the highest revenues) employed ~42,600 lawyers in 1997, and 70,100 lawyers in 2006, for an annual growth rate of 7.2% (AmLaw).
  2. Of the firms in the AmLaw 100 in 1997, 17 of them were no longer in the AmLaw 100 in 2006. Of those:
    • 13 had merged with another similarly sized or larger law firm, or dissolved or were in dissolution between 1997 and 2006, for an average hazard rate of 13%, or 1.3% per year.
      • The merged firms included:
        1. Rogers & Wells (now part of Clifford Chance)
        2. Graham & James (now part of Squire Sanders)
        3. Lord, Bissell & Brook (now Locke Lord Bissell & Liddell)
        4. Brown & Wood (now part of Sidley)
        5. Hale & Dorr (now Wilmer Hale)
        6. Wilmer Cutler & Pickering (now Wilmer Hale)
        7. Gray Cary Ware & Freidenrich (now part of DLA Piper)
        8. Piper & Marbury (now part of DLA Piper)
        9. McCutchen (now part of Bingham McCutchen)
      • The dissolved firms included:
        1. Coudert Brothers
        2. Jenkins & Gilchrist
        3. Arter & Hadden
        4. Brobeck, Phleger & Harrison
    • 7 remained intact, but had grown revenues more slowly than other firms and so had been displaced from the AmLaw 100 by 2006. These firms were:
      1. Littler
      2. Thompson Hine & Flory
      3. Ballard Spahr
      4. Kelley Drye
      5. Robins Kaplan
      6. Winthrop Stimson
  3. Of the 83 firms in the AmLaw 100 in 1997 that were in (or had clear merger successors in) the AmLaw 100 in 2006:
    • All had grown in size.
    • The average growth was 308 lawyers; the median was 238 lawyers.
    • The smallest absolute growth was 27 lawyers (Hogan & Hartson).
    • The largest absolute growth was 1091 lawyers (White & Case).
    • The average % growth was 71%; the median % growth was 58%, for an median annual growth per year of 6.5%.
    • The slowest % growth was 7% (LeBoeuf); the fastest % growth was 348% (Greenberg Traurig).

Globalization's Effects on the U.S. Legal Industry >>Top
  1. In the AmLaw Global 100 (the 100 law firms worldwide with the highest revenues) in 2006:
    • U.S. law firms had 10% of their lawyers based outside the U.S.
    • Non-U.S. law firms had 26% of their lawyers based outside their home country.
    • U.S. firms had an average of five foreign offices.
    • Non-U.S. firms had an average of 10 foreign offices.
  2. In the National Law Journal’s NLJ 250 (the 250 highest-revenue producing law firms with most of their lawyers in the U.S.) in 2006:
    • 13% of the lawyers were based outside the U.S.
    • the countries with the largest number of U.S. lawyers were:
      1. the United Kingdom (~5,000, or 30% of all non-U.S. lawyers);
      2. Germany (~1400)
      3. France (~1400)
      4. China (~1400)
      5. Japan (~600)
      6. Belgium (~500)
  3. Data from the U.S. Commerce Department Bureau of Economic Analysis show:
    • dollar receipts from the export (cross-border sale) of legal services by U.S. firms were ~$5 billion in 2006;
    • that amount was roughly 1-2% of all U.S. law office revenues;
    • exports of legal services by U.S. firms grew in the period 1998-2005 at an average annual rate of ~15%, twice the rate of growth in all U.S. law office revenues;
    • cross-border purchases (imports) of legal services in 2006 were ~$1 billion, so the balance of trade in legal services for the U.S. was a positive $4 billion;
    • imports of legal services also grew 1998-2006, but at a slower rate of 6% on average per year, so the positive trade balance in legal services for the U.S. roughly doubled in that period, from ~$2 billion to ~$4 billion.

 
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