Too many new lawyers? Build a wall?

[Originally published on slaw.ca]

Over the last few years, there has been much debate about how to deal with the significant increase in the numbers of Canadian and foreign law school graduates seeking licensing in Ontario. While the number of articling positions has significantly increased, the number of applicants has increased even more quickly. The Law Practice Program (LPP) was established several years ago as an additional pathway to address this shortfall and to pilot a new approach to experiential training.

With a recent proposal to terminate the LPP facing substantial opposition, the Law Society of Upper Canada is now developing “long-term recommendations for an appropriate, sustainable Law Society licensing process”[i].

In this column, I hope to make three points. The first is that the question of an appropriate licensing process is far from new. It is unlikely that easy and obvious answers will be found. The second is that history shows that prediction is very difficult, especially about the future[ii]. We have far too much confidence that we can predict the supply of and demand for lawyers.

The third point is that there is more than a little self-interest involved in a self-regulating profession seeking to regulate the number of lawyers. Even if we could do so with accurate predictions and with actual authority, there is reason to question whether the public interest is pursued in limiting numbers in response to economic anxiety within the profession.

I also hope to provide some historical information which may be useful in thinking about these issues.

45 years ago – Articling and the “Problem of Numbers”

In 1972, Bert J. MacKinnon[iii], as he then was, presented the Report of the Special Committee on Legal Education to Convocation of the Law Society of Upper Canada. The Special Committee Report described the then context saying:

Increasingly in recent years, the Law Society of Upper Canada became concerned about a number of problems related to legal education. In particular, it was felt that the time required to qualify for the Bar (up to 9 years) was too long. Also, the last full scale investigation of legal education in Ontario had taken place in 1955-57. Since then, there has been radical changes in the nature of law, the profession itself, the law schools and the number of students requesting admission to the law schools. Consequently, a further review of the problems became necessary.

The reference to a “full scale investigation of legal education” in 1955-57 is significant. That is when the current approach to legal education was established with a required minimum of two years undergraduate education followed by three years of law school, then the Bar Admission Program and then articling.

As of 1972, the Bar Admission Program was an eighteen month program following law school. According to the Special Committee Report, the time required to qualify for the Bar was thought to be too long. There was also a concern about the number of students seeking to become lawyers. Forty-five years later, the issues aren’t all that different.

As described the Special Report, the existing schools at Osgoode Hall and U of T became approved law schools in the late 1950s, Queens and Ottawa opened law schools in 1957, Western opened in 1958 and Windsor opened 1968. It took forty-five years for the next law school to open at Lakehead University in 2013.

The Special Committee Report summarized the then current problems as follows (i) Length of Process of Legal Education, (ii) Separation of Legal Education into Distinct Elements, (iii) The Problem of Numbers, and (iv) Financing Legal Education. One could see recent debates about legal education and licensing in these same terms which is instructive. Some problems may be somewhat inexorable with new balances needing to be found from time to time.

My main reason for looking at the Special Committee Report is its discussion of “The Problem of Numbers”. This is a discussion which doesn’t go away. In the late 1960s when William Howland[iv] was Treasurer, Convocation debated whether to restrict the number of lawyers called to the bar. It did so again in 1983[v] when the Special Committee on Numbers of Lawyers reported the majority view that “in the present circumstances more lawyers are engaged in private practice than are needed to provide proper legal services to the public”. I have little doubt that the issue of “numbers” has and will emerge from time to time over the generations.

By 1972, there had been 15 years of experience with law schools being the entry point for legal education and licensing. During these years, the number of law schools had dramatically increased. There must have been a sense of rapid change and concern about what might to come. As of 1972, the Special Committee Report noted:

Until the mid ’60s, the capacity of the Ontario law schools expanded at the same rate as did the other university faculties. However, in the late ’60s, their capacity began to level off while the numbers of graduates with first degrees continued to increase. The present capacity of the six Ontario law schools in their first year classes is between 1,000 and 1,100 but the total number of applicants in 1972 exceeded 3,000 at the very least.

Sitting in 1972, the immediate future looked like about 1,000 or so new lawyers annually with about three times as many people wanting to get into law school as there were spaces for them. One can only speculate what might have been thought in 1972 about the situation thirty years later.

15 years ago – Looking back and looking forward

As it turns out, 2002 looked astonishingly like 1972[vi]. There were still six Ontario law schools. The capacity of their first year classes was essentially unchanged at 1,176 students. The number of applicants for law school admission in Ontario was essentially unchanged at 3,457 applicants. The number of foreign trained licensing candidates was less than 100.

I doubt that anyone in 1972 would have thought that the significant changes over the prior 15 years would be followed by 30 years of very little change. And if one reflected in 2002, what would the next 15 years have looked like? Given the primacy of recent experience, I expect that a seer would have expected little change. Of course, that would have been wrong.

The last 15 years, new lawyers and licensing

By 2016, a new Ontario law school had been opened (Lakehead) and plans for another had been announced (Ryerson). The number of applicants for Ontario law schools had increased by 817 or nearly 25% to 4,502. The capacity of the Ontario first year classes had grown by 373 or nearly over 30% to 1,549[vii].

More significantly, the number of law school graduates from outside Canada seeking licensing has increased even more. From 2002 to 2014, the number of certificates issued by the NCA[viii] for all of Canada had increased from 120 to 779. Nearly three-quarters of this increase[ix] was from graduates of American, Australian and English law schools. Canadians going to foreign law schools represented a substantial portion of this increase.

Over the last 15 years, the demand for law school admission has significantly increased as has law school tuition. In Canada, Australia, England and the United States[x], law schools responded to this opportunity.

The result has been a significant increase in the number of Ontario licensing candidates. While the number of articling positions has increased significantly, the increase has not been sufficient to meet the increased demand. To address this difference, the Law Society established the Law Practice Program (LPP). In 2016, approximately 2,200 lawyers were called to the Bar with approximately 220 coming from the LPP[xi]. There are approximately 1,900 articling positions which is obviously a substantial increase from 2002.

As matters stand, those who are qualified and wish to become lawyers in Ontario are able to do so. There is of course a cost to the LPP. But the alternative would seem to be a barrier to licensing.

As might be expected, these significant recent changes have caused alarm. Coupled with the slowed economy since the financial crisis of 2008, discussion has turned again to “The Problem of Numbers”. As usual, the expectation is that the new normal is the future. While that might be true, it would be right to be sceptical about our ability to project the future and to be concerned about measures taken to respond to current insecurities.

Looking beyond new lawyers – past growth in the legal profession

Looking just at those becoming and wanting to become lawyers can be misleading. While “entry” numbers are important, there are more than 50,000 licensed lawyers in Ontario (as of 2014)[xii]. Of these, over 23,000 were practicing and insured and nearly 13,500 were practicing and exempt from insurance. This means that there were some 38,500 Ontario lawyers in private practice, in-house and government in 2014. A few hundred additional new lawyers annually is significant and no doubt feels even more significant. But the increase should be understood in context.

How did we get to where we are. Records from the Great Library provide some useful historic information. According to Law Society Committee records, there were 14,747 lawyers in private practice in 1989 and 4,275 lawyers in education, government and other areas[xiii] . Ten years later, the Law Society reported 16,942 lawyers in private practice, 2,906 in government and 4,778 in education, in-house, not-for-profit and other.

Overall, the number of practising lawyers increased by 561 lawyers[xiv] or 2.3% annually during the 1990s. This compares with an increase of 700 lawyers or 2.7% annually during the following 15 years from 1998 to 2013.

To summarize, there were approximately 19,000 practicing lawyers in 1989. By 1998, there were approximately 24,000 practising lawyers. By 2014, there were approximately 32,500 practising lawyers. The net annual increase of practising lawyers was nearly 600 lawyers in the 1990s and averaged 700 lawyers in the following 15 years. The rate of increase has grown from 2.3% to 2.7% annually.

Private practice vs in-house practice

But this overall perspective can be deceptive. During the first 10 year period from 1989 to 1998[xv], the number of private practice lawyers increased by a total of only 14.9% while the number of practising lawyers in other categories increased by 79.7%. During this period, in-house law departments rapidly increased[xvi]. The number of private practice lawyers increased by 220 lawyers or 1.4% annually while the number of practising lawyers not in private practice increased by 341 lawyers or 6.0% annually.

Looking at the next 15 years[xvii], there were 17,032 insured practicing lawyers in Ontario in 1999 while there were 5,067 practising lawyers exempt from insurance. This latter category included lawyers who were in-house and in education. I expect that most were in-house lawyers and will refer to them that way for simplicity.

By 2014, the number of private practice lawyers in Ontario had increased over 15 years by approximately 400 lawyers annually (i.e. 2.1%) from 17,032 to 23,057. The number of in-house lawyers had increased by approximately 300 lawyers annually (i.e. 4.3%) from 5,067 to 9,549. It may not have been intuitively obvious that over 40% of the net increase in practicing lawyers over the last 15 years has been outside of private practice.

Comparing the 10 years starting in 1989 and the subsequent 15 year period starting in 1998, the number of private practice lawyers increased more rapidly in the later 15 year period at 2.1% annually compared to 1.4% during the earlier 10 year period. On the other hand, the in-house etc. group grew more slowly in the latter period at 4.3% annually compared to 6.0%. Nevertheless, the number of in-house lawyers continued to grow more rapidly than private practice and a decline from the earlier very rapid growth of in-house lawyers was likely inevitable. Reflecting on the growth of in-house law departments, the greater rates of growth of the numbers of in-house should be no surprise.

Looking more closely at private practice

We know that there was significant growth in large firms in the 1980s and 1990s and that there has appears to have been diminished growth in large firms since the 2008 financial crisis. Unfortunately, we have no good information looking at these differences prior to 1998. But, there is information from the FLSC archive by firm size since 1998[xviii].

Over the 15 years from 1998 to 2013[xix], the number of lawyers in private practice in firms of more than 50 lawyers appears to have increased by 112 lawyers annually (i.e. 2.9%). Looking at the 5 years since 2008, the annual increase appears to be essentially unchanged at 110 lawyers annually for a lower annual percentage of 2.5%.

During the same 15 years, the number of sole practitioners increased by 114 lawyers annually (i.e. 1.6%) and the number of lawyers in firms of 2 to 10 lawyers increased by 151 lawyers annually (i.e. 2.6%). But in the 5 years since 2008, the number of sole practitioners has increased by 193 lawyers annually (i.e. 2.7%) while the number of lawyers in firms of 2 to 10 lawyers has increased by 207 lawyers annually (i.e. 3.2%).

Combining these “soles” and “smalls”, the increase is 400 lawyers annually (i.e. 3.0%) for the last 5 years of the period compared to 266 lawyers annually (i.e. 2.1%) for the entire 15 year period.

So what is the implication of this information. It seems clear that the experience in the “sole and small” sector has been quite different than in large firms and in-house. The “sole and small” sector was comprised of roughly 15,100 lawyers as of 2013. Over the 5 years ending 2013, some 400 net lawyers annually (up from 266 lawyers annually over 15 years) or 3.0% annually (up from 2.1%) were added to “sole and small” sector.

This increase is very likely the product of increased law school admissions, increased NCA numbers and somewhat diminished large firm growth. No doubt the addition of nearly 150 net more lawyers annually compared to a decade ago is causing competitive stresses.

Putting this change in broader context, it is useful to understand that the “soles and smalls” generally serve individuals. As such, the available work is likely correlated with number of people in the province. In 1998, there were approximately 1,030 Ontarians[xx] per lawyer in sole or small firm practice. By 2013, there appears to be approximately 900 Ontarians per “sole and small”. It follows that there will be greater competition for work in this sector. This analysis also suggests that there will be proportionately more inexperienced lawyers in this sector than there were which is a source of concern especially where practice in isolation is relatively common.

But none of this demonstrates that there are too many lawyers for the available work. There is no basis by which to judge how many is too many or too few especially given the substantial evidence of unmet legal needs. It may be that the increased number of lawyers will simply increase competition for limited work – or it may be that innovation will result in new services being provided to Ontarians – or there may be some combination of both.

Looking beyond new lawyers – projected future supply and demand

The analysis to this point has been historic. One point that can, and should, be taken from this historical review is that trends have changed and that the recent past has often looked quite different than the near future turned out to be. It is all too easy to assume that recent trends will continue when that is not necessarily true. For example, the number of applicants for law schools in the United States grew over many years – and has dropped dramatically in recent years[xxi]. Unlike in Canada, law schools are closing in the United States as demand falls in response to decreased opportunities.

Looking to the future, the Higher Education Quality Council of Ontario recently commissioned a study from Prism Economics and Analysis (the “Prism Report”) projecting the labour market for teachers, lawyers, physicians, nurses, architects and engineers. The headline conclusion for lawyers was “Based on the Lawyers Supply-Demand projection model developed in this research, it is estimated that over the 10-year period until 2025, there will be 1.6 new licensed lawyers for every new practicing position”.

The essential assumption made in the Prism Report is that there will be a significant decline in the number of new practising lawyer positions over the next 10 years while the number of law school graduates and new licensed lawyers will increase slightly. The result is a projected significant difference between supply and demand. This imbalance between supply and demand presumes a significant decrease in demand and no corresponding effect on supply.

On the demand side, the Prism Report assesses two components of demand; expansion demand (the increase in the demand for legal services) and replacement demand (the need to replace lawyers who leave practice because of voluntary withdrawal, retirement or death). As to replacement demand, the Report projects an increasing retirement rate and mortality rate with the “greying of the bar”. The Report notes the tendency of lawyers to retire later in life than the population generally and later than other professions. The Report does not address whether this trend toward late retirement will be true for in-house lawyers although the number of potential retirements from in-house practice may not be significant over the next decade given relatively low numbers in in-house practice in the 1980s.

More significantly, the Report projects a significant decline in expansion demand based on unreferenced projections of “slowing economic growth combined with increased globalization, the adoption of new technologies and rising competition”. As a result, the Report forecasts expansionary demand of some 320 lawyers annually over the next ten year down from a current estimate in the range of 700 to 1,100 lawyers.

It should be clearly understood that the most important variable in the Prism Report is the projected expansionary demand. The ability to make this sort of macroeconomic projection is highly suspect. Looking back at long term general economic forecasts and long forecasts for the demand for doctors, nurses and teachers shows that these sorts of forecasts are rarely right. While the Prism Report may be right that we are about to enter an unprecedented period of significant decline in expansionary demand, it is appropriate to be highly sceptical about the reliability of that prediction. If the expansionary demand since the financial crisis of 2008 is instead assumed, the conclusion of the Report would be quite different.

Figure 2-1 from the Report shows the annual historic and projected change in supply and demand for new lawyers from 2005 to 2025 with the first ten years being actual and the second ten years being projected. Notably, the number of new practising positions is just slightly less than the number of new licensed lawyers during the first ten years. A radical change is projected during the next ten years based on macroeconomic assumptions[xxii].

My point in this review of the Prism Report is not to throw rocks but rather to highlight the inherent fragility of the projection. I fear that the apparent reliability of charts and numbers will add fuel to protectionist fears.

What to make of all of this

It would be great to be able to make wise projections about the supply and demand of lawyers going forward. But, in my view, history shows that doing so is a mug’s game.

Lawyers in 1972 would not have guessed that the number of licensing candidates would remain essentially constant over the next 25 years. The growth of in-house practice and large firms would not have been projected in the late 1970s. Lawyer graduating in the early 1980s would not have predicted that they had become lawyers at such a good time. In 2002, the rapid increase in the number of Canadian and foreign law school graduates coming to Ontario to be licensed was entirely unpredicted. In 2007, the economic crisis of 2008 and its effect on the legal profession (and the economy generally) over the next decade was unpredicted. The rapid decline in US law school applications at the same time as increasing applications by Canadians to domestic and foreign law schools was not predicted either.

The implications are two-fold. The first is that we should not design and implement regulatory policies based on a false belief that we have the competence to “manage” supply and demand (even if we had that authority as a self-regulating profession which we don’t).

The other practical implication is that we should stick to our knitting and address what needs to be addressed. The principal mandates of a self-regulating profession are competence and conduct. The foregoing analysis shows what we already know which is that there are more lawyers going into small and sole practice and that many of these new lawyers are foreign trained. The goal should be proper assessment of qualifications, proper experiential training and practice support to better ensure that those practising in relative isolation have support.

But the implication of an increased number of lawyers is not to build a wall.

____________________________________________

[i] November 9, 2016 Convocation

[ii] Yogi Berra is commonly credited for this expression although the Danish physicist and Nobel Prize winner Niels Bohr appears to have said this before Mr. Berra. http://quoteinvestigator.com/2013/10/20/no-predict/

[iii] The Honourable Justice MacKinnon was appointed to the Court of Appeal in 1974 and then Associate Chief Justice in 1978. He served as Associate Chief Justice until 1987.

[iv] Appointed to the Court of Appeal in 1975 and appointed Chief Justice of Ontario in 1977.

[v] When I articled in 1982/83, the market was pretty grim. Articling hire-backs the previous year were very low. Interest rates had exceeded 20%. The economy was in a recession. No one would have guessed that becoming a lawyer in the 1980s would turn out as well for my generation as it did.

[vi] Ontario Universities’ Application Statistics at https://www.ouac.on.ca/statistics/law-school-application-statistics/

[vii] In descending order, Ottawa added 164 first year spots from 2002 to 2016, Windsor added 77 spots, U of T added 42 spots, Queens added 33 spots, Western added 17 spots and Osgoode was essentially flat.

[viii] National Committee of Accreditation of the Federation of Law Societies

[ix] An increase of 478 certificates was from England (255), Australia (131) and the United States (92). 177 was from other countries. India, Nigeria and Pakistan are the largest sources after Australia, England and the United States

[x] Until the market changed dramatically for lawyers in the United States.

[xi] Approximately 50% of the LPP students are from Canadian law schools.

[xii] Federation of Law Societies Statistics http://flsc.ca/resources/statistics/

[xiii] This were presumably mostly in-house lawyers. It is amusing now to see this group of 2,317 lawyers described as “other”.

[xiv] There are of course both new lawyers and lawyers who leave practice.

[xv] Based on LSUC annual information from the Great Library for 1989 and 1998.

[xvi] During this period, the size of large law firm serving large clients also increased significantly. While the numbers are not available, I expect that the number of lawyers serving individuals and small businesses likely grew even less.

[xvii] The Federation of Law Societies (FLSC) has a useful statistical archive with annual information back to 1998. The 1998 statistics from this archive for Ontario appear to have been done on a different basis than for 1999 and following years. Accordingly, I have used 1999 as a base rather than 1998.

[xviii] Unfortunately (and ironically), the available information is less reliable after 2007. Until 2007, the number of lawyers in private practice equaled the number of the lawyers in firms. In 2008 and following, the number of lawyers in firms exceeded the number of lawyers in private practice which makes no sense. It appears that the reason for this anomaly is that the data started in 2008 to double count lawyers who were in more than one firm. I have assumed that this double counting is randomly distributed by firm size and have restated the numbers so that the number of lawyers in firms is forced to the number of lawyers in private practice. This introduces a source of error into this analysis with the effect of the error being unknown.

[xix] The anomaly in the FLSC archive as between 1999 and 1998 was in the practising-exempt category. The practising-insured category was consistent. As data by firm size is not available for 2014, the 15 year period from 2008 to 2013 is used.

[xx] Based on Statistics Canada data as to the Ontario population

[xxi] The number of LSAT tests administered has dropped from over 170,000 in 2009/10 to nearly 106,000 in 2015/16. The number of Credential Assembly Registrations has dropped from approximately 88,000 in 2009/10 to nearly 52,000 in 2015/16 http://www.lsac.org/lsacresources/data/lsac-volume-summary

[xxii] One wonders how the obviously unexpected election of Donald Trump and the Brexit vote affects the assumption of increased globalization for example.

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