Why Law Schools are Making a ‘Big Mistake’ in AI Era Admissions

The number of law students who graduated in the class of 2024 spiked compared to previous years. That worries Nikia Gray, the head of the National Association for Law Placement.

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“I think it’s going to be a big mistake for law schools to continue to admit large law school class sizes,” she said, “when we can predict with some pretty good certainty that GenAI is changing the business models of firms and their hiring practices.”

Gray spoke to Bloomberg Law editor Jessie Kokrda Kamens on our podcast, On The Merits, about the ways AI will change the jobs of entry-level attorneys. The former Quarles & Brady recruiter also discussed what law students should be doing right now to get ready for a job market that’s about to get much more competitive.

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This transcript was produced by Bloomberg Law Automation.

Host (Jessie Kamens):

Hello and welcome back to On the Merits. I’m your host, Jessie Kamens. Today we’re bringing you another episode about the role of AI in legal education.

A few weeks ago, we heard from a dean of the University of Chicago Law School about how and why they’re teaching AI to aspiring lawyers. But now we’re going to hear from someone who represents the gatekeepers to a legal career. Nikia Gray is the executive director of the National Association for Law Placement, or NALP, a group that works on legal recruiting issues for schools and firms.

I asked Gray what she thinks law firms want newly minted JDs to know about AI before they become associates. But she also told me about how AI is already changing the market for how many associates firms need. And a warning to any current law students listening, you might not find her outlook to be very encouraging.

Guest (Nikia Gray):

I think AI is already starting to change the way lawyers practice law. And with that, we think it’s going to change how many lawyers law firms need and the expertise they’re going to need to have. And here’s the real thing about it. Law firms have spent the last three years largely doing this, should we, shouldn’t we debate when it comes to gen AI. That’s now over.

One law firm senior executive told me or described it as there’s going to be those firms who figure GenAI out and those firms who don’t exist anymore. And that’s kind of where we are. Law firms recognize it’s no longer optional. It’s essential to their business. And as the tool develops and lawyers become more proficient in it, it will replace a lot of that more routine work, legal work that lawyers today spend so much time doing and billing for.

And this is where we’re going to see the changes happen in the law firm business model. And I think it’s going to be quite painful for many of them in the beginning. There’s going to be fewer lawyers needed for that routine work as it’s going to be replaced by gen AI. And it makes up so much of the routine billings in law firms today. So that means there’s going to be less revenue per engagement as there’ll be less billings on each matter. And the leverage models will shift. They’re likely going to decrease and shift to this much more senior lawyer mix, all of which will decrease profits and headcounts in law firms. And it will cause the practices of existing lawyers to become much more narrower and more highly specialized.

Host:

I want to pick up on a couple of things that you said. First, can you explain the leverage model to our listeners for those who could use a little more explanation on that?

Guest:

Sure. And this is a really important factor to understand. And a lot of, I think, folks don’t necessarily understand it. Leverage refers to the ratio of non-equity timekeepers to equity partners. So it’s the ratio of folks like income partners, associates, staff attorneys, paralegals to your equity partners. So leverage models are highly correlated with profitability of firms and specifically the profitability per equity partner of firms. So if that leverage model decreases, that means you have less billers per equity partner. And if it shifts to a more senior lawyer mix, it means it’s a more expensive model because you have to pay them more, both of which reduce profits.

Host:

And then another thing that you touched on was that you said it will become a more specialized career. Can you talk a little bit about that as well?

Guest:

Yeah. I think what’s going to happen here is that Gen AI is going to, again, replace a lot of that routine work that lawyers do and that comprises so much of those billings in the firm. And what’s going to happen is lawyers are going to have to use Gen AI to practice faster, practice better, practice more sophisticatedly, more strategically. So their practices are going to be much more niche. Due diligence is going to really focus in a highly specialized device that Gen AI can’t do rather than looking for all of the incongruities in contracts, right? Things like that.

Host:

So let me ask you, is AI changing the practice areas where demand is highest for associates?

Guest:

We’re not seeing that yet. At least I haven’t seen any reports on that yet, but I do think it will in the future. We do expect GenAI to disproportionately impact certain practice areas like patent prosecution is one, contract review, general commercial practices are ones where we think that’ll be highly affected as well.

Host:

Do you think, aside from taking away some of that early routine work that associates and big law firms do, are you foreseeing other ways that it’s going to change associates’ career paths?

Guest:

I do. I think that associates are going to have a much shorter runway to learn and become profitable, right? So right now, a lot of law firms don’t evaluate junior associates on profitability. And by that, I mean, how much time does the associate bill that is actually charged to a client and then collected on, right? The client actually pays on. Right now, it’s just accepted in law firms that they’re going to need to write off a lot of that time of the first year, during the first few years of an associate’s practices. So long as the associate is doing good work, meeting their billable requirements, right? It’s generally thought of as okay and just expected. And it really isn’t until more of that the associate is in their fourth or fifth year that most firms really start to look at the profitability of the associate and evaluate them on it.

But with revenue per engagement decreasing, that padding that allows the law firm to carry an unprofitable junior associate for a limited amount of time, right, as they’re learning is decreasing. And that means that firms are going to expect future first year associates to start performing like today’s fourth year associates on a much shorter runway. So I think they’re going to have much less time to learn and figure out their practice than they have in the past.

Host:

So I was looking at some of NALP’s recent reports, and it looks like 2024, the graduating class, it was a really bumper year in terms of career prospects and number of students hired. Do you think AI is making any kind of ripple in employability at this point? And do you expect that to evolve over time?

Guest:

Yeah, that’s a fantastic question. That’s one I’ve spent a lot of time thinking about. And I am very concerned that the results of the class of 2024 are going to be misconstrued into thinking that we can continue to admit large class sizes, right? The class of 2024 was very, very large compared to the classes we’ve seen since about 2016, since we recovered from the Great Recession in the legal industry. And it had phenomenal record-setting employment outcomes. And I’m very concerned that law schools will see that and continue to admit large law school class sizes.

We know the class of 2027 is going to be quite large. That was the one admitted last year. And I think it’s going to be a big mistake for law schools to continue to admit large law school class sizes for the class of 2028, 2029, and beyond, when we can predict with some pretty good certainty that Gen AI is changing the business models of firms and their hiring practices in this same window of time. By the time we get to 2028, 2029, my fear is that law firms will have pulled back on hiring. And if law schools haven’t adjusted their class size by then, the market will be flooded with a disproportionate number of law students compared to what it can absorb at that time.

Host:

So this is sounding a little bleak for future law students. What do you think that they can do to boost their potential for having a fruitful career?

Guest:

First of all, I want to say, I don’t think it is bleak for law students. And I appreciate you asking me that because I want to clarify this. When I say law firms are going to reduce their hiring, it’s not that they’re going to hire no one or that they’re going to stop hiring. And I have to sometimes be careful because I think sometimes when I say things like reduce hiring people, it gets sensationalized in the media. I am not saying that at all. Law firms will still need to hire junior talent and train them so that they have those more experienced attorneys that they need to perform the work. So they’re not going to stop hiring. We just think they’re going to reduce it.

And I think that the law student who really wants to give themselves an edge can really focus on getting a certain level of AI fluency. And I think those law students who do will have an edge. Right now, a lot of law firms are focused on building out their own AI tools and training their workforce to use those tools effectively and properly. And there was this great article on Ropes & Gray launching an AI initiative that gave their summer associates training and experience with the technology. And I think a lot of firms are doing that, right? So AI adoption is still new enough that the firm themselves are providing that training, at least for now. But as Gen AI gets more embedded into the way lawyers are practicing, the graduates who have that AI fluency when they come out of law school will have an edge. And I think eventually it will become a base level competency that employers expect graduates coming out of law schools to have.

Host:

And we spoke with William Hubbard, a dean at the University of Chicago Law School. They are bringing in a lot of new AI courses for their students there. And he said he was surprised that some of the students were really skeptical of AI and they needed to actually be encouraged to use it. Are you seeing that among attorneys? And would you encourage them to try to overcome that sort of hesitancy that some may have about leaning on AI?

Guest:

Yeah, I think we have to. And I’m not surprised to hear that students are hesitant. I’ve had this conversation even with my own team and found some hesitancy to use it for all sorts of different reasons. And so it doesn’t surprise me to hear that law students are expressing that. But I do think they have to be encouraged to engage with it and to learn how to use it and learn how to use it effectively. It will not do everything. It will not completely replace lawyers, but it is going to replace some of that routine legal work. And this is not new. It happened when computers first came on the scene, when word processing came on. It used to be when I started practicing that no lawyer knew how to type, right? And they had secretaries who would type all of their letters up, right? That has changed over time as technology has changed. And so I think this is just the next step. And they do have to be encouraged to overcome that apprehension. Because as I said, law firms now think of it as essential to businesses. And clients are demanding that lawyers now use the tool and become more efficient and reduce their billings because of that.

Host:

That was Nikia Gray, Executive Director of the National Association for Law Placement. And that’ll do it for today’s episode of On the Merits. For more updates, visit our website at news.bloomberglaw.com. Once again, that’s news.bloomberglaw.com.

The podcast today was produced by myself, David Schultz, and Elleiana Green. Our editors were Chris Opfer and Alessandra Rafferty, and our executive producer is Josh Block. Thanks, everyone. We’ll see you next time.