AI and the Coming Mismatch Between Law Schools and Law Firms

The future lawyers of America were taking the LSAT this weekend. But, by the time they get their JDs in a few years, law firms may have replaced many of their entry-level associate jobs with AI. That’s a fear Mike Spivey hears a lot about these days.

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Spivey is a former law school administrator who is now an admissions consultant working with schools and prospective students. He says law school applications for the class of 2029 are spiking right now—even though AI may totally transform the legal industry by the time they graduate.

Law schools are asking themselves “‘Are we admitting people and bringing in large class sizes who, in three to four years, we’re setting up to be in great debt? Are we going to have these debt-ridden people without jobs?’” Spivey said on our podcast, On The Merits. “That’s the tension.”

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This transcript was produced by Bloomberg Law Automation.

Host (David Schultz): Hello, and welcome back to On the Merits, the news podcast from Bloomberg Law. I’m your host, David Schultz.

The lawyers of the future were taking the LSAT this weekend. What’s the legal industry going to look like by the time they earn their JDs in a few years? And more importantly, will law firms have replaced all their entry-level attorneys with AI by then?

Today’s guest Mike Spivey is a former law school administrator who now runs his own admissions consulting firm. His clients are mainly prospective students, but he also works with schools and even a couple of firms. Spivey says this is a problem that could just solve itself because of long-term demographic trends But Spivey says, the situation could get worse before it gets better.

Mike Spivey: Today, 9.3 out of every 10 law school students has a job at graduation. We’ve been on a long, good run of hiring at a law school. And David, what has that fueled? Well, applications, as of this morning, are up 17.7%. Last year, they ended up 18.3%. So students, they’re seeing these astronomically high employment rates at a law school, and they’re gravitating to law schools, which are increasing the size of law school enrollment. What’s going to happen two or three years from now? And there’s two camps.

So camp number one would say, why not use AI? Look, 80% of what junior associates do, a first-year associate, discovery, doc review, that already can be done by AI. So we’re not going to lay off our current associates. You invest a lot of money in training these people. But we’re used to hiring 50. Let’s hire five. And those 45 salaries we save, that goes back to the partners. Why wouldn’t the partners want to make money?

So camp number two says, well, I’ve heard this story before. I heard it with email, and with smartphones. What did email do? It made me busier.

So to be determined, but I think with law firms in particular, and I’ve used this analogy before, they like putting their toe in the water. But if the water’s cold, they pull it out really quickly. We’ve seen case law hallucinations from AI. So law firms see this, and they’re risk averse. They say, unlike businesses, why do we need to take this risk? So those are the two camps.

Host: Are law schools seeing this and saying, maybe we should not admit so many students right now, because we’re a little concerned that they won’t have jobs when they graduate?

Mike Spivey: That’s such a good question, because the tension is demographic cliff is coming, which means the number of child births in America was greatly reduced during the Great Recession. And that’s about three to four years from hitting law schools.

Host: Well, let’s linger on that for a second. You’re saying that there’s going to be fewer people of law school age because of demographic changes that happened, I guess, 20, 25 years ago.

Mike Spivey: Correct. So in three to four years, barring law schools today being able to attract an incredible amount of international students, which I don’t see happening currently, they’re going to be crushed with far fewer applications, which means they probably will have to reduce the class sizes.

So one side of the tension is we need to build up our surplus now when all these people are applying. Why wouldn’t we? Financially, it’s our fiscal responsibility to do so. But the other responsibility is to ethically employ your students. And if in three years, AI is going to have, and I don’t know, but if AI is going to have this huge hit on hiring, are we admitting people and bringing in large class sizes who, in three to four years, we’re setting up to be in great debt? Are we going to have these debt-ridden people without jobs? That’s the tension.

Host: Yeah, it really seems like law schools are feeling a lot of pressure to admit as many students as they can now before they reach this demographic cliff, as you called it. But on the other hand, it’s very possible that the demand for junior associates in a few years will also fall off a cliff. It’s like we have two cliffs. Is that what’s going on?

Mike Spivey: You’re 100% right. We have two competing cliffs. So let me give you a little more optimistic. So two years ago, law schools increased class size by 8%. Last year, 5%. And what if there’s a moderate impingement on hiring? There’s a moderate hit to hiring when there’s fewer students in law schools? You could almost see those just serendipitously lining up together. So less students but less jobs is not the worst case scenario. The worst case scenario, obviously, is more students and less jobs. That would happen if this hit to hiring happened starting this year.

Host: I see. The demand for lawyers goes down, but also there could be fewer students.

Mike Spivey: We would want that. I talked to the global litigation chair of Gibson Dunn last night. His name is Trey Cox. He also does their hiring. He was talking about also, hey, law schools are now incentivized to train students in AI. Well, guess what we want? We want lawyers who are trained also in understanding how to work with AI.

Host: Yeah. But let’s get a little bit deeper into this because not all law schools are the same. I mean, it can be very top heavy. You have the top 14, maybe 20 law schools. People are falling all over themselves to get into these schools, regardless of what’s happening in the economy. And then there’s everyone else. Do you think we could sort of see a K-Shaped, for lack of a better word, trend in law schools where you have the T14 law schools are doing fine, they’re still getting a ton of applicants, despite the demographic cliff, despite the demand for lawyers going down, and then all the other law schools below those really, really suffering intensely?

Mike Spivey: Yeah, it’s a great question. You know, we’re in a K-Shaped economy right now. What I would say is yes with an asterisk: There’s a new cap on federal loans at $50,000 for law school students. So yes, unless students become so debt-averse that strong students gravitate away from the 14 you mentioned that are going to give you probably more debt and go to a top 25, 30 school with a lot of merit aid, and then firms start seeing the talent go to those schools, it’s still going to be, quite frankly, it’s still going to be K-Shaped. But the tail of the top K, for lack of a better, I can visualize it, will be longer than 14. It’ll be 30 or 50, maybe.

Host: Finally, I want to ask you what you’re telling students right now. Is there a way that they can stay above the fray and out-compete AI? Or are you telling them, yeah, you should be really worried about this?

Mike Spivey: So they should be a little bit worried. And I’m telling them, well, one thing we’re telling them, our firm, is the same thing we’ve been telling them for the 14 years our firm has existed, which is do not go to law school for anyone’s purposes but your own. If someone’s telling you you’ll make a lot of money or you have parental pressure or societal pressure, but you’re not geeked up and excited about law school, horrible reason.

And because there may be this impingement, this hit to hiring, if you’re passionate about the law, that’s going to come out. You’re still probably going to be hireable. If you’re doing it for someone else’s sake, that’s going to come out. And you’re going to be less desirable and probably a less desirable legal hiring market two to three years from now.

Number two is maybe pick a school that’s becoming more AI-focused. And there are schools out there that are having centers for AI, teaching AI. Gravitate towards those schools.

Host: That was Mike Spivey, a former law school administrator and CEO of Spivey Consulting Group. 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. Our editors were Chris Opfer and Alessandra Rafferty. And our executive producer is Josh Block. Thanks everyone for listening. See you next time.