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What are the prospects for law grads in Australia?

A writer from lawgrads.weebly.com published an article in September 2013 exploring the state of affairs for Australian law graduates and law schools. Click on the button below to read the article.

INTRODUCTION

Everybody hates lawyers. Alongside politicians and sex workers, lawyers rank among the least trusted professions. Yet, at the same time, everybody wants to be a lawyer. Countless popular TV shows revolve around lawyers — Suits, The Good Wife, Franklin & Bash, Boston Legal, The Practice, Ally McBeal, L.A. Law, Matlock and so on.

School leavers and their parents could not regard law more highly. Law students are expected to join a prestigious and well-paid industry. Because of this, tens of thousands of Year 12 students apply to enrol in law degrees. Demand for places is so insatiable that law schools generally have ATAR cut-offs in the high 90s, despite most law schools admitting 300-400 new students per year.

The appeal of law must be re-examined. Perceptions about law graduates' bright futures in esteemed corporate firms are false. Law graduates have an unfathomably small chance of winning a job at such places. Today we explore the prospects for students by reviewing statistics around the explosion in the number of law schools and the post-2008 restructurings at big law firms.

PARAMETERS

Our focus is limited to students hoping to work in top corporate law firms. Examples of such firms include Allens Linklaters, King & Wood Mallesons, Herbert Smith Freehills, Ashurst, Clayton Utz and Minter Ellison, among others.

We do not examine suburban/regional practices because Australian law students overwhelmingly apply to work in city-based corporate firms. Similarly, we do not study options outside the law because, as a recent academic survey found, approximately 97% of law students believe they will enter the legal profession after graduation.

EXPLOSION OF LAW SCHOOLS

As the introduction highlighted, law degrees excite Year 12 students and parents alike, fueling very high demand for places. Universities noticed this phenomenon in the 1990s — precisely when the Howard government began cutting public finding to universities. In searching for new revenue streams, universities realised they could respond to the huge demand for law degrees by opening law schools. Under the HECS/HELP system, law degrees are the equal most expensive degree to study. Law students are therefore highly profitable for universities, to whom course fees are paid directly (either by the student upfront or by the government through HECS/HELP). This profit margin is boosted by the simplicity of teaching law; no labs, no workshops, no field trips, etc — only lectures and tutorials, inexpensive and risk free.

With these factors in mind, it is no surprise that Australia saw an explosion of law schools. In the past twenty years, the following 19 universities each opened a law school: James Cook, Canberra, Wollongong, Flinders, La Trobe, Griffith, Southern Cross, Notre Dame, Murdoch, Western Sydney, Edith Cowan, Victoria, RMIT, South Australia, Southern Queensland, Central Queensland, Curtin, Australian Catholic and Sunshine Coast. Incredibly, there are now 36 law schools in Australia.

There are currently 30,000 law students in Australia according to the Australian Law Students Association. Given a cohort of 30,000 — with a mix of 5 year LLB and 3 year JD students — one would expect around 7,000 law students graduating each year. Fairfax reported that Australian law schools accepted 6,890 students, excluding tranferees, in 2012. Taking into account the attrition rate among law students, a conservative estimate may be that 6,000-6,500 students graduate with a law degree each year. Most strikingly, there are only 59,280 lawyers throughout Australia according to the 2011 Law Society National Profile. Only 21.4% of this number practiced in firms with 24 partners or more (the top corporate firms have 150-200 partners), meaning only 12,686 lawyers work in what could be described as mid-sized firms or above.

It is axiomatic that a system with 30,000 law students and 60,000 lawyers suffers from a colossal oversupply of graduates.

CLERKSHIP HUNGER GAMES

For several decades, big law firms have exclusively hired graduate lawyers through vacation clerkships. Law students in their penultimate year of study apply and, if successful, spend their summer/winter break as an intern with a firm. The expectation is that the students will be offered a law graduate job when the clerkship ends. Failing to secure a clerkship with a corporate law firm virtually ends any opportunity to work at such firms, as they do not hire graduates among final year students.

Obviously, clerkships are ferociously contested by law students.

The level of competition is the stuff of legends. Firms seldom release figures, but the consensus numbers, circulated among NSW universities, is that over 1,200 students apply for clerkships at the leading law firms in Sydney, with each firm taking around 20 clerks. Indeed, way back in 2008, the managing partner of Allens revealed to The Australian that the firm's Sydney office receives 1,200 applications for summer clerkships. Even further back, in 2005, Deacons (now Norton Rose) informed Lawyers Weekly that its Melbourne office receives 1,000 applications for its 15-18 clerk positions each year. In 2013, Lawyers Weekly reported that Australia's largest law firms attract 30-50 applications from students for every 1 position. Even small firms experience this, with Swaab Attorneys advising BRW (professions section, 16-22 August 2012) that their single graduate lawyer position attracted 'several hundred applications from students, several of whom had achieved first class honours'.

The Australian (business section, 28 June 2013) reported that the 'big 6' law firms (those cited as examples at the beginning of this page) took on 485 law graduates nationally in 2012 (a number which is expected to reduce considerably in 2013). Picking up our earlier statistic of 6,000-6,500 law students graduating each year, we see that, even optimistically, 92% of law students will never have the chance to work at Australia's leading corporate firms.

Encapsulating this absurd competitiveness is the following account of last year's clerkship selection process at Thomsons Lawyers, a mid-tier firm in Sydney, which was first published in the Australian Financial Review:

With more than a whiff of the Hunger Games, students were ushered into a boardroom chock full of champagne-swilling partners, after each had had a Polaroid of their image tacked to a wall in an adjoining room. The wise heads in human resources gave the youngsters just one rule for the 70 minute battle to the death: get in, get circulating and get out. The student who left the most partners impressed would be the winner. When time and the canapes ran out, the partners wandered next door to jab their swizzle sticks at their chosen photos, in the process deciding who made the cut and who’d be left on the cutting room floor.

While not all firms have gone as far as Thomsons, the clerkship process has certainly intensified over recent years. Top-tier law firms focus heavily on academic results (even going back to the HSC) and generally only interview students with above distinction averages in law — marks that are more difficult to achieve in law than other faculties. There is partiality for specific universities, evident in the preponderance of 'Group of 8' law students among clerkship intakes. Long responses to application questions, an star-studded CV and unique cover letter are also standard requirements. It is becoming increasingly common for firms to use cognitive tests to further cull students before interviews. Moreover, it is now almost a prerequisite that applicants have professional legal work experience, as well extracurricular leadership roles.

Given the standards firms expect and the sheer crowd of competing applicants, clerkship season is not for the faint hearted.

Update: This page has attracted tips claiming that particular large firms in Sydney have, for the first time, failed to offer most of their 2012 vacation clerks a graduate offer in 2015. If you have further information about this, use the form below.

Update: We have received anecdotal information that firms have again reduced their clerkship intakes in 2013-14, and some firms with especially small intakes are only interviewing students with high distinction averages.

AN INDUSTRY IN DECLINE

Despite the bleakness depicted above, hope remains so long as big law firms continue to hire graduates to help run their vast legal empires. Unfortunately, in June 2013 the managing partner of Allens told the AFR 'we can probably halve our graduate intake'. This reflects a miserable reality — since the global financial crisis in 2008, Australia's corporate law firms have been shrinking substantially. Using figures from the AFR, a truly depressing story is told.

Between July 2008 and July 2013, Mallesons partnership shrunk from 200 to 156, Freehills from 218 to 185, Allens from 200 to 165 and Clayton Utz from 221 to 200. Overall, a 16% reduction in the partnerships.

More worrying are the figures for non-partner lawyers. Between July 2009 and July 2013, Mallesons fell from employing 1,070 lawyers to 678, Freehills from 958 to 822, Allens from 940 to 770 and Clayton Utz from 887 to 658. Overall, a whopping 24% reduction in the number of non-partner lawyers.

(Figures for Minter Ellison and Ashurst were omitted because each firm reported in an inconsistent way, sometimes including staff outside Australia, other times not, etc).

In light of the decline that big law firms are experiencing, the prospects for law graduates who dream of working at these places are grim. This decline shows so signs of ending: in the last six months, redundancies were made at Clayton Utz and Ashurst (with both firms also deferring the start dates for some graduates) and DLA Piper, a pay freeze was instituted at Mallesons and Freehills, and Allens also 'embarked on a round of job cuts'.

Finally,  the increasing use of legal process outsourcing (sending low level work to lawyers in India) by Australian firms will further discourage firms from hiring anything but a very small class of law graduates. In the words of ALSA:

The effect of LPO on law graduates is that a proportion of the work that was historically done by ... entry level lawyers, will no longer be available. If this trend were to continue in Australia, this could add a concerning level of pressure to the already tight legal graduate market.

Update: only weeks after this page was published, a survey was released by the Commonwealth Bank finding that 67% of top-tier law firms expect to continue to reduce their staff numbers in the future, and another survey by law firm Mallesons found that 75% of companies estimated their spend on lawyers would either not change or reduce over the next year.

CONCLUSION

For law students chasing a future with a corporate law firm, employment prospects could not be worse. The immense oversupply of graduates matched with the ever-shrinking nature of Australia's leading firms amid weak global economic conditions means that (in the words of the head of Australia's largest legal recruiter) 'it is the worst time in living history to be a law graduate'.

It is incumbent upon young students, be they in Year 12 or first year law, to understand the realities of this market. Think about whether law, and particularly high level corporate law, is really what you want to do. If it is, be prepared for a difficult journey.

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