Balkinization  

Sunday, November 20, 2011

New York Times Financial Advice: Be an Unpaid Intern Through Your 20s (Then Work till You're 100)

Frank Pasquale

Jason Mazzone has already addressed the main shortcomings of the latest N.Y. Times article by David Segal on law schools. I'd like to situate it as part of a neo-liberal ideology developing at the Times and other scriveners for the powerful.

If you pair the basic message of Segal's piece ("law students and professors aren't doing enough to raise corporate profits") with that of Ed Glaeser's anti-retirement musings in the same pages ("work into your 90s"), the ideology starts to emerge. Labor economist Mark Price pithily suggested it:

Law schools couldn't possibly teach the wide range of firm specific skills that law firms need . . . . And yet you have a writer [pushing] propaganda that the big law firms are tired of paying for on the job training.


On the other hand it is at least comforting to know that law firms are not that different from firms in Manufacturing or Health Care[;] that is[,] they would prefer that somebody else pay for the skills that make them profitable.


This is a classic problem of uneven bargaining power familiar since the 1920s.* Why are wages falling while productivity is rising? Because firms realize they can fire current workers, shift their duties (unpaid) to frightened current employees, and reap the profits of having one person do the work of many. It's another form of "shadow work" that contributes to the time bind so many Americans find themselves in. When 65% of economic gains go to the top 1% of the population, it's not too hard to discern this dynamic.

Of course, a firm can only pile so many unbillable hours onto existing employees. So what's the next step? Start calling beginning work an "unpaid internship." Complain that "kids these days" don't know a thing; they're "zero marginal product" workers; they don't deserve to be paid till they're truly experienced. (At the end of a long line of traineeships, some may find themselves discarded as "too old" or "overqualified" for what is now defined as an "entry-level" position.) This is a wonderful strategy for cutting the budgets of corporate legal departments. But it only spells doom for attorneys caught up in the corporate games once reserved for blue collar labor.

The Political Roots of Rising Un- and Underemployment in the Legal Industry

Mazzone has complained that Segal doesn't know enough about legal education. He's also too narrowly focused on it. There is no question that, in many sectors, there are fewer positions for attorneys. Many journalists have attributed the decline to the creeping influence of "skill-biased technological change" and outsourcing: e-discovery can be done by computer or by the asymmetrically open Indian legal market. These trends do undermine some firm business models. But James K. Galbraith has already demonstrated the weaknesses of the "skill-biased technological change story" in many contexts. Moreover, the biggest driver of legal unemployment is political: the wholesale dismantling of tort, contract, and administrative remedies for corporate wrongdoing.

As I observed back in 2008, it would be shocking if an ideological movement to shut the courthouse doors to the injured failed to threaten lawyers' livelihood. To build on that: maybe there are less jobs for finance lawyers because the Justice Department has systematically failed to prosecute egregious white-collar crime. A "tort reform" movement has made the price of violating the law a mere cost of doing business for thousands of companies. When banks can get away with robo-signing and foreclosure fraud, why should they hire attorneys to ensure that their paperwork is actually valid? Even an ostensible regulator, the OCC, isn't bothering to launch a serious investigation in areas where deeply troubling practices have already been documented.

Corporate promotion of tort reform, deregulation, and arbitration has saved businesses many costs, including legal fees. But it has also increased the fragility of our food and drug supply chains, accelerated a financial crisis that has already cost the US trillions in lost output, and reduced opportunities for attorneys to fight to assure that business is conducted in a fair and societally beneficial way.

To ignore the political roots of the decline of both law and the rule of law in the US (and its obvious impact on attorney employment) is to fail to even begin a serious analysis of young lawyers' problems. Segal acts as if corporate defense is the heart and soul of legal work. He never considers how legal education works to prompt legal challenges to corporate wrongdoing. No one will have a job defending corporations if there aren't well-trained attorneys applying old law to new corporate wrongdoing. That takes creative thought, a chance to learn the policy behind law, and engagement with current industry trends. It's not something to be drilled into people by projecting bar prep rote back into law school.

Law as a Cost

Throughout Segal's article, another pair of assumptions creeps in. Law is presented as a cost, a series of niggling and none-too-important hoops to jump through to get down to the real business of mergers and deals. Law professors' research is dismissed as pure self-indulgence, as we are once again treated to Justice Roberts' witty dig at articles devoted to Kantian Bulgarian evidence law.

Segal never stops to ask: Why might a Justice like Roberts want to discredit the legal academy? Maybe it's because, while colleagues of mine were trying to nip the housing crisis in the bud, a phalanx of deregulators on the Supreme Court came up with a politicized preemption decision that let the good times roll for America's most predatory banks? Maybe it's because law professors actually have the time to document how radically Roberts and his allies have diverged from precedent? Perhaps it's because Roberts, after long years in corporate practice, sees law profs' efforts to reinterpret old statutes and doctrines in light of new harms (a far larger part of legal scholarship than the high theory he laments) as one more nuisance for the clients who made him a rich and powerful man?

But we need not even engage with these politically sensitive questions. Rather, we might wonder: why does philosophy stand in for Segal as archetypical legal scholarship? When I first heard Justice Roberts lament the tragic dearth of practical articles, I marveled: has he ever taken a look at Sharona Hoffman's or Nicolas Terry's cutting edge work on digital medical records? This emerging field raises critical questions about the balance between privacy and innovation. We cannot permit our digital health infrastructure to be constructed solely according to the corporate interests of whatever vendors and providers happen to be most powerful at the time. We desperately need more work like Hoffman's and Terry's to guide us through the thicket of administrative and technical issues raised by electronic medical records.

I can think of figures as eminent and important-to-practitioners as Terry and Hoffman in five areas of health law and four areas of intellectual property law off the top of my head. (Ever heard of Pam Samuelson, Mr. Segal?) Yet Segal is apparently ready to write off the entirety of legal scholarship because someone, somewhere had the temerity to write about Kant.

I can understand why a writer at the New York Times might want to lash out at maladaptive institutions. Segal is daily subjected to his paper's opinion pages, which peddle one irrelevant or stereotypical piece after another from their tenured moderates. (You learn more from Dean Baker's critiques of them than from the articles themselves.) Thursday Styles reports on the 0.1%'s lifestyle intently, breathlessly tracking the price of Birkin bags as if it's news the rest of us can use. The Gray Lady is becoming less the paper of record than a chronicler of the conventional wisdom and consumption of the wealthy.

What Next?

Law students, like many others today, face a grim job market almost without precedent. But I think proposals like Segal's---making students start corporate-type work earlier and earlier---will only exacerbate the problem by providing an ever-larger pool of free labor for firms. We need a bigger picture view of an economy where professional and rentier incomes in general must deflate to match the diminished buying power of strapped lower and middle classes.

Debt is the critical financial issue of our age. Mortgage debt, student debt, credit card debt, medical debt, sovereign debt—--all are causing social upheaval. Debt often seems like a standalone menace, a black hole sucking money (and thus time and opportunity) from the indebted. But behind every mortgage statement is a servicer, distributing those funds to buyers of income streams. Debt is the shadow side of wealth, as Margaret Atwood memorably portrayed it. You don’t have to immerse yourself in the accounting equivalences of Modern Monetary Theory to figure this out.

Congress addressed two major sources of debt recently. The credit card provisions in the 2009 CARD Act and Dodd-Frank offered some weak disclosure provisions. Look at your statements, and you’ll see exactly how many years it will take you to pay off the balance if you stick to minimum payments. Basic consumer protections are in place, but there is not much substantive relief for debtors.

However, the ACA addressed medical bills much more comprehensively. I think its provisions can be a model for balancing obligations of the individual and society in other essential areas, like housing and education. In brief: for unemployed individuals (or those who are not offered affordable insurance by their employer), health insurance exchanges will offer various health plans. Thus the notorious “individual mandate:” these persons will need to get insurance or pay a fine. But the government will offer help, in two ways.

First, to help pay for the premium, advanceable tax credits will ensure that no one pays too much of their income for insurance. How much is too much? A family of four with earnings under $40,000 should not be paying more than around 6.3% of income for premiums; for those making around $85,000, the rate rises to 9.5%. (Here is a calculator with rough estimates of how much individuals and families need to pay at certain levels of income.) This is essentially an income-based payment scheme, for people making up to 4 times the federal poverty level. Moreover, "those with incomes below 250 percent of the poverty line will also receive cost-sharing assistance" on the other side of medical bills: the copays, coinsurances, and deductibles not covered by an insurance policy. The formula is complex, but the bottom line is that the federal government assists in paying these costs based on income, as well.

Income-based repayment schemes are a part of education financing now, though many have complained that they are not sensitive enough to other costs of living. Making income-based repayment more fair, and considering other legal changes in this area, are very important political issues. Housing policy should also be more open to income-based payment of mortgages, offering options ranging from “rights to rent” to direct principal modifications.

The key point here is that the owners of the income streams from student debts, mortgages, and other sources are playing a dangerous game if they think rights to payments are as sacrosanct, as, say, the AIG bonuses. They may think that they can continue to squeeze the indebted to pay 60 or 70% of their income each month for housing, insurance, and loan debts (and for the dubious right to claim as an asset something that will eventually be worth far less than what was paid for it if current debt deflation continues). But the larger economic implications are disastrous. Consider Steve Keen's diagnosis, as related by George Monbiot. Keen believes that both the Great Depression and the current crisis "were triggered by a collapse in debt-financed demand:"

Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. . . . In the 1920s, private debt rose by 50%. Between 1999 and 2009, it rose by 140%. The debt-to-GDP ratio in the US is still much higher than it was when the Great Depression began.


We are in the midst of a great readjustment. For decades we’ve been told that our economic model, as persons, was to act like corporations do, accumulating assets and rights to payment. In fact, this “ownership society” was a mirage, providing great wealth to a few at the very top and precarity to the rest. There is no way to guarantee a secure future all on one’s own. Social structure, norms, and bargaining power matter.

Neither law students nor law schools can preserve their own future simply by better learning how to serve the corporate interests that would like to eliminate all profit-menacing regulation and tort claims. Economic security is an inevitably political question, which requires a coordinated political response---not one more effort to legitimize corporate wage-slashing with a simple story about "unskilled" workers. Before the Times treats us to another "what's wrong with law schools" story, it might want to investigate the forces of deregulation and volatile financialization that kneecapped not only the legal job market, but employment prospects generally. No one needs another piece legitimizing the "young people don't deserve to be paid" meme of the radical right, in the guise of snide snark about out-of-touch law professors.

*I've addressed these imbalances many times in posts on Law & Inequality. See, for instance, Power & Productivity After the Great Recession; Inequality and the Great Recession).

X-Posted: Concurring Opinions.

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