The Economics of articling, our Titanic

Apart from all the stale metaphors about deck chairs etc. …

(la version française suit)

A historical significance of the fatal 1912 maiden voyage of the Titanic was its foreboding of an end of a European social order already seeking a rescue from the New World. When it sank, there were not enough lifeboats. Aristocrats and steerage passengers alike perished, as a result. Had they survived, White Star Line would simply have built another and implemented better iceberg detection. The shortage of lifeboats was a matter of choice. So, too, is the decision the Bar of Ontario has to make about the training requirement for licensure of new lawyers. If we do not get this right, we will fail in our mandate to provide competence and access to justice. We also risk a lost generation of law school grads. We could, as the writer has argued, lose the right to self-regulate. The public would simply take it away.

In order to approach the lack of lifeboats in the context of our impending appointment with the iceberg, we have to understand the nature of the choice. From a transportation safety perspective, it is common to limit the the number of passengers a ship can carry by the number of lifeboats. Increase the capacity of the lifeboats, and you can let more on. There are others who say you should add lifeboats, according to the number of tickets you sell.

Crisis in Supply or Demand?

The regulatory and academic sectors tend to consider the articling shortage as a failure in supply. See, for example, Adam Dodek’s bold proposal for an Ontario Legal Corps. It is a novel and smart approach because it confronts the public/private aspect of our self-regulating profession. The “scarcity of supply of articling positions” is a valid concept from a self-regulatory perspective, because it is the profession’s collective responsibility to provide on-the-job training through internships.

Dodek’s plan relies on a $200 levy on 40,000 lawyers (although in reality the practising bar is a much lower number). If allowing only well-trained lawyers is the Bar’s duty, then it is hard to argue against the need for the Bar to implement and fund an appropriate solution to the shortage of positions.

The individual members and firms in the legal profession, however, tend to approach it as a “demand” issue. According to classical economics, those who are paid and seek money, whether labour or commodities, are suppliers (articling students) and those who pay (lawyers, firms, government and corporate legal departments) provide demand.

On the other hand, the overwhelming support by the practising bar to maintain articling can be read in two ways. It could be demand for the maintenance of a particular competence regime. We want new lawyers to have gone through articling, but we do not exercise enough recruitment and hiring due to market pressures. The public, in contrast, might see this desire as a means of controlling the supply of legal services to maintain price. This collateral equation is an extraneous market distortion based on monopoly economics. It is not without some validity, but it does not describe the market itself. The reason why the Bar does not provide articling jobs in sufficient numbers is driven by law firm needs (demand), not by any plan to restrain trade.

The lesson we can glean from this is that it is unfair to all stakeholders, students, firms and the public, to rely on a market model. The regulatory model and the market model operate under divergent principles. We, as a profession, have to “get” this first. Otherwise the deckchairs on the Titanic will not be just a stale metaphor.

♦ ♦ ♦

En dehors de toutes les métaphores périmées au sujet de transats etc …

Une signification historique de la voyage inaugural du Titanic en 1912 était son pressentiment de la fin d’un ordre social européen. Quand il a coulé, il n’y avait pas assez de canots de sauvetage. Les aristocrates ainsi que les passagers d’entrepont ont péri. S’ils avaient survécu, la Line White Star aurait simplement construit un autre et mis en œuvre une meilleure détection des icebergs. La pénurie de canots de sauvetage a été une question de choix. Alors, aussi, est la décision du Barreau de l’Ontario a à faire sur l’exigence du stage (articling) pour des nouveaux avocats. Si nous ne résoudrons pas cette crise, nous échouerons dans notre mandat d’offrir des compétences et l’accès à la justice. Nous avons également le risque d’une génération perdue parmi les diplômés des facultés de droit. On pourrait, comme j’ai soutenu, perdre le droit de s’auto-réglementer.

Afin d’aborder le manque de canots de sauvetage dans le cadre de notre réunion imminente avec l’iceberg, nous devons comprendre la nature du choix. Du point de vue la sécurité des transports, il est courant de limiter le nombre de passagers que le navire peut transporter par le nombre de canots de sauvetage. Accroître la capacité des embarcations de sauvetage, et vous pouvez laisser plus de passagers. Il ya d’autres qui disent que vous devriez ajouter des canots de sauvetage, selon le nombre de billets que vous vendez.

Crise de l’offre ou la demande?

Le secteurs de la réglementation et universitaire tendent à considérer la pénurie de stage comme un échec de l’offre. Voir, par exemple, la proposition audacieuse d’Adam Dodek pour un Corps juridique de l’Ontario. Il s’agit d’une approche novatrice et intelligente, car elle confronte l’aspect public / privé de notre auto-régulation professionnelle. La « rareté de l’offre de postes de stagiaires » est un concept valable dans une perspective d’auto-réglementation, car elle est la responsabilité collective de la profession à fournir des stages.

Le plan de Dodek repose sur un prélèvement de 200 $ sur les 40 000 avocats (en réalité le barreau pratiquant est d’un nombre plus petit). Il est difficile d’argumenter contre la nécessité du Barreau de mettre en œuvre et financer une solution appropriée à la pénurie de postes.

Les membres individuels et des entreprises dans la profession juridique ont cependant tendance à aborder la question comme celle d’une « demande. » Selon l’économie classique, ceux qui sont payés et demandent de l’argent, qu’il s’agisse du travail ou des marchandises, sont des fournisseurs (les stagiaires) et ceux qui paient (avocats, entreprises, gouvernement et services juridiques des entreprises) fournissent la demande.

D’autre part, le soutien massif d’avocats pour maintenir le stage peut être lu en deux manières. Ce pourrait être la demande pour le maintien d’un régime de compétence. Nous voulons que les nouveaux avocats aient traversé de stage, mais nous n’avons pas assez d’exercice de recrutement et d’embauche en raison des pressions du marché.

Le grand public, en revanche, pourraient y voir le désir comme un moyen de maintenir le prix des services juridiques. Cette équation est une distorsion du marché fondé sur l’économie de monopole. Ce n’est pas sans une certaine validité, mais il ne décrit pas le marché lui-même. La raison pour laquelle la barre ne fournit pas d’emplois de stage en nombre suffisant est dictée par les besoins cabinet d’avocats (la demande), et non par un plan pour restreindre le commerce.

La leçon que nous pouvons apprendre de cela est qu’il est injuste pour tous les intervenants, les étudiants, les entreprises et le grand public, de s’appuyer sur un modèle de marché. Le modèle de la réglementation et le modèle du marché fonctionnent selon des principes divergents. Nous, en tant que profession, doivent d’abord comprendre la nature économique due problème. Sinon, « les transats sur le Titanic » ne seront pas seulement une métaphore rassis.

Terms of use / Mentions légales

Comments

  1. Lee, what are your thoughts on the dynamics of the legal marketplace in small cities/towns? Smaller cities seem to have a shortage of lawyers. I also hear lawyers in small cities complain about having trouble finding good candidates. I have no doubt that there is plenty of demand for low cost legal services in small cities. Yet these firms seem to be the last to take on articling students, and, if they do hire, provide awfully low to pay to articling students or new calls, despite the labour shortages.

    Do you think that because of their size small firms can’t take on the risk of having one bad candidate? If so, do you think the law society should be doing something to help these firms mitigate that risk, and encourage them to take on articling students?

    • Thank you, John. You’ve hit the nail on the head, on that subject. The smaller and more remote communities appear to be a purely market-driven case of the labour supply not being mobile enough and the demand not prepared to entice labour to move. It is ironic because, as you point out, there is an emerging shortage of lawyers. We have a serious problem of lack of succession in those areas, where the average age is above 55. I have spoken with unemployed law students who don’t want to move, and senior rural lawyers unwilling to hire a student for the purpose of succession. There are some success stories of students getting jobs in outlying areas through meetings at the OBA, for example. For the most part, though, we have to accept that the market utterly fails when it comes to providing law practice succession through hiring of students. I read from this that any meaningful solution will have to come from major population centres.

  2. Thank you, Noel. Indeed, the restrictions on use of family corporations to split incomes of small firms place lawyers at a disadvantage compared to doctors and dentists. That advantage in fact provides incentive for medical practitioners to locate in less served areas and hire support staff. The analogy to articling may indeed be appropriate, because LSUC has found it hard to increase articling hires outside of major cities. In smaller communities, it is harder to make that leap economically.

  3. An incisive analysis. But could regulation itself be the iceberg?

    Regulation might be preventing the supply of articling students from meeting the demand for legal services. If the scope of articling student practice were expanded, law firms might find it more economical to employ them.

    More ambitiously, if law firms were allowed to access capital and ownership expertise from non-lawyers, then they might be able to expand and adopt lower-cost service models which the middle class can actually afford. This would in in turn make it profitable for firms to hire many more articling students, paralegals, etc.

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