Legal Services
Overview
Legal services are performed in the United States through a variety of settings. By far the largest segment of the legal profession are private lawyers, with firm sizes ranging from sole proprietors to large corporations with hundreds of attorneys. Private attorneys represent an estimated three-fourths of the total number of practitioners in the legal profession. A second group of legal services includes those providers of public legal assistance, who work either as public defenders or in legal aid offices set up to assist those who cannot afford the high cost of private legal counsel. A third group is government lawyers, who work for state, local, or federal government agencies and deal primarily with laws and regulations involved with government service. A fourth group are lawyers who work for nonprofit organizations and provide legal counsel in matters that relate to their particular organization’s interest.
In 1998, legal services employed 1.5 million workers in legal services with $139 billion in revenues. Cost-cutting, so widespread in U.S. corporations, has affected legal services contributing to a modest slow-down in the rate of growth in revenues. Over the last 10 years ending in 1998, revenues of legal services firms increased an average of 5.2 percent per year. For the next ten years, annual growth in revenues is likely to average about a percentage point slower. Expected is more volatility and dispersion of performance among the industry’s subsectors with increased competition from non-traditional law firms. Highest levels of revenue growth occurred in firms involved in product liability litigation and securities litigation.
The industry will continue to be shaped by technology, mergers and acquisitions, and global issues. Technology, in particular, is changing the way that companies and people interact with each other and with the law. Technological advances and innovations have rapidly improved the work environment for attorneys. Like other professional services, the legal profession is receiving a vast of communications and information over the Internet. With technological advances come opportunities, such as legal ramifications (e.g., contracts, cost recovery, insurance, regulatory compliance, and remediation) surrounding the Y2K computer problem.
Although private lawyers will continue to the largest segment of the legal profession, mergers and acquisitions of law firms are becoming more common in recent years. Such mergers and acquisitions allow legal firms to reinforce services in some areas and overcome lack of services in other areas.
Many U.S. law firms have significant competitive advantages in providing legal services outside the United States. The U.S. system of law is very effective and several of its elements, including antitrust and antibribery, are being utilized in other countries. There remain, however, a number of obstacles for legal professionals entering other markets. These market access issues are being examined in bilateral and multilateral discussions and by the World Trade Organization.
The legal services industry faces significant supply side changes. Within a tighter cost control environment, more assignments are being given to lower cost paralegal professionals. The demand for paralegals should continue to rise over the next decade as this trend extends throughout the legal profession. The spread of franchise law firms is another supply side development. Such firms are marketed to handle basic standardized legal services at fixed fees well below those charged by traditional partnerships. Other supply size developments include the rise of legal temporary services and new forms of legal services akin to the health maintenance organization. The latter development has spawned the prepaid legal service—an attractive option for small businesses.
Another development being watched with wariness is the "legal consulting" being offered by accounting/management consulting firms. Legal services provided by accounting firms are being challenged as unauthorized practice of law. Potential mergers and acquisitions between law firms and these management consulting conglomerates are being contemplated by the American Bar Association. One-stop shopping for legal and accounting advise makes business sense but enormous conflicts of interest questions are being raised.
Current Status in Washington
In 1998, the legal services employed 16,750 workers in Washington. This industry has a significant number of sole practitioners; the combined 1998 employment of proprietors and employees in Washington legal services totaled 29,750. According to the most recent economic census, legal services firms in Washington had revenues of $2.15 billion in 1997.
Growth in legal services establishments has been steady; between 1981 and 1998, establishments were added at an average pace of 3.9 percent. The pace of employment growth in legal services grew at the same pace of 3.9 percent per annum.
Legal Services Establishments in Washington State, 1981-1998
Source: Washington Employment Security Department
For more detail of above graphic
Total Employment in Washington Legal Services, 1981-1998
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis
For more detail of above graphic
Annual Change in Wage & Salary Employment of Washington
Total Nonfarm, Legal Services and All Services, 1981-1998
Source: Washington Employment Security Department
For more detail of above graphic
Average covered wages for legal services workers was $41,273 in 1998, about 22 percent above the statewide nonfarm average of $33,922. In 1998, legal services employees’ wages and salaries ranked fourth among all services industries (behind business services, engineering and management, and miscellaneous services), and substantially above the statewide services industry average at $35,244. Real (i.e., without inflation) wage growth in legal services between 1981 and 1998 has been faster than statewide nonfarm workers, but slower than all services workers.
The distribution of hourly wages for legal services is dissimilar to the state, with a pronounced disposition toward higher hourly wages. Thirty-six of all workers in the legal services earn over $20 per hour, compared with 28 percent of all nonfarm workers in the state. More than half of all legal services workers earn between $10 and $20 per hour, compared with 42 percent of all nonfarm workers.
Table 1
Real Average Wages for Washington Legal Services Workers,
1981-1997 (1997 dollars)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis
| Sector | 1981 |
1983 |
1985 |
1987 |
1989 |
1991 |
1993 |
1995 |
1997 |
1998 |
| Legal Services | ||||||||||
$31,148 |
$29,886 |
$29,484 |
$31,009 |
$32,135 |
$33,962 |
$35,086 |
$36,652 |
$39,814 |
$41,273 |
|
| Total Services | ||||||||||
$22,525 |
$21,216 |
$20,583 |
$21,493 |
$21,592 |
$23,948 |
$24,908 |
$26,490 |
$30,653 |
$35,244 |
|
| Total Nonfarm | ||||||||||
$28,783 |
$27,789 |
$27,313 |
$27,304 |
$27,167 |
$27,928 |
$28,575 |
$29,046 |
$31,504 |
$33,922 |
|
Hourly Wages for Washington Legal Services Workers, 1997
Source: Washington Employment Security Department
For more detail of above graphic
The labor force in the legal services sector is dominated by professional, technical and clerical occupations. Common legal services occupations within the professional and technical group are lawyers and paralegals.
Table 2
Occupational Profile of Legal Services Workers in Washington,
1995 and 2005
Source: Washington Employment Security Department
Estimated 1998 |
Projected 2008 |
|||
| Legal services, SIC 81 | Estimated Employment | Percent of Total Employment | Projected Employment | Percent of Total Employment |
| Managerial & administrative | 462 |
2.5% |
605 |
2.6% |
| Professional, paraprofessional & technical | 9,148 |
48.6% |
12,289 |
52.3% |
| Sales & related occupations | 2 |
0.0% |
2 |
0.0% |
| Clerical & administrative support | 8,846 |
47.0% |
10,138 |
43.1% |
| Service occupations | 141 |
0.8% |
176 |
0.8% |
| Operators, helpers & laborers | 1 |
0.0% |
1 |
0.0% |
| Undefined occupations | 207 |
1.1% |
301 |
1.3% |
| TOTAL | 18,807 |
100.0% |
23,512 |
100.0% |
Contributions of Legal Services to
Washington State Economy
Prior studies have found that a significant proportion of the state's professional services, like legal services are sold afar rather than locally, implying that growth in legal services need not be derived from merely growth in local goods production. One set of studies looks at the proportion of a state's legal services employment. The observation that a state's employment concentrates in a particular professional services industry (that is, that there is surplus labor employed in producing legal services), suggests that the state produces more than it needs and therefore exports the surplus. The most commonly used measure for legal services export has been a simple index of employment concentration which looks at an industry's share of total employment in a state. This share is put into index form by dividing by the industry's share of total employment in the nation. An index number greater than 1.0 suggests that the state produces a surplus in legal services which is exported elsewhere. Accordingly, an index number of 1.0 would indicate little or no trade while an index number less than 1.0 would suggest that the state imports the service. As Figure 5 indicates, legal services in Washington does not have a significant export component.
Index of Specialization in Washington Legal Services, 1969-1997
Source: U.S. Bureau of Economic Analysis
For more detail of above graphic
Additional analytical studies confirm these impressions that legal services does participate within the increasingly important export sector in Washington. The most recent Washington State input-output study found that nearly one-fifth of business services' (including legal services) total 1987 revenues of $4.09 billion was exported out-of-state to customers in other states or foreign countries. Another report, Foreign Exports and the Washington State Economy, found that business and professional services (including legal services) was among the state's leading service sectors in foreign exports with 1995 sales valued at $244 million.
According to a recent study, An Economic Analysis of the Puget Sound-Alaska Partnership, the Puget Sound area also serves as a regional center for Alaska, with a number of law firms providing significant legal services.
Outlook
The growth in legal services will likely be above average over the next ten years, as it was over the previous ten years. In Washington, legal services is forecasted to grow faster than the state in terms of employment. Forecasts to 2010 indicate annual growth rates of between 1.3 percent for legal services, slightly above the state nonfarm employment growth rate of 1.1 percent. For the second forecast decade, legal services are projected to lose employment (-0.1 percent per year), compared with the statewide growth of 1.1 percent per annum.
Washington Legal Services Wage & Salary Employment Forecast, 2000-2020
Sources: Washington Office of Financial Management,
Washington Employment Security
Department
