No AI Impact On Total Law Grad Hiring, But… – Artificial Lawyer

AI uptake is having no impact on the number of new law graduates hired into legal roles, yet. Data from NALP has found that freshly-minted US law grads experienced their ‘highest overall employment rate ever recorded’. But, curiously, median salaries across all law firms combined – i.e. large and small – dropped by 3% for entry level jobs.

So, what does it mean? This is AL’s take.

First, should we expect any impact on employment yet from legal AI? Until now the answer would have been no, as its uptake was just not widespread enough, or use regular enough, to really be felt across the whole market. It feels – and with some surveys to support this – that things have changed and whether it’s small firms using ‘raw’ ChatGPT or Big Law firms and large inhouse teams using legal AI tools, then AI is indeed seeing real use now.

Why has the number of law grad hires increased overall? NALP – the National Association for Law Placement – said that it was the best year ever in the US for converting law school graduates into those with legally-related jobs. (And in fact, it was a larger cohort than the previous year as well.) Or to put it another way, every year thousands of people graduate from law school, but the number of each graduating year – in this case the year of 2024 – who move into legal jobs, varies.

A follow-up question is: if the number of entry level roles has in fact increased, across law firms, public sector jobs and other areas, then why have salaries dipped by 3% for law firms? (And in this case that means all law firms, i.e. including all the many small and medium size firms, not just the giants of Wall Street and other commercial centres.)

And,

Here’s some thoughts:

First and foremost aggregate demand for legal services seems to be increasing, at least in the US, following a long-term pattern of an always more regulated world, where new laws are enacted at breakneck pace, and businesses and public sector organisations equally respond to ever-growing legal risks.

That just because many of these law firms and organisations that need to hire law graduates are using AI for some of their needs around legal work, doesn’t mean that they have yet rationalised or triaged their workflows and thought through how they can work in new ways. I.e. they just keep on hiring in the same way as before whenever they feel an increasing need for legal support, hence more juniors are hired. That is to say, they are starting to use AI tools now, but that the thinking and planning in terms of organisational economics has not yet evolved to catch up with these changes. So, more demand still means more people, for now.

But, this pattern may not be sustainable. Even if demand keeps rising – which it likely will given that the world becomes ever more ‘legified’ each year – eventually managers and owners of businesses will realise they are adding human labour to areas that are not needed because of AI. At that point things may indeed change. Although…with Jevon’s Paradox, that demand may actually accelerate as AI makes some legal services cheaper. Overall, it’s supply and demand, mediated by AI’s efficiency impact. But, presumably at some point, even with Jevon’s Paradox, things must balance out…?

But, why the 3% drop in salaries at law firms? Now, this is really interesting. As you can see from the table. Not since the financial crisis of 2009 have median salaries at law firms dropped – and this data is for all firms in the US, small, tiny, and very tiny, as well as Big Law, which is doing great still, so one would assume the drop is being felt more outside of the larger firms. Clearly there is a good supply of law grads, so that has to be factored in. Yet, to the above point about not changing how they hire yet, why are law firms paying less? That suggests that the law firm sector is perhaps more sensitive to changes in the market.

Why are these changes resulting in lower pay offers, at least in some parts of the law firm market? As noted, a simple reason is lower demand. Yet….the commercial legal world is booming we are told. And although we have some economic instability in the US and elsewhere, overall we are not in a recession. So, here are some reasons:

Inflation and other macro-economic factors are deterring legal spend from customers, especially in the mid and small law world, perhaps.

That there are too many junior lawyers chasing jobs. That even though across the whole economy hiring of lawyers is up, in the law firm sector the demand for jobs there is slightly higher than the demand to hire, perhaps especially at the smaller end of the scale?

Or….and this is the most enticing idea: that AI is in fact having some small effect now, especially on this small- to mid-size part of the market and that such firms are finding they can do a lot more with AI than before and so that is being represented by them offering slightly lower pay to new lawyers? They are still hiring as before, because as noted, old habits of hiring people for everything, have not changed yet. But, perhaps a realisation that their need to hire because of AI use is just a little lower, is translating into a drop in pay?

Overall, we don’t have the data yet to know for sure. Plus, as noted, 2025 is probably the first year in history that we can realistically expect to detect even the smallest signs of AI having an impact on legal sector employment.

Commenting on the results, Jim Wagner, a pioneer in legal AI, founder of The Contract Network, and who also guest lectures at Duke Law School, told Artificial Lawyer: ‘We all expect AI to have a long-term impact on the work of legal professionals, but these numbers remind us, again, of the resilience of this community.’

So, to conclude, early days for systemic signals about AI and legal jobs – and this data is certainly not showing any major impact, yet, in fact you could argue that the best hiring scenario ever in terms of numbers with new jobs shows AI is having no impact. Yet, the dip in pay across the whole law firm market raises a question mark over whether this is a ‘blip’, or the first signs of something happening.

What have you seen?

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You can get the full data from NALP here.

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