Why are lawyers so expensive?

Vladimir Vinokurov is a solicitor and a deputy Victorian State director of the Australian Taxpayers’ Alliance. The views expressed here are his own.

Vladimir Vinokurov is a solicitor and a deputy Victorian State director of the Australian Taxpayers’ Alliance. The views expressed here are his own.

Everyone complains about the cost of lawyers, but few look at the cause: occupational licensing laws. Occupational licensing requires anyone who intends to become lawyer to comply with a range of requirements to practice law. These including studying a law degree that is too long, formally applying for “admission” into the profession in an unnecessary ceremony, as well as meeting cumbersome training and supervision requirements that are sometimes unnecessary. These requirements cost law students years of time and tens of thousands of dollars to comply with. The more expensive it is to become a lawyer, the fewer lawyers there will be and the more they can charge. There can be no doubt that this partly explains why lawyers are expensive.

The sheer expense of hiring a lawyer undermines the individual right to obtain legal representation. It means that hiring a competent, effective lawyer can be unaffordable for poorer members of the public. Even wealthier people may find their resources drained by legal fees. The expense of becoming a lawyer also undermines the right to pursue a career of one’s choice, especially poorer students who lack the financial support to study full-time for years and comply with red tape. Lastly, these laws reduce the quality of legal services. The fact that competent would-be lawyers are being excluded from the profession means that existing lawyers have less incentive to operate competently because they have less competition.

The problem starts with the law degree, which must include 11 “core compulsory subjects” but takes three years of full-time study to complete as a result. The degree costs about $10,000 per annum with government subsidies and more without them. Many solicitors may never encounter some of those subjects in practice. Few lawyers practice in constitutional or administrative law. Some solicitors exclusively practice in criminal law or commercial law. Only some do both. It is simply not necessary to study them all in order to practice law. Students should have the choice of studying criminal law and procedure, commercial law subjects or both. Splitting up the degree will reduce costs and create new pathways to legal practice.

But the red tape doesn’t stop there. Graduates must undertake “practical legal training” before they can practice law. They must pay several thousands of dollars to learn what they otherwise should be learning as junior lawyers. If they are not, they can take the course. The problem is that everyone is forced to take it whether or not they have learnt the basics of legal practice. Even experienced overseas barristers have been forced to undertake this training. Forcing this requirement on everyone is unnecessary and wasteful.

Formal admission ceremonies further increase costs. As of 2015, Victorian admission ceremonies alone cost $926. This is a substantial hit to the savings of many graduates. The ceremonies take place monthly, but applicants must apply months in advance to become admitted—further delaying their careers. In the meantime they are simply expected to make ends in meet.

The restrictions pile on after admission. As of 2011, would-be barristers must pass a bar exam and undertake a 2 month readers course, costing thousands of dollars in total, to practice. The exam is unnecessary: barristers typically spend hours to prepare for specific cases, and thinking up answers on the spot will not get you far in the courtroom. Moreover, the exam covers material that graduates may have just covered at university. It’s no wonder practising barristers, even junior barristers, weren’t required to sit the exam: it has nothing to do with upholding standards.

Similarly, solicitors are required to practice for two years under the supervision of another lawyer before they can do so independently—unless they are overseas, or happened to open a practice before that rule was imposed. The inconsistencies in these requirements expose both their arbitrariness and their actual purpose: keeping people out of the profession.

Running a law firm is also unnecessarily cumbersome. By law, all practitioners must obtain “practising certificates” and insurance coverage from a single government-appointed insurer. A competitive insurance field would reduce costs. On top of that, barristers must buy robes and wigs. Costumes can cost thousands. Renting chambers (if practitioners choose to do so) and paying for practising certificates and insurance every year, taken together, costs thousands more.

While there is a great deal of concern about the supposed oversupply of law graduates, the simple fact of the matter is that they are legally forbidden from working without complying with these requirements. The expense of doing so means they cannot compete with established practitioners, which brings prices up.

It is also hard to argue that these regulations protect the public, given that so many current practitioners were exempt from them when they entered into the profession.

By contrast, deregulation will help society at large—especially the poor. Legal fees are just one factor at the margin that can lead to financial insecurity. Reducing costs will help those who are financially at risk.

Nor are regulations the only way to protect the public. Lawyers’ societies could still accept, reject or expel members on the basis of reputation, skill, honesty or competence just as the regulators do now. Ratings systems and online review websites  can also serve an important role in keeping the profession honest. These measures are informative and cost effective. Lastly, in serious cases incompetent lawyers can still be sued by clients for breach of contract, just as they are today.

Those concerned about upholding the standards of the profession forget that some legal work is already competently performed by non-lawyers with knowledge of the law. Tax agents and accountants, police prosecutors, patent attorneys, and industrial advocates all provide legal representation in their chosen fields right now. Indeed there are prosperous, stable nations with reliable justice systems like Sweden and Finland in which anyone can practise law without a licence. There is no reason why Australia cannot adopt a similar system for lawyers or other trades and professions, for that matter.

The case for deregulation is clear: it empowers the poor, the public as a whole and law students. Occupational licensing laws must be repealed. The law must recognise that for many lawyers, the years of study and tens of thousands of dollars spent obtaining a licence to practice is unnecessary.