There is a gap — a pretty big one, in fact — between those who need legal representation and those who can afford it. Many people believe “innovation” will substantially narrow or close this gap. This is a load of hooey.

Neither technology nor business models can make competent legal representation cheap enough to close the justice gap — well, not until after the Singularity, anyway. In the meantime, the only innovation that will make a difference is regulatory. That is because the only way to eliminate the justice gap is to eliminate the prohibition on unauthorized practice of law.

See, I knew you wouldn’t like it. But it’s the only way.

The high cost of legal representation

Our legal system has a pretty obvious problem: its cost. The cost of legal representation, in particular. Average hourly rates in 2012 were about $370 for associates. It would take someone working at minimum wage (currently $7.25) more than a week to pay for a single hour of the average associate’s time. At the median U.S. household income of $50,502, that’s still a bit less than two days of work, before taxes.

[A]ny way you look at it, though, there is a gap. A huge gap. A lot of people cannot afford a lawyer.

Fortunately, lawyers.com says that in rural areas and small towns, fees of $100 to $200 per hour are “probably the norm.” So anywhere from two to four days for someone working at minimum wage, without taking taxes into consideration. Or a day, for someone at the median. That’s without taking into account the cost of living, obviously.

And then, Americans average around $15,000 in credit card debt, $147,000 in mortgage debt, and $31,500 in student loans. In other words, for many Americans hiring a lawyer probably means going into more debt, which means adding interest, and often late fees and overdraft charges, to the lawyer’s hourly rate.

If you are really poor, you might be able to get a lawyer to represent you for free. In general, this means people at or below 125% of the poverty line. (125% of the poverty line is currently $14,363 for an individual, and $29,438 for a family of four. That’s about what you’d make working full-time for minimum wage, and most people would consider themselves poor at twice that.) Free legal services can’t help everyone, either. The Brennan Center for Justice) says about 80% of the need is unmet. Legal Services Corporation says (pdf) it turns away about 50% of those who apply for help.

Regardless, free legal services are limited to certain legal issues. As you might imagine, people who fall into this category are at least as likely to need legal services as those with higher incomes.

And, of course, those eligible for free legal services are hardly the only people who need them. The income limitations leave out the lower middle class, or about a third of Americans, and most of them would have a hard time paying for a lawyer, too. That’s also probably true of many in the rest of the middle class.

While it is not hard to find estimates of the number of people whose needs are unmet by legal aid organizations, I could not find any estimates of the number of Americans who need legal help but are either unable to afford it or too “wealthy” to qualify for free legal aid.

Still, any way you look at it, though, there is a gap. A huge gap. A lot of people cannot afford a lawyer. Most people who cannot afford a lawyer, probably don’t get one.

The myth of rich lawyers

Most lawyers couldn’t afford to hire themselves.

So legal representation is expensive, and lots of people can’t afford it. It’s not clear that there is anything unfair about lawyers’ hourly rates, though. Despite the size of lawyers’ fees, lawyers aren’t automatically wealthy. Remember: most are not earning the six-figure salaries represented by a tiny point on the NALP lawyer salary curve. Most lawyers are earning just $40–65,000, before taxes. That puts most lawyers at or below the median on most personal income scales. Most lawyers couldn’t afford to hire themselves.

In other words, lowering hourly rates will only result in impoverished lawyers. Or more-impoverished lawyers, in many cases.

If legal fees are so high that most Americans can’t afford them, why can’t more lawyers make a good living? The answer is complicated, but in a nutshell, it is expensive to become a lawyer, stay a lawyer, insure against risk, and run a law practice, and it is hard to make a meaningful dent in those expenses. There are lots of ideas for partial solutions, but no proven ways to make lawyering work — at scale — for substantially-lower prices.

Online legal document services are barely smart enough to handle basic legal document prep. Virtual law firms and unbundled services aren’t enough, either. Even virtual lawyering pioneer and evangelist Richard Granat admits that “pure” virtual practices don’t work. He meant “for lawyers.” And if they aren’t a sustainable business model for lawyers, they aren’t going to work for consumers, either. Others think corporatizing law firms by allowing non-lawyer ownership and investment will introduce game-changing efficiencies and new, more-profitable business models. And the various plans to put law students and new lawyers to work for low-income clients is simply untenable without substantial long-term funding — not to mention unhelpful. People need competent legal help, not inexperienced law students and lawyers.

At best, online document prep, virtual law firms and unbundled services, and non-lawyer ownership are components of a solution. They are not the solution itself.

Simply increasing efficiency is not enough. Pretending that reducing overhead is the main thing keeping lawyers from cutting fees is like pretending the cost of paperclips is the main thing keeping Dell from giving away laptops.

So, something’s gotta give, and it is the prohibition on unauthorized practice of law.

Eliminate UPL laws, eliminate the gap

The practice of law is premised on the idea that clients should get competent representation in every case. We aren’t willing to accept many mistakes, and we have a complicated set of professional responsibility rules that set a fairly high bar (even if not all lawyers don’t get over it). That high bar comes with a price — the price of trained, tested, licensed, and experienced lawyers. But that is a price many people cannot pay.

The only way to lower the price is to lower the bar and let everyone compete for clients in the legal marketplace. That means getting rid of laws that forbid the unauthorized practice of law. A couple of years ago, Andy Mergendahl took a look at what would happen if UPL laws were eliminated. Here are his posts:

  1. What would happen to people who need legal help but can’t afford it?
  2. What would happen to people who _can _afford a lawyer, but might prefer a non-lawyer?
  3. What about big clients?
  4. Oh yeah, what about the lawyers?
  5. Last but not least, what would law schools do?

You should read through Andy’s posts, but consider what it would mean for those who fall into the gap.

The costs and benefits of deregulation

Sure, the quality of some legal services will go down, perhaps drastically. But fees are probably close to the lowest they can get under the status quo. If you want fees to drop further, you have to accept a reduction in quality. On the upside, even if the quality of legal representation drops, there still should be a net positive, overall. More people will get the help they need, even if more people get less-than-competent representation.

More justice, in other words, depending on how you measure “justice.”

The question becomes what is the lowest level of legal quality we are willing to accept, and at what price?

Think about it in terms of a simple will package for sale by one of the big online legal document vendors for $69 (the starting price on LegalZoom). Substantially the same thing from a lawyer would probably cost somewhere between $500 and $2,000, although the lawyer is more likely to identify the clients for whom the package is not appropriate. But a lot more people can afford the LegalZoom version, and as at least one lawyer is willing to admit, most of the people who use the online service will be just fine. Sure, there are horror stories, but if more people can afford a simple will package, and simple will packages are things worth having, then it’s a net positive. If we are willing to accept a few more “bad” wills, we can get good-enough wills to a whole lot more people.

The same scenario can play out for other legal services. There are certainly non-lawyers who could do as well as some lawyers in the courtroom. Why not let them? Why not force lawyers to compete on a level playing field?

The question becomes what is the lowest level of legal quality we are willing to accept, and at what price? And keep in mind, there are definitely lawyers who aren’t clearing the bar right now. Lowering the bar will certainly impact quality, but the status quo hardly guarantees it.

Innovating away the gap

Perhaps rating services like Avvo can learn to help potential legal services customers choose the level of quality they are willing to accept. At the high end, those high-priced lawyers will probably still command an impressive hourly fee. Lawyers with less-impressive track records will have to accept less. Slick marketing — by lawyers and non-lawyers alike — will proliferate. (Maybe even by vending machines.)

Perhaps non-lawyer advocates will prove to be a complete failure. But if people like ABA president James Silkenat really want to solve the access to justice problem, this is what they should be talking about. There is no clear benefit to assigning incompetent lawyers (read: new law school grads) to clients of any income level. And lawyers cannot solve the access-to-justice problem. We have had decades to try, and all we have done is chip away at the problem and talk about “innovation” without any apparent ability to do it.

Instead, we should be talking about opening the legal market. If we want drastic change, we have to take drastic measures, and we have to let others take a shot at solving the problem.

(image: http://www.flickr.com/photos/lex-photographic/9374317863/)