GDP figures, legal services spend and fees per inside lawyer on law firms don’t mesh

Bill Henderson, Director of the Center on the Global Legal Profession and a Professor of Law at Maurer School of Law, co-authored an article in the ABA J., July 2011 at 41. The authors write that “over the last 25 years government data shows legal services constitute a slightly larger proportion of the nation’s GDP – now nearly 2 percent – with no hint of decline.” Let’s assume that “legal services” means work done by law firms, that our gross domestic product in 2009 was $14.5 trillion, and that “nearly 2 percent” is 1.9%. That calculation says $280 billion paid for “legal services.”

There are something like 75,000 in-house lawyers in the United States (excluding government lawyers) who each spend on average roughly $600,000 a year on outside counsel (See my post of May 4, 2009: outside counsel spend per lawyer, about $600,000.). The General Counsel Metrics benchmark study for 2010 had data from 370 US law departments and found that median figure to be $511,000 per lawyer (but it includes some government departments). On those rough estimates, corporations in the US paid about $45 billion to law firms. (Yes, non-US companies pay for services of US law firms, but I don’t know how much.)

If the legal services market was on the order of $280 billion and corporations accounted for $45 billion, something seems off. Consumer spending makes up two-thirds of the GDP, but surely companies pay more than one-third of total legal fees. Part of the answer might be that “legal services” includes employed legal staff and perhaps the court system as well as fines, judgments and awards.

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