Medical Tourism/Legal Tourism rising: US/EU health/law professionals to earn less

A Changed Playing Field

The economic downturn has negatively affected practicing and would-be lawyers as much as any group of professionals, changing the expectations of the playing field for all but a select a few.

Prominent news publications have reported that the economic recession  is forcing law school students (like me) to anticipate the worst law job market in some sixty years.  This year, all law school recruitment materials have shared talking points on how to be a more competitive job candidate.

1) Be a pro-active job applicant; engage in letter campaigns; be patient

2) Be an entrepreneur; look at small, boutique firms; explore markets outside of the big city area

3) Get another degree that makes it easy for you to specialize, like something in the engineering sciences; not necessarily an MBA

4) Look for jobs in the public sector; in the military;

5) Be open to internships:continuing to work with the law is important, even if you can’t get a paying job

All schools are offering more or less the same advice because they anticipate that the post recession period is not a finite period of increased employer expectations and reduced employee benefits; it is the new reality. The only reason that recruitment materials don’t candidly describe the situation  as such is because no one has yet figured out what this downturn may mean for their own school’s own bottom lines; I suspect that once students are enrolled, the faculty and administration will be much more straightforward with their assessments.

Never mind, the message  is clear enough:  anyone who hopes to practice law will need to do all of the above listed things, from now on,have the chance to be a successful legal professional.

So, it is with some chagrin that I will now discuss  the potentially greater impact that the increasingly flat world and legal outsourcing will have on young lawyers, as big and mid-size firms, and companies with costly in-house legal departments,  continue to look for ways to cut costs.

Globalized Talent Pool of Lawyers

A few weeks ago I talked to an American  pharmaceutical executive who believes that the future of the pharmaceutical industry is neither a low cost Asia, nor a high salary West.   Rather,  salaries for pharmaceutical jobs will be standardized across the world, give or take 20-30% .  Eventually, the labor and operational costs of doing business for a pharmaceutical company in, for example, India, will be very close to what they are in America and Europe, and the variables that go into making the decision to outsource or not, will change.  This will precipitate in many now-outsourced jobs returning to the West because employers will find Western pharmaceutical professionals to once again be a good value, since salaries will be almost even across the world, and the Americans will be better versed in pharmaceutical business owing to their comparatively greater experience.

Then, this past weekend, in the New Yorker, I read Larissa MacFarquhar’s terrific profile – The Deflationist -  of Paul Krugman, the Nobel prize winning economist, and columnist for the New York Times. At one point, Ms. MacFarguhar describes one of Mr. Krugman’s lasting contributions to economics:

There was a large amount of trade between countries whose economies were extremely similar, and these countries traded goods that were virtually identical: Germany sold BMWs to Sweden and Sweden sold Volvos to Germany. People had speculated about why this should be so, but nobody had come up with a model that explained it in a rigorous manner.

Krugman realized that trade took place not only because countries were different but also because there were advantages to specialization. If one country was the first to begin manufacturing airplanes, say, it might accumulate an advantage in economies of scale so large that it would be difficult for another country to break into the industry later on, even though there might not be anything about the first country that made it particularly well suited to airplane-making. But why would countries trade goods that were almost the same? Because consumers like to have a choice, and, as Avinash Dixit and Joseph Stiglitz had pointed out a few years earlier, the same logic of increasing returns to scale that Krugman had identified as an essential dynamic in trade could apply to a single brand as well as to a whole industry.

It struck me  that the pharmaceutical executive and Paul Krugman were describing the same phenomenon dressed up in two different skins.   Hiring departments are consumers of talent.  They like to have choices, and the products they buy are professional talent and location.  Eventually, like cars,  pharmaceutical professionals and potential office locations all across the world, at the group level, will have certain outstanding qualities, with minor differences, both aesthetic and mechanical.  The price difference amongst them will be minute.  Who they wish to hire, and where they wish to set up shop will come down to a matter of aesthetic, and they will shop for talent globally.

In this fast approaching reality, a business will choose location based on the weather, and staff it with talent from all over the world. By contrast, right now, white collar outsourcing happens because professionals in other countries are able to so much work for so little money, that quality doesn’t factor prominently into the equation.

As far as young American job seekers, like me, are concerned, we will no longer be competing with only the people in our country/city/graduating class for jobs in the US – we’ll be competing with the entire world for job placements with the potential to take us anywhere.

The Rise of 24/7 Legal Tourism

If the prediction is to hold true for lawyers, the first shift of the landscape will involve the emergence of legal outsourcing.  India has already developed itself into the premiere outsourcing destination for American communication firms, and more recently, with government help, started to make a real push to become the world’s medical tourism capital, so there is reason to believe that the country will also become the premiere destination for legal work, as well.  Not surprisingly then, the UK’s Law Society Gazette reported that legal services outsourcing is already booming;

We are halfway through a media tour of an Indian legal process outsourcing (LPO) centre at LPO provider CPA Global’s Gurgaon facility.

LPO – also called legal services outsourcing (LSO) – is an emerging phenomenon that most lawyers will already have heard about. India has seen the greatest expansion in the LPO industry, as senior lawyers and general counsel in the west begin to acknowledge that Indian lawyers can do the work of junior associates for a fraction of the cost of a City salary. At the end of last year, Allen & Overy signed a deal with LPO provider Integreon to outsource some litigation document review work to Mumbai and New York. Integreon says it undertakes work for 32 of the 50 biggest law firms, including magic circle firm Clifford Chance and national firm DLA Piper, and 11 of the world’s biggest companies.

Estimating the value of the growing LPO industry is tricky, but Forrester Research predicts that $4bn (£2.6bn) worth of legal work will be outsourced to India in 2015…

…Most corporate clients are wary of disclosing their use of outsourcing, as evidenced by the strict non-disclosure agreements put in place before this visit. However it can be disclosed that private healthcare company Bupa; imaging company Canon Europe; construction firm Carillion; computer hardware manufacturer Sun Microsystems; pharmaceutical company Novartis and Arsenal FC all work with CPA for either IP work or general LPO. IP firm Marks & Clerk has worked with CPA for some years, but other law firms choose not to be named. Perhaps they don’t want their clients to know that they are trying to save money when serving them with their next bill.

This may sound far fetched.  One can argue that good lawyers would never take this kind of work en masse, or that the standards of Indian law schools won’t ever catch up to those of America, that the LSO will be a contained phenomenon.  But, there are good reasons why that line of argumentation is wrong.

1) India’s legal system descends from British common law which, in turn, provides the basis of American law, and Mahatma Gandhi, India’s most famous international figure, began his career as a lawyer in Natal, South Africa, so India’s tradition is both long and proud.

2) LSO’s offer things that law firms do not, like 9-6 working hours.  There are plenty of lawyers, all across the world, who want to have more time with family, and would consider choosing this model.

3) LSO’s have the potential to become the FORD of law practices.  Each staff will become specialized in very specific aspects of a case.  And dozens, if not hundreds of people, will put each case together piece by precisely crafted piece.

Indeed, if the legal jobs market doesn’t improve from where it is today, LSO’s could very easily thrive and eventually  completely transform how people access legal services.  We could very well see the rise of Legal Tourism – a kin to its cousin, Medical Tourism -  where individuals and companies constantly outsource their legal needs to LSO factories.

Is it so far fetched to imagine a world where it is possible to send a parking ticket violation to a lawyer in India who will put together a case? “Have a parking ticket?  Don’t pay.  Send your case to Mahatma Associates, LLC.We’ll send you back a case folder for half the price of your ticket, in 24 hours. “

I wonder if India’s Ministry of Tourism has a marketing plan in store for the rise of Legal Tourism.  How much money would this cost the American economy?

When the world does finally flatten out, LSO’s, too, will become part of the new reality.  Law students and law schools will be at a crossroads.  The former may find their career plans to no longer be relevant.  The latter may find their business models failing. Students are going to want more bang for the buck, more specialization, more language.  Northwestern Law School is on the right track with its two year JD program, and the very top school’s fees still make sense for some because of their established reputations with not just law firms, but academia, consultancies, and all manner of people who are willing to invest money into those schools graduates.  But, I really do fear for the Tier 2/3/4 places that cost as much as the very top guys.  I fear for the law student, like myself, who’ll graduate with 100K+, in loans, mostly unsubsidized.

The reality is that whatever happens, the next phase of my life, and that of my working peers, is going to be one where we all have to work hard and expect to get paid less than we had expected to be paid years ago.  Innovation and specialization will be the tools that help us seize the day.  And, it’s also probably a good idea to start getting properly versed in cross cultural training.