Following up on yesterday's post, LSAT Test-Takers at Ten-Year Low:

Legal diplomas are apparently losing luster.

The organization behind the LSAT reported that the number of tests it administered this year dropped by more than 16%, the largest decline in more than a decade. ...

The decline reflects a spreading view that the legal market in the United States is in terrible shape and will have a hard time absorbing the roughly 45,000 students who are expected to graduate from law school in each of the next three years. And the problem may be deep and systemic.

Many lawyers and law professors have argued in recent years that the legal market will either stagnate or shrink as technology allows more low-end legal work to be handled overseas, and as corporations demand more cost-efficient fee arrangements from their firms.

That argument, and news that so many new lawyers are struggling with immense debt, is changing the way law school is perceived by undergrads. Word is getting through that law school is no longer a safe place to sit out an economic downturn — an article of faith for years — and that strong grades at an above-average school no longer guarantees a six-figure law firm job.

For some law schools, the dwindling number of test-takers represents a serious long-term challenge. What I’d anticipate is that you’ll see the biggest falloff in applications in the bottom end of the law school food chain,” said Andrew Morriss of the University of Alabama School of Law. “Those schools are going to have significant difficulty because they are dependent on tuition to fund themselves and they’ll either have to cut class size to maintain standards, or accept students with lower credentials.”

If they take the second course, Mr. Morriss said, it would hurt the school three years later because there is a strong correlation between poor performance on the LSAT and poor performance on the bar exam. If students start failing the bar, then the prestige of the school will drop, which would mean lowering standards even more. “At that point,” Mr. Morriss said, “the school is risking a death spiral.”