The Signal: The law industry’s labor shortage shines light on the legal tech industry
The signal: The legal industry is going through a massive labor shortage which could benefit the growing legal tech industry.
In 2021, a jump in IPOs and dealmaking led to an increased workload among US law firms, according to Insider. The corporate and deals industry were the most affected but firms in other industries were also left reeling:
- Despite the available work, the total number of associates at top US law firms is “basically flat”.
- Unlike other industries, putting talent through law school takes time and the number of US law graduates have declined over the past 7 years.
As a result, law firms resorted to outsourcing their work or turning to technology firms.
The impact: The shortage in labor could benefit legal technology companies — which provide software to automate redundant tasks. Two companies we previously covered in the legal tech industry include:
- US-traded CS Disco (NASDAQ:LAW) — up 16% since going public late July 2021.
- Canadian-traded Dye & Durham (TSE:DND) — up 223% since going public in July 2020.
While legal tech won’t be replacing lawyers anytime soon, they’ll take away the “routine and commoditized” work like document review and file management.