Economic impact of the legal profession valued at $1.6tn states new IBA study

7th Jun 2024 | Source: IBA Press Office

According to a ground-breaking report from the International Bar Association (IBA), countries that firmly uphold the Rule of Law experience greater socio-economic benefits from the everyday contributions of lawyers than governments that impose restrictions on legal rights. In this first known study to comprehensively quantify the legal profession's socio-economic influence, The IBA report on the social and economic impact of the legal profession (the ‘Impact Report’) reveals that the legal profession directly contributes $1.6 trillion to the global economy, or 1.7 per cent of gross domestic product (GDP), via the work of more than 20 million lawyers, paralegals and support staff alongside a further 14 million workers in the supplier sector, including notaries and translators.

The Impact Report also states that, as threats to the Rule of Law become more serious in many parts of the world, action must be taken to improve access to representation, strengthen advocacy, improve education and pursue the highest ethical standards.

Other findings in the Impact Report include:

countries with the best access to justice have 25 per cent fewer cases of governmental overreach;
countries with a strong independent legal profession can hold governments to account, attract more investment, provide better healthcare and improve gender equity;
by increasing legal aid to the same standard seen in the top quartile of countries, inequality could be reduced by five per cent;
a robust Rule of Law can help countries to achieve: a higher life expectancy; 30 per cent more girls completing secondary education; 53 per cent less pollution; 34 million fewer youths that do not engage in education, employment or training; and greater protection of minorities including LGBTQI+ communities;
innovation levels were higher in the top quartile countries with the Rule of Law, which could generate an additional $83bn in research and development investment;
improving civil justice effectiveness could reduce informal employment by $34 million globally;
armed conflicts, the rise of autocratic states and anti-globalisation movements threaten the Rule of Law, which declined in many countries in 2023;
North America and Europe continue to dominate legal services, accounting for 80 per cent of the market; and
there is a perception gap regarding the legal profession's contribution to society, with only 54 per cent of the general public believing lawyers have a positive economic and social impact, compared with a 78 per cent positive perception among legal professionals themselves.

With the publication of the Impact Report, the IBA aims to increase the general public’s understanding of the Rule of Law, the role of lawyers and the legal profession’s social and economic contribution to society. As an example of the latter, the breakdown of the data on the legal services sector’s $1.6tn contribution to global annual GDP is comprised of $787bn in legal service revenues, $191bn of tax contributions and $637bn of ‘ecosystem effects’ in supply-side services such as administration and broader economic systems. Of the world’s legal services, corporate law contributed $222bn and litigation $193bn – the two largest elements of the profession.

It is known that the functioning of society depends heavily on the day-to-day work of legal professionals. Examples of the broadness of lawyers’ work includes: purchasing homes; employment arrangements; online purchases, insurance agreements; promoting business relationships; protecting intellectual property rights; instrumenting investments; and defending individuals inter alia. However, the most relevant contribution of the legal profession is in regard to support of the Rule of Law.

Where the Rule of Law is upheld, countries saw major benefits from legal checks and regulations in areas including government policymaking, environmental standards and economic growth, as well as education, health outcomes and human rights.

Almudena Arpón de Mendívil, President of the IBA, said: ‘This landmark study demonstrates, for the first time, in a comprehensive manner, the true contribution of the legal profession through its sustaining of the Rule of Law. It shows how effective legal systems, supported by robust and independent legal professionals, can limit the overreach of governments, whilst also supporting economic growth, promoting innovation and education, and combating inequality. But the Rule of Law is under threat in many parts of the world, including through subtle attrition in many countries with democratic governments.

Our profession should take more action to educate the public about the Rule of Law, increasing awareness of its importance and its significant benefits, as well as denouncing examples of lawlessness. The world’s legal profession makes a clear financial contribution to global GDP, worth $1.6 trillion a year. We must now match that economic impact with increased ambition to enhance access to legal representation, engage in advocacy, strengthen access to education and legal literacy, and to promote the highest standards of professional conduct.’

Several areas of improvement to preserve and strengthen the legal profession’s impact are also identified in the study. Together with ongoing initiatives to promote equality, diversity and well-being in the legal profession they include:

Enhancing access to legal representation: The IBA will continue to disseminate research on how to lower barriers to access and collaborate with international institutions including the World Bank and the United Nations on this important topic. The IBA will also continue to raise awareness, through its annual Pro Bono Award, of lawyers supporting citizens, while the IBA-founded eyeWitness to Atrocities app continues to be used to gather potential critical evidence for national and international institutions investigating and prosecuting alleged perpetrators of atrocities.
Advocacy and support of policy making: The IBA will continue to issue public statements condemning state actions that undermine the Rule of Law; build and disseminate research, guidelines, best practices and legal advice on issues such as human rights violations (mainly through the work of the IBA’s Human Rights Institute), media freedom, modern slavery, arbitration and artificial intelligence (AI) regulation, as well as continuing crucial work addressing the abolition of criminal punishments of lesbian, gay, bisexual, transgender, questioning, intersex or other (LGBTQI+) people. In addition, the IBA specialist committees will continue to make submissions to authorities, such as the European Commission, in areas like tax, antitrust and insolvency.
Education and communication: As the ‘global voice of the legal profession’, the IBA will redouble efforts in these areas, whether by providing educational programmes for young lawyers, technical assistance to legal practitioners and institutions or materials to broaden public awareness of the Rule of Law.
Ethics stewardship: The IBA will reinforce guidelines and best practices to help legal professionals uphold the highest possible ethical standards.

‘This study underlines the need for law societies, bar associations, law firms, law departments and other professional stakeholders to work collectively to uphold the Rule of Law’, said Ms Arpón de Mendívil. ‘It is an important step in gaining a better understanding of the profession’s social and economic impact, the factors that drive it, and potential ways to improve it.’