The legal industry in Philadelphia directly contributes $3.45 billion to the city’s economy, including $2.26 billion spent on employee compensation, according to a study commissioned by the Philadelphia Bar Association’s large law firm management committee.

The $3.45 billion encompasses the revenue generated by all facets of the legal industry, including law firms, court reporting companies, e-discovery vendors, the legal components of corporations and law schools, according to Stephen Mullin, president of Econsult Solutions, the company that conducted the analysis.

The Philadelphia legal industry also directly employs 21,400 people who then put some of their salaries back into the community through everything from eating out to getting their dry cleaning done. When combining that spending with the money the legal industry spends on non-legal-related items ranging from copiers to toilet paper, the $3.45 billion increases to $4.91 billion in contributions to the city and a total of 31,400 jobs, the study found. That $4.91 billion generates $160 million in city tax revenue, the study reported.

This is information the Philadelphia Bar Association hopes to use in discussions with city government about the importance of the profession to the community and how the government’s decisions affecting the industry could impact the local economy overall.

“We wanted to focus on the impact that the legal community had on the greater Philadelphia economy,” said Dechert partner Ben Barnett, a co-chairman of the large law firm committee. “We looked to see that other sectors had similar studies; we wanted to have better dialogue with elected officials about how decisions could impact the legal community.”

Mullin pointed out that the model used by his firm, the input-output model, is not designed to get down to the exact dollar amount of the industry’s impact, but rather to give a general sense of how big of a part of the city’s economy the industry plays.

“I didn’t realize how large the legal industry is and how important it is on the grand scale,” said Philadelphia Bar Association Chancellor Kathleen Wilkinson. “I really didn’t know we were talking in such huge numbers, which shows how important the legal community is to the greater business community in Philadelphia.”

To give a sense of the size of the legal industry in Philadelphia as compared to the overall workforce, Mullin pointed out that the 21,400 direct employment figure is part of the 600,000 to 700,000 employees Philadelphia is estimated to have overall. That equates to between 3 and 4 percent. But Mullin noted there is no industry in the city that equals 10 to 15 percent of the workforce.

The University of Pennsylvania and its health system, for example, contributes between $9 billion and $10 billion to the Philadelphia economy, Mullin said. That figure includes the direct and indirect contributions, which can be compared to the legal industry’s $4.91 billion in direct and indirect contributions, he said. The city’s overall gross domestic product is estimated to be around $75 billion to $80 billion, Mullin said.

Though one could say the legal industry is small in comparison, Mullin said it still ranks among the top 10 industries in the city with other large, local industries being government, health care and education.

While the legal industry is far from the largest in the city, Mullin said it does tend to have higher-than-average productivity and earnings and it tends to bring in more revenue than average into the city from sources outside of the city than other industries do.

“Location is now less relevant in terms of what we do,” Barnett said. “Technology allows us to be involved in a much larger range of matters.”

Barnett noted the city’s law firms are creating other jobs such as court reporters and videographers, translators, legal staffing agencies and law schools.

“We were very surprised at the size and impact that the legal community generates,” Barnett said. “We thought that it was a useful exercise. We want to use the report to have more informed discussions with elected officials about things such as tax policies that would potentially limit the growth of firms.”

He said the committee sees the profession as one that generates a “significant amount of revenue” and that is creating good jobs in the area.

Of the $3.45 billion in revenue generated by the Philadelphia legal industry as a whole, law firms generate $2.83 billion of that, the study found. Those firms employ 17,300 people and pay $1.87 billion in compensation.

The city’s three law schools—Temple University’s Beasley School of Law, University of Pennsylvania Law School and Drexel University Earle Mack School of Law—contribute $90 million to the city’s gross domestic product and directly employ 1,100 people, according to the study.

The court system brings in $305 million in revenue, paying out $172 million in compensation to its 1,800 employees, the study showed.

Another finding from the study, Mullin said, was that there has been a shift over the last decade toward moving employees outside of Philadelphia. According to the study, in 2001, 47 percent of the Philadelphia legal services industry was employed inside the city. That number fell to 41 percent in 2011. When looking at legal occupations, which include not only those employed in the legal services business but also lawyers or legal staff who work in nonlegal companies, the percentage went from about 40.5 percent in 2001 to 35 percent in 2011, according to the study.

In looking at just the legal services industry in Philadelphia, lawyers make up 36.7 percent of the industry’s workforce. Legal secretaries comprise 18.4 percent and paralegals and legal assistants equal 14.7 percent. Other categories, such as receptionists, bookkeepers, file clerks and title examiners equate to between 4.2 percent and 1.3 percent of the Philadelphia legal industry workforce, according to the study.

Gina Passarella can be contacted at 215-557-2494 or at Follow her on Twitter @GPassarellaTLI.

P.J. D’Annunzio can be contacted at 215-557-2315 or Follow him on Twitter @PJDAnnunzioTLI. •