It’s not a secret that the economic downturn is hitting the legal world like a blow torch. The Law Shucks Blog has a layoff tracker, and its readings are alarming. Furthermore, top firms are rapidly thinning their ranks, and several have closed.
Although the cries of the legal elite witness little sympathy, many hard-working lawyers have been blind-sided, including young associates who are finding themselves with six-figure loan debts and no source of income.
Historically, leading firms have avoided massive layoffs, concerned that their reputations would take a hit. However, that stigma seems to have faded since some leading firms are pushing out their colleagues.
The changes are likely to begin with compensation. A while ago, law firm starting salaries were not that different from government or public interest jobs, but the gap has widened in recent times. First-year salaries at top firms are around $160,000, compared to $48,000 to start for state and local prosecutors and $40,000 for legal service lawyers. With these statistics in light, it is not surprising that new associates often earn more than the judges they appear before.
The economy downturn will probably result in cutting down salaries at the high end. Top firms are already under pressure to lower the $160,000 starting salary; one industry-watcher says it could fall as low as $100,000. This practice is likely to become widespread as fewer firms can justify the need to pay top salary.
What will all this mean for the associates? Lower pay means that the associates will not need to work grueling hours many have been forced to do. This will also mean less pressure to go into private practice for graduates who would rather do something else, but are drawn by the lure of high end salaries.
Clients would also be beneficiaries of high end salary cuts. Big firm clients, led by the Association of Corporate Counsel, were pushing to phase out the billable hour – which can go as high as $1,000 – long before the downturn.
The effect on law school students promises to be profound if this change takes place. For years, law school tuition rose along with big firm salaries. Between 1990 and 2003, the cost of private schools rose at nearly three times the rate of customer prices. The average graduate now leaves with more than $80,000 in debt. If the downturn is prolonged, law schools will need to keep tuition and other costs down so that students do not graduate with unmanageable debt. More schools may follow the lead of Northwestern, the first top tier law school, to offer a two-year program.
Law schools may also become more serious about changing their curriculum. They may find ways to make better use of their sometimes-aimless second and third years.
Lastly, the economic downturn may increase the pressure to prepare students for non-legal careers. Law students have always ended up in business, government, journalism, among other fields. Law schools may find the need to build these subjects into their coursework.
Although the past few decades of prosperity made a lot of lawyers wealthy, they were not always good for the profession. Now is the time for law school deans, bar association leaders and firm managers to take charge of the crisis and start planning for what comes next.