Thursday, July 31, 2008

Legal Salary Distribution: Class of 2007



Bill Henderson with another great post on the bi-modal distribution of starting attorney salaries:
In the above graph, 32.5% of the law graduates took jobs with starting salaries in the $100K+ range; but the true percentage for the class of 2007 is probably lower. Some facts and then one normative observation. The facts first:
  • 91.9% of the class of 2007 was employed 9 months after graduation, which compares favorable to 2006 (90.7%), 2005 (89.6%), 2004 (88.9%), and 2003 (89.0%). I would like to believe these numbers of trustworthy.
  • 76.9% were in jobs that required bar passage. [It would be useful to disaggregate the jobs in the remaining 23.1% of law school graduates. Who are these students? How many entered law school with no intention of practicing law? ]
  • The median salary in the above distribution is $65,750; the mean is $86,396. But these measures of central tendency are not reliable guides of future earning power.
  • 38% of all starting full-time salaries were less than $55,000 per year, including 18% of all jobs in private practice, 27.5% in business, and 70.0% in government (excluding judicial clerkships).
  • 79.6% of law firm jobs in NYC, 80.3% in Washington, DC, and 74.9% in Boston were in firms with 100+ lawyers. Even in Indianapolis, 50.4% were in 100+ lawyer firms. Wow! those are big numbers.
On the normative front, I have a simple thesis: the bi-modal distribution is bad for students, bad for law firms, bad for clients, and bad for law schools. [When I showed the 2007 distribution to one law school dean, she shielded her eyes!]:
  • Students. It is bad for students because at $160,000 per year, many corporate clients will ask that you not be assigned to their matters. And if you initial work experience is document review, at $160K job can quickly become a dead-end because your skill set is now growing with your billing rate. So the atmosphere among associates at $160K+ firms is probably becoming more competitive. Why not start at $95K, learn your craft, and become a great lawyer who commands top dollar?
  • Clients. This is bad for clients because the short term solution of requesting only midlevels and partners will eventually constrict the supply of incoming legal talent. When clients and law firms try to externalize the cost of mentoring and training--here I mean observation, contact, and feedback from partners and clients--associates are more likely to leave.
  • Law Firms. Actually the bi-modal distribution is only bad for firms trying to keep pace with the Am Law 200 salary pay scale. In contrast, boutiques and organizations like Axiom will find general counsel more interested in their value proposition. For Am Law 200 firms, the difficulty is getting partners to commit themselves to the future of the firm by spending more time and money investing in associates. This will reduce attrition. But the $160K+ cost structure provides partners with strong incentives to bill hours rather than investing in the long term future of the firm.
  • Law Schools. The economics of the bi-modal distribution take the pressure off elite law schools--indeed, they can raise tuition! Thus, for many law professors, the best outcome is lateraling into a Top 15 law schools. But more law review articles--a precondition of a lateral offer--is not going to solve the difficult institutional problems of lower ranked schools. Now more than ever, all law faculty members need to understand the structural shifts taking place in our profession. When faculty at Harvard and Yale ignore these changes, it does not mean that these changes are not important. It just means that Harvard, Yale, et al. are not affected.
Read the whole thing.

See my previous posts:
Posted by at
Labels:

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)