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September 24, 2007

Widening Gulf in Prospects After Law School

The Wall Street Journal offers a sobering front-page story on legal prospects after law school:

For graduates of elite law schools, prospects have never been better. Big law firms this year boosted their starting salaries to as high as $160,000. But the majority of law-school graduates are suffering from a supply-and-demand imbalance that's suppressing pay and job growth. The result: Graduates who don't score at the top of their class are struggling to find well-paying jobs to make payments on law-school debts that can exceed $100,000. Some are taking temporary contract work, reviewing documents for as little as $20 an hour, without benefits. And many are blaming their law schools for failing to warn them about the dark side of the job market.

...Some practice areas have declined in recent years: Personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs and payouts on damages. Securities class-action litigation has declined in part because of a buoyant stock market.

On the supply end, more lawyers are entering the work force, thanks in part to the accreditation of new law schools and an influx of applicants after the dot-com implosion earlier this decade. In the 2005-06 academic year, 43,883 Juris Doctor degrees were awarded, up from 37,909 for 2001-02, according to the American Bar Association. Universities are starting up more law schools in part for prestige but also because they are money makers. Costs are low compared with other graduate schools and classrooms can be large. Since 1995, the number of ABA-accredited schools increased by 11%, to 196.

Evidence of a squeezed market among the majority of private lawyers in the U.S., who work as sole practitioners or at small firms, is growing. A survey of about 650 Chicago lawyers published in the 2005 book "Urban Lawyers" found that between 1975 and 1995 the inflation-adjusted average income of the top 25% of earners, generally big-firm lawyers, grew by 22% -- while income for the other 75% actually dropped.

…The news isn't any better for the 14% of new lawyers who go into government or join public-interest firms. Inflation-adjusted starting salaries for graduates who go to work for public-interest firms or the government rose 4% and 8.6%, respectively, between 1994 and 2006, according to the National Association for Law Placement, which aggregates graduate surveys from law schools. That compares with at least an 11% jump in the median family income during the same period, according to the Census Bureau. Graduates who become in-house company lawyers, about 9%, have fared better: Their salaries rose by nearly 14% during the same period.

…Incoming students are "mesmerized by what's happening in big firms, but clueless about what's going on in the bottom half of the profession," says Richard Sander, a law professor at the University of California-Los Angeles who has studied the legal job market....

Nalp_bimodal

At ELSBlog, Bill Henderson has posted a NALP graph that shows a dramatic bimodal distribution of salaries of graduates.

Given the increasing costs of a law school education, it is especially important for students to be told about job prospects. I suspect that websites such as Above the Law, which cover the high end of the legal market with (understandably) breathless "Year end bonus watch" reports on "legendary Kirkland & Ellis bonuses" might mislead many students. At the same time, where one is likely to fall in the distribution depends on a number of factors, including: (1) law school attended; (2) class rank; (3) how well one performs in a job interview; (4) local job market; and (5) determination. The bimodal distribution reflects both first, second, and third tier schools, so it may not be as surprising as it initially seems. This makes it even more important that information about job prospects, by law school attended, should be made available to students.

Active discussion of the issue here on the WSJ's law blog.

Anupam Chander

September 24, 2007 in Legal profession realities and developments | Permalink

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