Don’t Let Your Babies Grow Up to be Lawyers!

A hoity toity Juris Doctor Diploma sure looks good on your wall, smiles back you on your resume and makes you feel warm and fuzzy all over. Unless you got that sheepskin in the past few years, when the American Bar Association (yes, I am a member) tells us that more than half of recent grads have failed to generate jobs in their chosen field within two years of graduation. Law school applications continue to fall through the floor, and enrollments reflect the damage. “Law school enrollments nationwide are down 11 percent this year from last year and 24 percent from 2010, new figures show.” ABA Journal, December 17th.

Professional schools (notably, law, MBAs and medical schools) are notorious for according financial aid pretty much only as student loans, and with tuition at private schools in the $40-$60K/year range (state schools are not too far behind!), graduates are facing repayment obligations in the very significant six figure range, with no job to pay off that debt and bankruptcy laws making discharge almost impossible. Even where jobs are found, pay levels are falling to reflect the reduced demand for lawyers, except that the highest and most heavenly level.

Online DIY kits and folks taking to represent themselves have taken their toll. Having learned how to “cost control” during the severe recession years, big corporations have continued to apply their Grinch-mode policies right into the present day. Some will not allow Big Law to charge anything for first or second year associates (we’re not paying for your training efforts), while others cap fees, create benchmarks for fixed payments and generally challenge the hourly structure that has supported the traditional Big Law pyramid (partners at the top feasting on the hourly billings of overworked associates at the bottom).

In fact, except for the older lawyers still holding senior positions at Big Law who have the client base to take them through to retirement, the mega-firms that dominate Washington, DC and New York are feeling the shifting sands of the new business environment. When they leave the profession, there may be a very big next-level change that alters the economics of practicing law even worse. The old models of Big Law are drying up.

“The percentage of associates in the nation’s top 250 law firms was at its highest point [in 1988], comprising more than 60 percent of the lawyers, Indiana University law professor William Henderson has found. Beginning in 2008, there have been fewer associates than partners in large firms… Henderson discusses the issue in a monograph, in a post at the Legal Whiteboard and in an interview with [the ABA’s] Above the Law. ‘Large firms are not going extinct,’ he writes at the Legal Whiteboard. ‘But as a matter of demographics, they are greying. If Big Law were trading on the Nasdaq, the analysts would be very critical of this trend.’

“The pyramid has been replaced by a diamond, Henderson says in the monograph, with ‘a relatively small number of entry-level associates, a growing bulge in the non-equity and counsel ranks, a sizable but largely invisible group of permanent staff attorneys, and a proportionately smaller equity class of partners who grow and control valuable client relationships.’ In the short-term, the result is higher partner profits.

“But Henderson sees the current leverage ratio as shortsighted and unsustainable in the long run. He cites a 2012 survey by American Lawyer Media in which 74 percent of managing partners forecast an increase in lateral hiring over the next five years, but only 15 percent foresaw hiring more first-year associates. ‘These numbers suggest that the market for lateral associates is in the process of thinning out,’ he says, ‘and thus will not be a reliable source for high-quality legal talent.’” ABA Journal, December 16th.

I admit to convincing my son not to follow in my footsteps. He’s an overworked associate investment banker with a hoity toity MBA instead. And I do remember that old adage that old lawyers don’t die, they just lose their appeal.

I’m Peter Dekom, and as society changes so do the peaks and valleys of economic opportunity.