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June 29, 2009

Comments

anon

Mr. henderson, What happened to the employment rankings you did last year? Did your peers pressure you into ending that publication?

Law School Graduate

I noticed that the NALP data is based on data for 22,305 law school graduates. Last year, there were 43,588 total law school graduates. Thus the data above only includes 51% of graduates. NALP's salary data for the class of 2008 is based on a similar portion of graduates. As the author of this blog notes, the data is still very revealing even though it isn't complete.

The question is how is the reported data skewed from the overall data? Why aren't 49% of law school graduates salaries included? Law schools are required to keep statistics on what percentage of graduates are employed, so why are they unable to get salary information on almost half of them? It would seem logical that those with good news are more likely to report it. Large law firms typically publish entry level salaries and list all attorneys on their public websites, so it would tend to be easier for law school administrators to gather data on students with higher salaries. By contrast, small firms, solo attorneys, and unemployed graduates typically don't widely advertise salary information.

Chris R

Bill, thanks for the response. Three rejoinders:

1) Some clients may in fact refuse to have work done by first or second year associates, but do you have any data on how widespread this is? Your response seems to imply that this "fact" is vital to your claim that lower salaries are good for associates, but without evidence to establish this as a fact, I'm skeptical of your claim.

I work in-house, and we regularly use large law firms--but I'm not aware of us asking that first or second years not be staffed on our matters. And I think that makes some sense. First, there are in fact tasks that, on balance, you would prefer be done by a first or second year rather than a lower-costing paralegal or a higher-costing senior associate or partner. Second, when it comes down to it, all we really care about is (i) the final work product and (ii) the bill. If the work is good and the bill is reasonable, we don't really care who worked on the matter.

Finally, if indeed clients are complaining about the costs of first and second years, there seems to be an easy way to deal with this--reduce their billing rates. A reduced billing rate, however, does not necessarily imply a reduced salary. In reducing associate salaries recently, partners have claimed that this move is in direct response to client concerns--but that is completely disingenuous. Partners could respond to client concerns by maintaining associate salaries and reducing all billing rates, including their own--but this would of course lead to lower PPP, which, as I indicated in my original post, they won't/can’t do.

2) Why won’t/can’t partners reduce PPP? I don’t believe partners are “greedier” than they were in the 1970s. I do believe that the widespread publication of PPP numbers, and the portability of partners, leaves firms with little choice but to maintain and attempt to grow PPP so as to maintain their current partnership and attract other lateral partners with books of business. I haven’t had a chance to read your article with Galanter, but maybe this is the “collective action problem” you’re referring to—but isn’t this “problem” just the normal operation of a market?

3) An unstated assumption of some of this discussion appears to be that partners can set salary levels anywhere they like—but obviously this isn’t the case. There is a market for elite law school graduates, and that market sets a rate. Law firms either pay that rate or fail to recruit those graduates. What we’re seeing now is an attempt by law firms to test that market rate, to see if they can reduce some of their costs but maintain their flow of elite associates. This isn’t “greed”—this is business. Partners are certainly in this to make money—but so are the associates, and I guess I remain unconvinced that cutting associate salaries is a net positive for associates.

sumit

Legal trends are a booming matter as far as law is concern and it is now a very much demanding issue. This category of site is a great instance for the legal consultation for the victim and it is a good record as the site contains huge details of data. Also Motion for Reconsideration is needed to rehabilitee them from the curse.

Bill Henderson

The above comments are substantive and all warrant a response:

Regarding how lower salaries will benefit associates (Chris R): The first order explanation is that clients are refusing to have any first or second year associates work on their matters. Why? They don't know very much and also then tend to leave shortly after they are in a position to benefit the client. If a young lawyer does not get good work, they cannot grow.

It is a separate a worthy question whether partner greed would absorb the lion's share of the savings (once again Chris R). Marc Galanter and I argue elsewhere that the current dynamics of large law firms foster destructive behavior; the lawyers themselves are not, on balance, greedier than in an earlier era. Structural changes in the size and dispersion of law firms, plus changes in the nature of corporate clients, make cooperative, long-term behavior much more difficult than 20 or 30 years ago. See http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202426214536
Are some lawyers greedy? Sure. Are lawyers greedier than during the 1970s? We doubt it. Rather, the profession is wallowing in a collective action problem that requires a regulatory innovation to fix, or at minimum a very innovative new model to challenge the existing BigLaw model.

Regarding Eric Schmidt's query on the underlying data, NALP generates these graph and they use a "smoothing" utility to generate the curves. This is a very common technique for displaying a probability distribution. Displaying them as you suggest would make the graphs harder to interpret. The NALP folks are both good and careful in the graphics they put out.

Regarding Nonya's skepticism on these graphs/figures -- you are right about one thing: the underlying data is almost certainly skewed in favor of higher salaries. I explain the reasons for this in the July 30, 2008 blog post above. As unpleasant as the market above is for most law students, I will readily concede the complete and accurate sample, if we had the actual data, would look even worse. All statistical analysis need to be examined critically -- but not so critically that the valuable information is ignored merely because it is imperfect. Perfect information is a rare as hen's teeth.

Thanks for these comments. Bill H.

nonya beeswax

these figures are bogus.
I am in the class of 2008, from a third tier school, and I can tell you that MOST of my classmates do not even have jobs in law unless they are solo, and those that are solo are making 20 or 30K.

Sure maybe 10 percent got decent paying jobs.

eric schmidt

;


Umm. Those plots look like they were drawn by a kindergartener. It doesn't look like real data. Could you provide the actual data for people to download and see, or plots in histogram form showing error bars?

;

Chris R

High entry level salaries at large law firms may indeed have been the proximate cause of “intense billing pressure, client resentment, heavy leverage, and very little substantive training for new hires”—but I think the ultimate cause of each of these is the desire/need of law firm partners to maintain/increase profits per partner (PPP). A lower entry level salary is certainly good for partners, in that it allows them to maintain/increase PPP without necessarily increasing billing/leverage (which at any rate would be difficult/risky to do these days with less work to go around). Whether this is good for clients depends on whether associates’ billing rates are reduced—do you have any evidence on this front? You conclude that this development is good for associates, but I’m skeptical. What incentive will law firm partners have to decrease billing pressure, decrease leverage, and increase substantive training? All of these initiatives would dent PPP. If partners can decrease salaries but maintain current billables and leverage, that is certainly a win for the partners—but I’m failing to see how it helps associates. They wind up working the same hours for less pay with the same negligible chance of making partner. What am I missing?

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