Thursday, April 02, 2009

On A Sadly Serious Note: Lower Salaries --> Lower Tuition (?)

The New York Times has a piece today titled "With the Downturn, It's Time to Rethink the Legal Profession". O RLY? Here's the punchline: the key reason why firm's are suffering so much these days in terrible economy is that law firm salaries are too high:
The changes are likely to begin with compensation. Years ago, law firm starting salaries were not that different from government or public-interest jobs. But the gap has become a chasm. First-year salaries at top firms are around $160,000, compared with $48,000 to start for state and local prosecutors and $40,000 for legal-services lawyers. New associates often earn more than the judges they appear before.

The downturn will probably rein in 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. And fewer firms will feel the need to pay the top salary.

Lower pay should mean that associates will not need to work the grueling hours many have been forced to. And it will mean less pressure to go into private practice for law graduates who would rather do something else.
First of all, that was many years ago, and at that time it didn't matter, because law school tuition was much cheaper. We're also unclear as to how lower salaries will mean that associates are necessary working less hours - isn't the whole point that they are simply billing less per hour to attract more clients, rather than actually working less? To us, it seems pretty ambiguous . . .

Of course, as the article points out, the increase firm salaries was accompanied by an increase in law school tuition; and as dramatic as the increase in starting firm salaries was, the increase in tuition was (we believe) even more dramatic. So does this mean if firms start lowering their starting salaries en masse, law schools will start lowering their tuition? The NYT seems to think it's a possibility:

For years, law school tuition rose along with big-firm salaries. Between 1990 and 2003, the cost of private law schools rose at nearly three times the rate of consumer prices. The average graduate now leaves with more than $80,000 in debt. In one survey, 66 percent of students said debt prevented them from considering government or public-interest jobs.

If the downturn is prolonged, law schools will need to keep tuition and other costs in check so 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.

We'll shoot this analysis out of the water right now: First, tuition is going up - even in a recession and even though the average starting salary of law school graduates will be lower this year than it was last year. Second, why cite Northwestern's two-year JD program? - it's terribly misleading because the tuition in the two-year program is the same as the three year program.

Do we really think tuition is going to ever go down? - tuition has not decreased in any previous recession, and I don't see it increasing in this one. Plenty of people were willing to believe a massive increase in Law School tuition, and not entirely unreasonably so. Tuition will be higher this year then last, here, and it just about every other law school in the country: whatever firms are doing, the costs of a legal education with top professors, top facilities, top new carpeting, top scholarships, etc., will continue to go up. So while we agree that with the article that firms may be trimming their compensation, we think that it is far to optimistic in its suggestion of a silver lining for current or future law students.

The law schools won't "need" to do anything about tuition - they can continue to raise and law students will just continue to take on more debt. Sure, a few might decide to pursue other paths, but for those who want to enter law (a noble profession which we love), what other choice is there? And what of the students already enrolled? Well, unless the Law School adopts a multi-layered tuition plan to protect current students from large (and seemingly periodic) increases, they'll have no choice but to grind their teeth and take on more loans. And because of this they'll continue to try work for big law firms whether the starting salary is $160k, $145k, or $100k for that matter - with the increased debt load, they will have less - not more - of a choice.

We would love to see tuition go down, or at least stabilize somewhat. Sadly, we have seen no indication that it will be doing so any time soon, the recession and impending changes to law firm's business model notwithstanding.

Alright, enough of this. It's time to look forward to a weekend of softball, barbeque, sunshine, and showing 64 other law schools just how great UVA is!


Anonymous said...

The NYT article overlooks the fact that firms will have to continue to compete to get the best talent. Right now, they use large salaries to lure people who otherwise would work for the public or business sector. If salaries drop to $100K, you'll see a lot of grads from top schools do other things.

Also, this downturn has already reached its nadir. The reason firms struggled the past 2 years was not because of excessive associate pay, but because of a lack of business transactions, mergers, and complex litigation due to the economy. With the recession likely ending in the next 12-18 months, firms will need to start ramping up again.

Sorry for the long post, but any opportunity to disagree with the NYT is too good to pass up. And people wonder why newspapers are going under...

Fred said...
This comment has been removed by the author.
Anonymous said...

When salaries in any industry drop by 50% (190k w/ bonus to 100k = 47% drop), the world is ending, and our concerns will shift from OGI to finding canned food.

At most, 30k bonuses will go away, which is a salary cut. 190k to 170k or so sounds like a reasonable shift.

Anonymous said...

Fred, you're a tool. Have fun making $39K in public interest.

3:02 is right on

Anonymous said...

Why should they drop tuition when many of the students here are on at least partial scholarships AND there seems to be a pack of others on the waiting list willing to fill up the spots of those who say no.

Even things get so bad that only half the class, or even a third, at top schools is getting the coveted top firm jobs, everyone enters thinking they will be on of those people. . .

Anonymous said...

If only 1/2 or 1/3 are getting the "coveted" jobs, that would mean those firms are struggling financially and unable to hire, and therefore those top firms will no longer be regarded as top firms. Just like in any other industry, the cream will rise to the top. There is always a market for legal services. Yes we're in a downturn, but it's temporary. As economy recovers there will be a huge demand for top laywers This is much ado about nothing.

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