Showing posts with label law firms. Show all posts
Showing posts with label law firms. Show all posts

Saturday, April 11, 2009

NYT on Law Firms Coping with the Recession

The NYT (April 4, 2009, Adam Cohen) had an article on the legal profession and the recession:

http://www.nytimes.com/2009/04/02/opinion/02thu4.html?em

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...

More schools may follow the lead of Northwestern, the first top-tier law school to offer a two-year program.

Astute readers can see that the high debt load and the length of most legal study programs are related. The third year of law school is usually unnecessary, unless students participate mainly in clinics or other programs that provide practical experience. My third year, I worked part time in a law firm. By year three, most law students are finished with their core bar classes and are spending most of their time looking for jobs or working. How much are they paying for this privilege of looking for work, interning for free, or working part-time? About $40,000 for some private law schools.

I have always said big law firms were pyramid schemes. At some point, all pyramid schemes collapse under their own weight. You can only get so top-heavy before something gets crushed.

Monday, February 9, 2009

Law Firms Freeze Salaries

The NY Times talks about salary freezes at law firms:

http://www.nytimes.com/2009/01/25/jobs/25lawyers.html?_r=1

I found the section on legal salaries illuminating:

According to the National Association for Law Placement, 16 percent of the class of 2007 law school graduates employed full time make $160,000 or more, while 38 percent make $55,000 or less.

If you do the math, 46% of new lawyers make between 55K and 160K. Assuming most mid-sized and small law firms pay around 70K starting, 84% of new lawyers probably make between 25K and 70K. If you're a law school student, remember those salary numbers when you're taking out loans and dining out. Cut back on expenses while in law school, and you'll have an easier time paying off debt if you don't land the big firm position or the big money position right away.

I managed to pay off my loans fairly soon after law school because I practiced self-denial religiously. For example, I ate PB&J almost every day in law school and for a year after law school. I also didn't go to Starbucks or Peet's more than once a month while in law school. Anyway, I haven't had a PB&J sandwich in a long time. Like the 99 cent Jack in the Box chicken sandwich I ate all the time while at UC Davis, it tastes like poverty--disgusting and dry. But these days, I go to Peet's and drop three bucks on coffee almost every day. It doesn't sound like much, but if I hadn't denied myself the good things in life while in law school, I'd still be eating PB&J and drinking fountain water for lunch and dinner.

Wednesday, February 4, 2009

Law Firms Not Immune to Recession

The WSJ had a great article on recessions and law firms:

http://online.wsj.com/article/SB123292954232713979.html

What really interests me is the assumptions these now-defunct law firms made. For example, why were they so confident that complex cases, like the Microsoft anti-trust matter, would continue indefinitely? Didn't they realize at some point, all those associates had to work on other cases to bill a sufficient number of hours?

It looks like the recession bankrupted law firms that were inefficient and that failed to diversify. What's the lesson? Whoever ignores the rule of "not putting all your eggs in one basket" does so at his own peril. In law and in stocks, it pays to diversify.