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News Flash: Not Every Lawyer Is on the $160K Pay Scale

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Okay, so you already knew that. Last year, in a widely read, front-page story for the Wall Street Journal, Amir Efrati reported on the non-Biglaw blues: the challenging job market and not-so-hot financial prospects faced by many law school graduates (many of whom are saddled with heavy debt).
A month later, the Des Moines Register basically rewrote Efrati’s story. But Efrati couldn’t have been that offended, since his article was thematically similar to this piece by Leigh Jones, which appeared in the National Law Journal a few months earlier.
Preemption is a bitch. In this media-saturated age, it’s difficult to be truly original.
Nevertheless, even if these articles all sort of sound alike, they generate buzz and traffic — which may explain why they keep getting written, over and over again. The latest is a rather lengthy cover story from the Chicago Tribune’s Sunday magazine, by Greg Burns.
From one of the many tipsters who emailed us about it: “Nothing earth shattering revealed, but this article discusses the ‘haves and have nots’ of the legal profession.” Another reader noted:

I assume you’ve seen the Chicago Trib article on low lawyer salaries, for those not in BigLaw. Not that this discrepancy is a shocker to you, but your fans seem to enjoy lording their big, uh, paychecks over their less fortunate brethren, while taking perverse pleasure in working 20-hour days for the free dinner and ride home. As such, this seems like a perfect comment clusterf**k topic.

A third quipped: “Not sure if news, but enjoy!” We concur. Even if the piece’s thesis is nothing new, at least it’s well-reported, chock full of interesting anecdotes and data.
More discussion, after the jump.


From near the start of the piece:

For a 36-year-old single mother barely seven years out of law school, [state prosecutor Jeanne] Wrenn bears a weighty responsibility, and it’s exactly what she had in mind when she borrowed $100,000 to attend the Loyola University School of Law. Of all her friends from those law-school days, she enjoys her job the most, she says.

Except for the paycheck. At $59,000 a year, the assistant Cook County state’s attorney makes $100,000 less than the average first-year associate at big corporate firms, and millions of dollars less than the elite partners at those firms. If she chucked public service and went for the bucks, she probably could make a bit more money. But contrary to what many Americans believe, she’d need to overcome long odds to earn a lot more. Increasingly among the nation’s 761,000 working lawyers, admission to the bar no longer guarantees a gold-plated lifestyle, or even financial security.

A single mother/prosecutor is a nice find as a subject. Maybe they can turn her story into a TV drama starring Julianna Margulies?
(Oh wait. That legal drama starring Margulies as a mother/lawyer is tanking.)
But wait, it gets better. Jeanne Wrenn is also…. a bartender!

Wrenn, meantime, has come to terms with her paycheck. Most Fridays, after a long week at the county prosecutor’s office, she’s behind the bar at Lizzie McNeill’s Irish Pub downtown. Clad in a black polo shirt and dark jeans, her hair pulled back in a ponytail, she pours a mean Guinness, handling the pints with the same dexterity she uses to juggle folders and legal pads during her day job.

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Hence the title and subtitle of the article: “Two lawyers walk into a bar . . . One orders a round of drinks for the house. The other one puts on an apron and serves it.”
Some interesting statistical data:

[T]his pity party invites cynicism, and not just because lawyers are a group that seemingly everyone loves to hate. At $113,600, the average pay for American lawyers far exceeds the $39,190 average for the entire American labor force. Even Wrenn’s government paycheck of $59,000 puts her above the typical funeral director, postmaster or insurance agent. She makes more than most teachers, for that matter.

Yet the persistent whine about compensation from all levels of the bar underlines an ongoing socioeconomic change: Incomes have diverged in many occupations, from farmers and doctors to real-estate brokers. Those at the very top take a much higher share of the total. And for decades now, this winner-take-more phenomenon has accelerated.

That’s true. And it seems to be happening even within Biglaw, where the super-profitable firms seem to be pulling away from an already well-heeled pack.
The article goes on to talk about how, at non-elite law schools, you need to do very well on the grades front to have a shot of a job with a leading law firm. We’ll skip over that part because you already know that. It also talks about Kirsten Wolf, who feels her law school education was an expensive waste of time, but you probably already read about her over at the WSJ Law Blog.
Okay, now we get to some interesting history:

For a fortunate few, though, [a law degree is a golden ticket]. And that was true even four decades ago when the Cravath Swaine law firm in Manhattan started paying associates a then-shocking $15,000 a year. That represented a 50 percent boost from the norm, breaking a tacit agreement among law firms. From then on, competition for elite graduates became a bidding war. Influenced by the dot-com, hedge-fund and private-equity booms, the standard salary for starting associates stands at $160,000 today.

Then the piece talks about associate attrition and rising profits per partner. ATL readers know all about that too, so let’s skip ahead, to more historical background:

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Today’s millionaire lawyers can trace their good fortune, at least in part, to Finley Kumble, a Manhattan firm that respectable lawyers loved to hate in the 1980s. Known as a “shark tank,” it recruited rival partners with big-money offers, broke down barriers against self-promotion and championed lucrative niche practices such as bankruptcy. It converted billable hours into maximum cash, tradition be damned.

Finley Kumble went bust in 1987, but its commercial practices stuck, aided and abetted by the rise of The American Lawyer magazine’s “league tables.” These once-a-year charts spell out the revenues and profits per partner at the nation’s top firms-often to the dismay of legal titans making less than their similarly situated counterparts. Once that genie left the bottle, no one could stuff it back in, notes Loyola Law Dean David Yellen. “When something withheld from the market is exposed to the market, there’s no going back.”

And the same is true of associate salaries and bonuses. That’s what ATL is here for.
Here’s some insight into why legal bills are so high:

Big-firm lawyers also owe their success to the weakness of general counsels, the gatekeepers for corporate legal services. Some of these in-house attorneys make big bucks themselves, and they’ve gotten smarter about shopping around for legal help. But their turnover at major companies has averaged 30 percent over the past three years. Distracted by investigations and disclosure requirements, desperate for top talent to fight high-stakes legal battles, befuddled by a maze of international regulations, the typical general counsel has precious little leverage in negotiating fees.

Of course, some Big Law partners claim that clients are pushing back more on fees — with some success, especially given the weakening economy. But when it comes to the high-end, bet-the-company type of work that drives the top top law firms, price resistance is probably still low.
What does the future hold? The article closes with these provocative thoughts:

Academic researchers believe change is coming to the profession. John Coates of Harvard Law School, for one, has a clear vision of how economics will reshape long-standing practices. He foresees the American Bar Association and state bar examiners coming under pressure to reduce the cost of law school by relaxing rules. That could mean accrediting online programs or allowing two-year degrees instead of the standard three.

Restrictions on practicing law without a license also will relax, Coates predicts, so paralegals can handle house closings, leases, simple contracts and wills. More legal work will be carried out at a discount offshore, as well. In the wealthy corporate sector, Coates foresees publicly held firms from England and Australia using their superior capital to challenge U.S. rivals.

That, in turn, will encourage a change in rules that limit the ownership of American law firms to lawyers.

Eventually, Coates says, the great divide in lawyer incomes will divide again, this time into three categories: The super-highly-paid, a middle tier of the highly paid and, by far the biggest group, everybody else.

None of these changes will come easily, he says, but inevitably the economics of the legal profession will trump its outmoded traditions. “The one thing I can guarantee: There will be a lot of fighting.”

Mmm, sounds fun! We look forward to covering it in the years ahead.
As you can tell, we’ve given you just excerpts from Greg Burns’s article. If you have the time — and maybe some of you do, given how slow many law firms seem to be these days — read the full piece over here.
Two lawyers walk into a bar [Chicago Tribune]

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