In case anyone questions whether the legal industry is undergoing a fundamental transformation, you might consider some of these developments:
- The number of US law school applicants is down almost 25%, or over 200,000 applicants, over the last two years.
- Which might be in part because the Bureau of Labor Statistics estimates that over the next ten years only @ 73,000 new legal jobs will open up, mostly to replace retiring attorneys.
- Which means that given the current rate of graduating 45,000 law students a year, less than half (@48%) can expect to find a legal job.
- The lucky half that do find a job will, with the rising demand for low-paid contract attorneys and outsourced attorneys of various sorts, have an average salary that is not sufficient to pay off their average law school -related debt.
- Of those making it to a big firm and then sticking it out to partnership, the odds of becoming an equity partner, while never good, have gotten worse. After years of significant growth, the number of equity partners is falling. Nonequity partners at NLJ 250 firms — as reported this year in The National Law Journal‘s list of the largest US 250 firms by attorney headcount — climbed 7.8%, but the number of equity partners fell by 1.6%.
- Even for those who have grabbed the golden ring of equity partnership, the gold is starting to look a little tarnished. It’s been reported that one of the sources of partner fallout at Dewey & LeBoeuf, one of the country’s biggest law firms, is that 10% of the partners, primarily lateral hires with large guarantees, are gobbling up 80% of the firm’s profits, leaving many partners with not much more than an IOU.
- And partners in smaller firms are not doing much better. While last year the larger firms were able to raise billing rates as much as 5%, smaller firms have not been able to follow suit, producing an even greater gulf between the two in terms of profitability and compensation. According to a recent report, partners in the top 25% of hourly billers boosted their average rate to $873 an hour last year, while partners in the bottom 25% charged an average of $204, up just 1.3%,
- Leave it to the Brits to put a point on it. In the UK. research by the Royal Bank of Scotland suggests that "insufficient fee-earner capacity has been removed from the market" and that a further downsizing will be required in 2012. The RBS suggests cutting an additional 5% (@6000 jobs) from the UK lawyer workforce in order to right-size attorneys to demand, even after almost 15% of legal jobs were eliminated during the recession. "The U.K. market remains over-lawyered," says the report’s author.
The state of the industry? "Over-lawyered."