A Restatement of BigLaw Pay: or, as the Emperor in Star Wars said, “Your fate is inevitable…I have foreseen it.”
What do you get when you cross a starting law student who is glaring down the barrel of $100k+ in debt and knows that by the time he gets close to coming out from under that load, he may need to find new work? One distressed 23 year old, that’s what!
In my previous post on BigLaw pay, I talked about the irrationality of first-year associate pay vis-a-vis productivity, and how I think the intra-industry labor market should be more open to bidding and price-sensitive evaluation. In that post, I mentioned that US law firms are in a sellers’ market in the global economy, and by extension many newly minted law students, particularly the ones from the vaunted Top 10 schools, stand to reap ridiculous benefits. Well, as it has done so many times before, the Market has proven to be a brutal, honest teacher and punisher who’s temperament turns on a dime. In a recent University of Illinois Business Law Journal post, the writer has taken notice and conveyed what he sees as a potentially looming market dynamic shift regarding outsourcing. It seems initially that socially-intensive professions such as law should be immune to the market dynamic of outsourcing because clients demand the “face-time” and those “face-time” partners/associates require on-hand support. However, as the U of I journal article points out, those partners/associates in need of support may get exactly what they need due to the time-difference and leaps in technology: “Another advantage of outsourcing to India is the time zones difference. [15] An attorney can electronically send work to India as he is leaving the office, and return the next morning to the completed assignment. [16] The ten hour time difference also has its drawbacks, however.”
So, what could this mean? If the article is correct in its reasonable forecasts, it could mean that profits-per-partner, the industry standard for measuring the overall efficiency and profitability of a law firm would soar in the interim. For some of the firms, the the tempering aspect of the market-pricing mechanism (that which causes prices to fall), and which has proven itself to be largely absent in the associate-pay arena (because of their standing at the nexus), can and will be largely ignored, resulting in substantial savings and grand profit margins to those firms to move first. How long the time horizon on this bulge is indeterminable, but I would say that if the market acts as viciously and quickly as it has in centuries past, the good times won’t roll on for long. This means that the big firms reaping the huge profits per partner (because they will have laid off a great many of the associates whose work will have been outsourced) will have their figures reported by the news outlets and will come under intense competition from their non-outsourced peers, who will follow suit. This could mean brutal lay-offs/cutbacks in the near term for early law firm associates as they find themselves completely priced out of the market (due to an inability to bargain for wages…) and the firms recalibrate their local talent searches. In the long-term (aka: after the dust settles) we will probably see a return to the fragmented firm/solo practitioner model inherent in the “long-ago” days of law: firms built around one person or a small group of very knowledgeable people.
But, perhaps I am wrong, and this is either an aberration (and it won’t occur due to the continued explosive global economic growth,) or, the law firms will become more flexible in their hiring/wage-setting practice. There are so many market dynamics to try and keep track off in regards to this topic that it may take more investigation before a definitive answer can be posted.
