Five stages of grief

Updated with Online Link

James Leipold, the Executive Director of NALP, has a striking column in this month's print issue of the NALP Bulletin. For an online version, click here. Leipold begins by noting his surprise that "a number of law schools, through their dean or their office of career services, have called on NALP generally and on me specifically to develop a more positive message about the entry-level job market. One request went so far as to urge me to describe the entry-level legal employment market as good."

Shocking but, sadly, not surprising. Law schools have had to disclose their sobering job outcomes, but they want to reassure applicants that the market is "fundamentally strong" and will "turn around shortly." Fortunately, Leipold points out that he can't say things that are false.

After summarizing the dismal job statistics for recent graduating classes, Leipold turns to the future. Is all of this due to the recession? Can law schools assure applicants that the legal hiring market will return to the highs of 2006 and 2007?

Leipold, who has been reviewing law school job outcomes for years, gives an emphatic "no." "[O]ne thing we know for sure," he asserts, is that the job market for the Classes of 2016 and 2017 "will be different, and probably dramatically so, than it was for the Classes of 2006 and 2007."

Why? After pointing to steeply declining outcomes for the Classes of 2009 through 2011, Leipold writes: "We also know that the large law firm hiring model is different than it was before the recession, and is not likely ever going to look like it did in the last years before the economic collapse. That is because the business environment for large law firms has changed in significant ways that are likely to be permanent, or at least it has changed because of trends that are not likely to reverse themselves."

There you have it. Leipold is someone who hangs out with BigLaw partners and recruiters; BigLaw is the backbone of NALP. He also has every incentive to portray legal hiring as optimistically as possible; see above on pressure from law schools. If Leipold thinks BigLaw will not revive its ebullient hiring practices, then it almost certainly will not.

Leipold offers three further specifics, which have been noted on this blog and elsewhere, but are worth repeating:

• The legal market for corporate services has shifted from a seller's market to a buyer's one, and "that shift is not likely to reverse itself even if the U.S. economy improves significantly."
• Corporate clients have learned the lessons of disaggregation: They are "breaking up legal matters and sending the different pieces to the lowest cost provider," including offshore centers and domestic outsourcing companies. Again, economic recovery will not alter this conduct.
• Corporate clients are demanding alternative and capped fees, rather than open-ended hourly billing, for an increased percentage of their work. These demands are increasing, despite signs of economic recovery.

All of these trends dramatically reduce demand for new associates at BigLaw firms. If a client will pay only $10,000 for a legal service, the firm wants a lawyer who knows how to get the job done quickly. If the client is sending all document review to outsourcing, the firm doesn't want dozens of highly paid associates sitting around with nothing to do.

Leipold doesn't mention this fact, but the firms themselves have learned the outsourcing lesson: Why hire full-time associates, who you have to keep busy or pink slip with notice, when you can hire outsourcing firms as needed? Firms can mark up the outsourcing charges, so why not leverage that work rather than the output of high-maintenance associates?

As one measure of the shift in BigLaw, Leipold observes that starting salaries of $160,000 accounted for 25% of the NALP-reported salaries in 2009--but just 14% of those salaries in 2011. If we look at the total pool of graduates (since almost all $160,000 salaries are reported), we can translate those figures to these:  About 4,878 members of the Class of 2009 secured salaries of $160,000; that's 11.1% of that year's graduates. In 2011, just 2,608 graduates obtained that entry-level salary--only 5.9% of the full class. Top BigLaw salaries are almost as rare as giant pandas.

But this isn't just about BigLaw. As entry-level opportunities close in BigLaw, those graduates move into MidLaw, government, and other markets. They displace the graduates who once secured those jobs; those graduates, in turn, move down to SmallLaw, smaller government, and solo work. And all of these middle and smaller markets have experienced their own contractions.

Leipold's message is crucial because it acknowledges that BigLaw is not going to revive entry-level positions. If those positions are not coming back, then the same pressures will appear in smaller markets. Indeed the hiring effects may be more dramatic downstream because they will reflect both displaced BigLaw associates and direct market forces.

After offering these insights, Leipold returns to the "words and actions of many of those involved in legal education and the legal profession generally." He clearly is troubled by law schools that want him to pronounce a strong, recovering job market when just the opposite is true. Faced with this dissonance, Leipold recalls "Kubler-Ross's five stages of grief: denial, anger, bargaining, depression, and acceptance." He concludes that "there are quite a few people in law schools, law firms, and other legal services settings around the country who have yet to reach acceptance."

Indeed. Too many law schools are in denial--or, even worse, inviting deception. We need to get past denial and skip quickly over the rest of our grieving. There's not much point in getting angry at economic trends or trying to bargain with them. And depression won't help our graduates or the profession. It's time for acceptance, and then action. More on that soon.