[Editor's Note: This piece was originally written by Phila Lawyer in 2008, but we're bringing it out of the archives because it's every bit as relevant now as it was four years ago.]
I’m a humorist, a social critic. I never intended to be a repository of career advice. But considering the number of emails I’ve received from people asking whether they should go to law school – whether it’s a good idea given the awful job market – one final piece on this subject, debunking all the myths that drive college kids to the profession in difficult economic times, is in order.
Myth No. 1: You can “time” you way around a rough job market by getting a law degree.
I’ll go to law school, wait out a terrible job market and when I get out, things will be better and I’ll make serious bank. Win/win! If this is your thinking, let me ask you a couple questions. How long did it take you to reach that conclusion? And how general and broadly disseminated was the knowledge on which you reached it? And more important than that, how many other college kids with identical limited information are thinking exactly the same thing?
Here’s the first law you ought to study: Supply and Demand.
You and the other 100,000 college kids following this escape route will graduate en masse in three years. Just as the protracted recession we’re in starts easing and firms start hiring again you’ll create a glut of new associates in the market, tanking the value of the degree. A wave of thousands of like minds will find themselves in triple digit debt, fighting like wild animals to work for 2008 level wages. You want to be one of them?
Myth No. 2: Law is recession proof.
Wrong. Law is a business and every business depends on credit, particularly at a time like this, when bad debts and unpaid receivables are mounting. The current crisis forces firms to contract just like any other corporation – to jettison under-producing departments and slash salary increases and bonuses. And no, the spike in litigation that tends to occur in recessions will not offset the overall loss in revenue accruing from a bad economy. The corporations that hire billable firm lawyers are sophisticated buyers. They know their leverage in an adverse cycle and will aggressively shop counsel by price, negotiating payment structures less lucrative to the firms. And given the reality that some firm will always do the work more cheaply (some at loss-leader rates to grab new clients and clip the competition), lawyers have little power to avoid fee depression. So no, law is not recession-proof. Over the coming years of economic malaise, law firms will be reorganizing, going out of business and laying off workers at a rate similar to that of every other industry in this country.
Myth No. 3: Recessions are good times to go into plaintiff’s litigation.
Again, wrong. Because of their often erratic cash flow, plaintiff’s firms are even more dependent on credit than billable hour shops. As lending tightens, they’re compelled to settle more cases at discounts to fund operations, shrinking margins. They also have less money to throw at the enormous costs of discovery, expert witness fees and trial preparation involved in prosecuting their inventory, compromising their bargaining power in those actions. Simultaneously, insurance companies – the primary source of plaintiff lawyers’ income – grow less inclined to settle cases, preferring to hold onto their money. This can all but break a personal injury firm’s business model, which depends on a predictable number of actions settling on a regular basis. The firms are suddenly forced to try a sharply increasing percentage of their cases with decreased funding and thinly spread manpower, negatively impacting the quality of their results. And the size of their associates’ bonuses.
Myth No. 4: Bankruptcy and regulatory work will be huge growth areas.
This statement is true. With Democrats in office, it will be a good time to get into regulatory work, and bankruptcy is an obvious growth area in a bad economy. The problem is both are minor markets. Bankruptcy is a small fraction of most firms’ service platforms and regulatory work is a broad term for a variety of disparate niche practices, the most lucrative of which are concentrated heavily in Washington DC. And both are difficult areas to gain expertise in as a young lawyer, requiring years of hands-on experience with the strange creatures bankruptcy courts and regulatory agencies can be. This is why regulatory practices are usually staffed with lawyers who once worked for the government agencies with which the practices are involved, and you’ll never find a thirty three year old bankruptcy specialist at any firm paying enough to cover your law school loans. Neither area provides the type of work a green associate will find himself thrown into.
Myth No. 5: Law will never be outsourced abroad or commoditized to the point where the skill set is not among the most lucrative in the economy.
Over the coming years, as Corporate America faces shrinking revenues, it is going to become less and less willing to pay the outrageously inflated cost of legal services. Though billable hour firms refuse to admit it, everybody has heard rumors or seen articles about corporate clients forcing them to bid against each other for business by offering discounted fees, flat rates or “blended” structures (giving the firms a percentage of the award in any action where they represent a plaintiff). This trend is going to continue, much more aggressively, to the point where, in ten or so years, the overwhelming majority of billable hour litigators are going to be compensated like generic middle management.
In a not too distant future, the litigation divisions of most large law firms, usually described as “commercial litigation” practices, will resemble a sector of the industry known as “insurance defense” law. Insurance defense, for the ninety percent of readers unfamiliar with the term, is a practice area in which lawyers are paid by insurance companies to defend against negligence claims brought against insured defendants (slip and fall cases, automobile accidents, etc…).
A few decades ago being an insurance defense lawyer paid quite handsomely, almost, if as well as, any other practice area. Then insurance companies smartened up. They noticed a glut of lawyers coming into an increasingly attractive profession and responded. On one hand they aggressively shopped for the cheapest labor, creating a race to the bottom on hourly rates. On the other, they used their enormous leverage as the largest consumer of legal services to compel minimal year-to-year fee inflation. Consequently, today, where the average commercial litigator commands $250-400 per hour, the average insurance defense lawyer gets $90-175.
Additionally, as the price the market will bear for legal service decreases, the current industry trend toward converting firms from true partnerships to corporate pyramid structures will also accelerate. In this shift, a smaller slice of rainmakers at the tops of firms will take greater shares of profits, spreading the remainder in smaller increments among non-equity partners and associates below.
Stated simply, for you, the soon to be college graduate, getting a law degree now is paying $100,000 for the privilege of working as a nominal vice president at any ACME, Inc. With twice the aggravation and stress… Well, at least in litigation.
Just Say No
Look, I know where you are. I’ve been there. I got out of college in the early nineties and the economy was mess then as well. I remember being scared, having no direction and thinking law school was the perfect solution to all the career-searching I didn’t want to undertake.
I was a fool. Unless you’ve worked for a couple years, you don’t have the maturity to go into law school. And unless you really, truly want to be a lawyer and understand what goes with the job, law school shouldn’t even be on your radar.
Taking on six-figure debt to jump into a cut-throat field of fading margins to escape a bad job market, or because you can’t think of any better career, is insane. You’re young. You’re debt free. You can afford to make a few mistakes trying out different professions. Cash those mulligans in now, while you can. The bad times will pass and if you keep looking, you’ll find a path that fits. Don’t kill your options before you even start the game.