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As we’ve seen, whether it’s inflated salaries in the talent wars, or hikes in insurance premiums, whatever happens to law firms gets passed on to clients. The medium of that pass-through is always the same — through hourly rates. So this lesson, as we examine the downturn, focuses on hourly rates and asks the fundamental question: What are they based on?

For as long as there have been hourly rates, they have been based on the seniority and not the task. Law firms have tariffs for this — for a 5 year associate we’ll charge X, for a junior partner we’ll charge Y, and so on.

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