Q. I have been following all the developments with respect to first-year salaries, postponement of start dates, summer program cancellations (or curtailments), etc., with great interest. It is of interest to me not only because it impacts law firms such as mine, but also because I have a daughter who will be starting law school in the fall. What are your thoughts about how permanent these changes may be and what this generally portends for the future?
A. It is difficult to provide a reliable prognostication at this point, as the economic turndown does not seem to have run its course. I do foresee five potential changes, which I will discuss.
First, even though law school applications are up (presumably because it buys three more years, albeit expensive ones, until college graduates have to test the employment waters), there will be enormous pressure on law schools to place their graduates in paying jobs. The recession has dramatically impacted their ability to do so, as even the best and brightest are finding it difficult to land jobs, especially at customary high-salary levels in some of the country’s most prestigious firms. Their inability to find such jobs has more than a trickle-down effect — it may be a flood — on students in the middle and bottom of the class. Some of these students may now be competing against top-tier students for slots with midsize and small firms and other organizations, which rarely happened in the past.
Clients are showing increasing disinterest in paying high hourly rates for first-year lawyers who have little training or real-world experience. Large law firms that are delaying their first-year classes for months or even a year are going to reap some economic benefits from doing so, which may become narcotic. These two factors suggest that the train that has delivered such a large number of law students to the door of major law firms after graduation may not have just been temporarily stalled — there may be a permanent rerouting that will go into effect (as will be discussed below).
If I am correct, then the pressure will be on law schools to better prepare their students to more quickly hit the ground running after graduation. While this may mean offering more clinical and practicum types of programs, they likely will have to go much further. All those schools that have eschewed offering business of law type of courses as being too unseemly (for example, on business development and the economics of practice), may have to alter that philosophy — and quickly. It will be incumbent on them to show that $150,000 or more that is spent on an education will (assuming a student does well) actually result in that student finding a good paying job after graduation. Schools will need to better demonstrate to legal employers, and ultimately their clients, that their graduates are better prepared to contribute from day one. As intellectually challenging and interesting that an advanced class on esoteric constitutional or tax law issues may be, it may be far more prudent, and necessary, to offer more courses on the nuts and bolts of real-life lawyering.
Second, for some of the reasons described above, I anticipate that this delay in hiring first-year lawyers, even those at the top of their class who were set to join some of the largest firms in the country, will not be a one-time event. Firms are feeling the heat from clients who object to essentially paying for the on-the-job training, especially at high rates, for lawyers who, albeit quite bright and talented, generally lack experience that justifies those fees.
That factor, when combined with the cost savings of not paying high first-year salaries (which is only exacerbated by the reality that most associates don’t break even for their firms until their third or fourth year) is likely to lead firms to rethink this equation even after the economy eventually bounces back. There will always be some firms that feel it is important to land the best students from the top schools for a multitude of reasons. I believe that the majority will become much more comfortable in moving away from that model, as they will hire mid-levels who have been initially trained elsewhere and can then be molded to fit their firm’s requirements and culture.
Third, Economics 101 suggests that if demand for first years, at least from those firms that were willing to pay top dollar, declines, then salaries should as well (or they at least will remain somewhat stagnant for a few years). In the past, there always were firms that broke from the pack to raise salaries to help them land the best and brightest. Even if that happens in the future, which I think will be far less often, I expect fewer firms to follow the so-called leaders. As a result, I anticipate you may still see some outliers, but many more firms will likely keep salaries dampened because of their reluctance to match those high fliers.
Fourth, I foresee that this will present an unprecedented opportunity for smaller and midsize firms to hire first-year lawyers who otherwise may have been out of their reach. The opportunity to work in solid firms, where one can receive a good paycheck (albeit not at the lofty levels of the past), receive good training, get excellent work and presumably practice in a nice environment, could be quite compelling. The eventual challenge for these firms will be to so ingrain these lawyers into their firms that they will stay for the long haul. If they cannot do so, these firms may become the incubation grounds for the larger firms that will seek to pick these younger lawyers off after they have had a few years of experience under their belts.
Finally, I also predict that we will see the death, or at least the decline of the traditional large, expensive summer programs at major law firms. That was not an easy sentence for me to write, as I immensely enjoyed my experience as a summer associate many years ago. I also took great pride in a summer program I ran that hopefully had a positive impact on the students who were in it.
I was a passionate advocate of the benefits of a summer program while I was in private practice. This was a key recruiting tool that enabled a firm to evaluate a young lawyer in action, helped to bind him (theoretically) to the firm and tended to revitalize the whole firm for a few months. These benefits, and others, were perceived as outweighing the costs, which admittedly were significant.
I think the balance has now shifted the other way. Quite a few firms have told me that their informal analyses (which my long-term perspective supports) show that lawyers who started as summer associates don’t stay appreciably longer than those who join a firm laterally, directly as a first-year, or from a clerkship. While some who leave go on to in-house positions (and become clients), the majority go to other law firms and thus become competitors.
That reality removes a crucial underpinning for a summer program. If interconnectedness is important, and it often is, this, too, is not in play if a firm decides to stop or decrease its hiring of first-year lawyers. This would mean that a second-year summer associate would then be at least two years removed (or more) from his connections in the firm after he departed the program. These hardly seem like the ties that bind.
The costs of a summer program, particularly today, and presumably in the future, as attention to expenses will remain, weigh heavily in favor of ending or significantly scaling back these programs. Most firms pay summer associates a prorated weekly pay that is equivalent to what first-year lawyers earn. As those first-year salaries are under attack, how can a firm justify paying that same scale for clerks whose time is even less likely to ever be collected from more watchful clients?
If these programs survive, I expect they will feature smaller classes with far fewer perks — the days of flying summer associates across the country and oceans and battling to offer the coolest and most expensive events, will only repel clients. There will always be maverick firms that will go overboard, especially if the salad days return, but my belief is that there will be a paradigm shift in this realm, as sad as that is for me to acknowledge. •
Frank M. D’Amore is the founder of Attorney Career Catalysts, www.attycareers.com, a Pennsylvania-based legal recruiting, consulting and training firm. He is a former partner in an AmLaw 200 firm, general counsel in privately held and publicly traded companies, and vice president of business development. He can be reached at firstname.lastname@example.org .