Law: More Market Comments

April 13, 2008

Sometimes I consider asking Kurzman to post a little big about the job market for doctors because, well, I feel guilty constantly talking about the legal job market all the time.  To this end, every once in a while I’ll be having a conversation over AIM with Kurzman (less frequently recently as we both try not to die as the semester ends) and I’ll start to ask him “hey dude, can you throw something up about the medical job market, just so I don’t feel guilty,” then I remember, the job market for doctors is about as interesting as traffic court.  Unlike lawyers, there never has been (and I’m guessing never will be) a surplus of doctors.  First of all, the service they provide extremely useful (If you are going to list most useful professions to society, it starts with doctors, then there is a big gap, then there are the teachers, then a big gap, then everybody else though I’m not sure whats in third).  Additionally, the schooling they have to go through is insane.  I don’t mean to say that law school isn’t difficult, you can see the last five 8 months of me crying like a baby commenting on my experience for evidence of the fact that I find law school to be a difficult experience, but realistically, a huge chunk of the population can get into law school if they are willing to pay enough and accept a low end school.  Not so with Doctors.  Even the worst medical schools still turn away thousands of graduates and take extremely intelligent people.  Simply put,there aren’t enough doctors, so I imagine the market for their services isn’t particularly “interesting” in the same eat or be eaten way.

This is a long way to introduce a website full of articles that a friend sent me today.  The website, available here contains a variety of write ups about various elements of the legal services market.  A lot of the information the article contains is pretty self-evident.  Fo example, we already know top school grads are currently still seeing opportunities while lower school grads face long odds.  Furthermore, I think by now it is clear that the market is in a recession less bullish phase than it was 18 months ago (Republicans don’t use that nasty R word).  After reading the article, there are two points that jump out at me that I would like to comment on.

First, the articles mention several times that “law firms are hedges against a recession” and this seems to be conventional wisdom among a lot of people.  To some extent I understand this.  Bankruptcy, litigation, an employment practices all seem like they would generate significant additional work when things go back and problems arise.  Furthermore, areas like IP seem removed from a recession.  That said, whever everybody seems to be ignoring is this:  why would partners want to pass the “hedge” along to the associates? 

In theory, if the firms goal was to break ever every year after paying salaries this “hedge” would make good sense.  After all, when one group goes down, others can pick up the slack.  What this approach ignores is the fact that, when one group struggles for work, there are a lot of associates in that group that aren’t billing.  Sure some of them can be shifted over to bankrupty/reorg/whatever, but many of them can’t.  This means that regardless of the rearranging, partners are essentially face with “eating” the salaries of many associates or cutting heads.  Since associates salary is directly related to the money partners take home, it seems to me that shedding headcount allows them to better “hedge” their salaries despite the fact that these “hedging” benefits aren’ passed on.  Why mention this?  Well it sounds great when you say that a firm is hedged against a recession.  As a future associate, it makes me feel all warm, fuzzy, and safe inside.  That is, untill I remember that the hedge only works because they can fire/reassign me and make up my hours in a more robust practice group at that time.  Furthermore, even if this whole “replacing A work with B work” can succeed in practice without cutting heads, it ignores the fact that, by and large, M&A/corporate stuff is where the big $$ comes from in a lot of places.  Often these deals allow firms to charge flat rates/bonuses in addition to or instead ofthe almighty billable hour.  As these types of deals go away, firms are going to stop being flushed with cash and this change will likely be passed on down in the form of lower associate bonuses.

The second thing that I noticed in this series of articles is the total misfortune of a certain group.  This recession, at least for the legal market, seems a lot different than the 2001 recession.  In reality, a whole practice group may very well be severly cut in a way that it will never recover from.  Yes there will always be assets to securitize and securitization will always be an area of firm practice.  That said, some firms developed entire practice groups around this area and a good number of lawyes that are not midlevels or highr have built their whole career around securitizing risky home loans.  I cannot imagine there is much of a lateral market for a 6th year associate that has done securitization deals (the types of deals that have almos completely dried up) for the majority of their career.  For these guys, I’m not sure there is another harbor in the storm.  If contract attorneys are about to become the legal equivalent of the Michigan autoworker as I have argued before (read:  outsourced), then is it also possible that securitization lawyers are the legal equivalent of typwriter repair men?  Hopefully I never have to experience the frustrations of having my field blow up over the course of a few months, but if I did, I honestly don’t know what I would do. 

Consulting anybody?  Anybody?  Bueller?  Bueller?

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One Response to “Law: More Market Comments”

  1. JS said

    Love the blog. Keep up the good work!

    Regarding the job market: with medicine, they weed you out going in and with law, they weed you out coming out.

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