Pay Associates Less? A Novel Response to a Rapidly Changing Legal Market

Legal education is said to be in crisis. Law school applications are down sharply as prospective law students question whether the high cost of legal education is worth it.
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Legal education is said to be in crisis. Law school applications are down sharply as prospective law students question whether the high cost of legal education is worth it. A good part of the declining interest results from the loss of entry-level jobs at large law firms, which typically pay salaries high enough to offset post-graduation debt.

As firms complain that recent graduates are inadequately trained in the practical aspects of lawyering, law schools, including my own law school, are implementing various forms of experiential learning, ranging from in-house clinics to enhanced externship opportunities to the equivalent of full-year apprenticeship programs. While law schools should continue training lawyers to hit the ground running, these moves respond to only a small part of a larger problem.

Much of what is driving the diminution in opportunities for law school graduates at elite law firms is the fact that business clients have become less willing to pay high hourly rates for teams of novices. Instead, clients have insisted on far more efficient service, including the outsourcing of discovery and the implementation of computer algorithms to reduce costs. When lawyers without much experience are needed, clients often hire their own contract lawyers on a short-term basis, or insist that their outside counsel do so. The result is a decrease in the need for inexperienced lawyers.

This is a serious matter, because the combination of legal research, due diligence, discovery and, for that matter, just observing, has for most of the last century provided inexperienced lawyers with the training to become the next generation of sophisticated practitioners. The learning curve is not usually that steep. Third and fourth year lawyers often have gained enough experience to handle legal work on even complex matters that requires them to exercise skillful professional judgment.

The crucial question facing both legal educators and the legal profession, then, is how to get newly minted lawyers through the first couple of years so that they gain enough knowledge and experience to become "adult lawyers" capable of producing high professional caliber work.

Here is a simple proposal to address at least part of the problem: If clients are not willing to pay top dollar for the work of inexperienced associates, hire the associates at lower salaries, and give them substantial raises as their value increases.

Consider a firm that pays base salaries of $150,000, $165,000 and $180,000 respectively to first, second and third year associates and offers them annual raises of $10,000-$15,000. These figures are within the range of what large firms are paying, according to the National Associate for Law Placement (NALP), which conducts annual surveys. In the current economic climate, the firm has kept these salaries steady, but has cut back on the number of associates it hires because it is no longer possible to bill clients as aggressively for the associates' time.

Why not cut associate pay in the early years? For example, offer them $75,000, $125,000 and $175,000 for the first three years, respectively. This salary cut will permit firms to continue to train the next generation of elite lawyers in substantial numbers, while shifting some of the cost of training its most junior associates from the clients to the trainees themselves. Moreover, although large firms face pressure to remain competitive, the promise of these substantial raises should be a significant enticement to attract the best talent. Finally, savvy business clients will respect and choose firms that honestly link compensation to the realities of the market.

This system would more resemble the training of physicians, who must spend years in internships and residencies with relatively low compensation and grueling hours before they are considered sufficiently competent to practice on their own at much higher levels of income. A system that would require law graduates to bear some of the costs of their training, similar to their peers in medical school, seems logical and efficient, and may be especially appropriate in these economic times.

Until recently, clients were expected to bear most of the costs of grooming newly-minted lawyers at large firms. As the firms adapt their business models to meet new economic realities, shifting some of the costs of training to the inexperienced associates themselves may allow firms to absorb more lawyers, with better results for recent graduates, firms and clients in the long run.

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