<p>I don’t know, I think this is just an overdue market correction, and perhaps a tacit admission that the Big Law business model is broken and needs to be reinvented. For years the biggest law firms made money hand over fist by billing their clients outrageous sums, charging them for the hours put into the project rather than for the product itself. The partners in those firms also made fabulous money, in part because their own billable rate was so high, but mainly because although they paid their associates handsome sums, they charged their clients even more than they paid for the associates’ time. To keep the firm’s profits and the partners’ income up required a highly “leveraged” structure: few partners, lots of associates, meaning relatively few associates could ever make partner, and the rest were up or out after 7 years or so, replaced by each year’s newly minted crop of fresh associate recruits out of the nation’s top law schools. Associate salaries kept rising, though, because the firms were competing for the top talent coming out of the top law schools each year. And so did the amount the Big Law firms billed their clients.</p>
<p>In the current economy, clients have become far more resistant to the high cost of legal services. The price spiral of associate salaries has ended, though as the article explains, no firm wants to be the first to actually cut associate salaries for fear of losing top talent or being perceived as a second-tier firm. But hiring of “partner-track” associates has slowed, some more senior associates have been laid off, even some partners have been dumped, while others broke off to form their own firms and took their business with them rather than share it with less lucrative partners at their old firms. Clients are bargaining for lower rates, or for product pricing rather than paying billable hours; others are doing more legal work in-house, or taking some of their business to perfectly competent but less prestigious and less costly mid-market firms. So Big Law needs to do something to get back in the game. For some firms creating a second tier of low-cost, back-office, non-partner-track associates in low-cost locations is simply a cost-cutting move that will allow them to offer their clients a lower total price (while still, they hope, maintaining the firm’s profits and the partners’ incomes). There are plenty of eager young lawyers coming out of the law schools—even very good law schools–to snap up those jobs, and some may even prefer not to be under the pressure to rack up extreme billable hours that partner-track associates face. But if it works, it will mean more work going to these back-office operations, and less need for high-priced partner-track associates in the future.</p>
<p>Meanwhile, at the bottom end of the market there are thousands of newly minted J.D.s pouring out of second, third, and fourth-tier law schools for whom there simply are no jobs. But then, these schools never got many of their grads into Big Law jobs anyway. What’s dried up here is entry-level prosecutor jobs, other public sector jobs, legal aid work, and the like.</p>
<p>My impression, though, is that at some of the mid-level law firms things may not be so bad. They were never as pricey as the Big Law firms, and their partners never expected as big profits; nor were they as highly leveraged, nor did they pay as high associate salaries, nor did they push their associates so hard for billable hours. Consequently they haven’t priced themselves out of the market, and some cost-conscious clients may be more willing to consider them now, questioning whether the premium charged by Big Law firms is justified by any incremental difference in quality.</p>