Will You Make a Secure, Affluent Living in Law?
Starting Salary Graph from NALP
Starting lawyer salaries generally fall within one of two curves on a bimodal distribution. Therefore, a salary distribution graph is much more meaningful than isolated statistics like the median or mean. The graph at the right is produced by the National Association of Legal Career Professionals (NALP); it contains starting salaries for about half of the 2008 law school graduates.
What would the graph look like with the missing salary data?
Typically, data for law school graduates receiving higher salaries are more likely to be reported for several reasons. These job offers are usually obtained through on campus interviewing (OCI) scheduled through law school career offices. Those firms usually publish first year salaries through organizations like NALP. Furthermore, they typically list their associates on the firm websites. Therefore, these higher salary jobs are likely to be included in reported statistics. The salaries not reported are more likely to come from graduates employed in small or local law firms, where salaries are more likely to fall in the lower curve, or from graduates who are not yet employed, and are also unlikely to end up in the high-paying curve when they do get jobs. For 2008, 23% of the 51% who reported were in the right curve; this figure is probably 12-15% of total law grads. That leaves 85 to 88% of law school graduates outside the “big law” salary range. This data is also from the last year before the recession in the legal job market hit "big law", so current salaries may be lower.
Which Curve Will A Student End Up In?
Many law students are ambitious and high achieving, and tend to overestimate their ability to place at the top of the law school class and get a position at a high-paying firm. Most employers paying $160,000 recruit mostly from top 15 law schools, as ranked by US News and similar services. They often hire some associates from the top 5-10% at other law schools. Most jobs paying this amount are at large law firms and are usually located in large urban areas.
The graph to the right, from an article in the National Law Journal, shows that, during the 2005 law firm boom, about 50-55% of grads from top 15 schools like Virginia and Michigan went to top-250 firms. So even at the best 15 schools in the nation, during a big-law hiring boom, many students did not receive these high paying jobs. Anecdotal data from talking to students at one top 15 law school with a 3.2-3.4 first year median GPA, about a 3.5 and a journal or moot court was required to receive high-paying law firm offers, before the recession reduced law firm hiring. For other prestigious law schools in the top 25-30, like George Washington, University of North Carolina, Emory, or University of Southern California only 20 to 25% went directly to these firms. Law schools ranked in the 50 to 100 positions, about 5 to 12% went to these firms, leaving the vast majority of students with lower-paying options.
Some of the other students go directly to judicial clerkships, where they will receive a lower salary for 1 to 2 years in exchange for acquiring more experience. Some of these students who clerk for federal judges will later go to big-law firms, many clerking for state judges will not.
Be Wary of Incomplete Salary Surveys
Law school career offices often publish data indicating high salaries. Their reports often are not based on data from all graduates, but rather only from students who report to them voluntarily. A disproportionate number who report salaries got jobs from the more lucrative large firms during on-campus interviews. Also be wary of “Percentage Employed” data; it usually includes any job, not just high-paying jobs or jobs that even need law degrees. Therefore the figure is usually high for any school. The graph above shows that a significant percentage of graduates from lesser-ranked schools go into non-legal “business” jobs that often don't require a law degree.
A number of law schools, including some top ones, also hire recent graduates who haven't found work yet to do research or administrative work at the law school. Others will pay students a stipend while they volunteer for a firm or non-profit and then count these students as employed in these statistics. A graduate receiving a small stipend is often counted as “employed” in the percentage employed statistic, yet his meager salary could be omitted from the salary statistics. Read the second half of “The lost generation” article on the Above the Law blog for more details.
Some other surveys report much higher salaries for attorneys. Look carefully to see what pool of grads or jobs they are based on.Some are based just on lawyers working large firms or highly-regarded boutique firms, such as members of NALP. Also, participation in salary surveys is usually voluntary - firms paying high salaries are more likely to publicize these high salaries in order to recruit the law students with the best credentials and to ensure clients know they have these highly-credentialed lawyers Lower paying firms do not have these incentives to publicize their salaries.There is nothing inherently misleading about surveys that sample only a subset of lawyers; the problem comes when news commentators and prospective students do not account for the limitations of these surveys. Here is one such survey, which only includes selective NALP firms, and therefore reports high salaries.
Will You Make More As A Lawyer?
Tuition: Law school tuition is high, even compared to most other graduate or professional programs. Most top 50 private schools now charge over $40,000 per year. Most students finance law school mostly with loans.
3 Years Opportunity Cost: Almost all law school JD programs require 3 years. Most schools make it hard to graduate in less time, partly to protect their tuition. During this time, the person is not gaining work experience, and is not receiving an income. Since most people attend law school outside their home town and where they will eventually practice, they are not yet putting down roots in their future community that will make life enjoyable and could even bring in business.
Salary Versus Experience: When comparing how person who goes to law school does compared to non-lawyer, factor in the lost time. A lawyer with 2 yrs experience should be compared with a non-lawyer with 5 years experience, or a person holding masters degree who now has 4 years experience.
Overly Optimistic Grade And Job Expectations: Most law students assume that they will have little trouble securing a lucrative job, yet these same students believe many of their classmates will struggle. In short, more than 10% of the class believes they will be in that top 10%. By definition, 90% will not make it.
Costs of Being A Lawyer
High Cost-Of-Living Cities: High-paying legal jobs tend to be located in large urban areas where the cost of living is high. This situation is no coincidence – large businesses are more likely to be headquartered in large urban areas where there is more economic activity, and where that economic activity is highly regulated, such as the northeast and California. In these more urban and more regulated locations, state and even city income taxes reduce take-home pay. Housing is expensive too.
Professional Requirements: Lawyers pay annual dues to state bar associations and are required to attend legal education classes each year. Malpractice insurance is also an expense for many solo or small firm attorneys. Lawyers are typically more likely to be sued for malpractice than other professionals like doctors, in part because clients are already comfortable resorting to the law for their grievances.
Time at Work: Associates at large firms typically work long hours. Lawyers in general work more hours than persons in many careers. Career satisfaction is also typically lower. (See Job Satisfaction section for more information on this topic.)
Lawyers are Bright and Motivated; Would Have Done Well Elsewhere
Most students who attend law school are fairly bright and motivated – had they not gone to law school and instead worked in a less selective field, they may have still obtained salaries that were higher than average in that field. For example, a student with a 160 LSAT score and 3.6 undergraduate GPA would have credentials in the middle of those who attend law school. That same student may be in the top percentiles of students choosing less selective fields of study, and therefore may go to a top-ranked school or work for an employer who pays more than average for that field.
All of these factors must be considered in order to do a complete comparison. In summary, when comparing the outlook for a person considering law school, the biggest costs they need to factor into the comparison are likely to be: law school debt, 3 years of lost income, 3 years less professional work experience, and potentially having to live in a more expensive location.
Salary Outlook For Small and Local Firms
About 46% of 2008 law school graduates had starting salaries between $45,000 to $60,000. Many of these are in small and local firms. Attorneys starting their own solo practices should generally not count on making enough to support themselves for the first year, as noted in this recent ABA Journal article. Small firm and solo salaries have generally been decreasing relative to inflation for last few decades (see WSJ article 2007 above).
Widespread Availability of Legal Information To the Public: Online resources like FindLaw provide an overview of the law on almost any topic people commonly encounter, like landlord/tenant or employment law. Simple forms are available for certain legal needs like simple or low-value contracts and wills. Because of these resources, people don't seek small-firm and solo attorneys as much for very basic legal questions, especially when not much is at stake.
Elimination of minimum fee rules: Some state bar associations used to set minimum fees a lawyer could charge for certain standard services, like preparing simple wills. The minimum prices, set through state ethics rules, kept the cost artificially high compared to a competitive market. Those rules were ruled illegal violations of antitrust law by the US Supreme Court. This removal of these price supports may have reduced fees charged to clients, and therefore, lawyer earnings. Both of these changes may be good for consumers, but not small-firm or solo attorneys.
Increase in number of attorneys: The number of attorneys has grown faster than the population in the past few decades, leading to more lawyers per capita and more competition. In Texas, for example, total state population increased by 55% between 1980 and 2003, yet the number of licensed attorneys increased by over 100% in that same time period, from 35,000 in 1980 to 73,000 in 2003.
Salary Outlook For Large Firms
Law firm salaries typically go up in spurts during boom times. Big law salaries went up from $125,000 to $160,000 in 2007, after last going up during the boom of 2000. Many firms over expanded, hoping to copy the business model of the very largest firms. Some analysts warned that these high salaries were not sustainable. Starting in late 2008, many of these firms have cut salaries and laid off associates, especially in areas related to transactional work and general litigation. Over 10,000 lawyers have been laid off from significant law firms. Certain specialties like bankruptcy, energy, environment, labor, and employment have seen a slight increase in hiring. There are some articles predicting the end of big law and the billable hour, but articles have prematurely predicted demise in past recessions that never happened. For details on “big law” salary cuts: http://abovethelaw.com/salary_cuts/
Most law school graduates are likely to find salaries in the range of $45 to $60,000. Around 12-15% may find jobs in “big law”, paying $135,000 to $160,000. Most jobs feature long hours and lower levels of career satisfaction than one would expect for bright and motivated graduates in other fields. When comparing earnings potential for lawyers and similar individuals who choose not to become lawyers, one must consider the opportunity costs of law school, mainly law school debt that often exceeds $150,000, 3 years of lost income, 3 years less professional work experience, and the fact that many legal jobs are concentrated in locales where taxes and costs of living are higher than average. They must compare the earnings potential to what a person of similarly high academic ability and motivation would achieve in other professions.
For some, entering the legal profession is a major financial success. For others earning $45,000 to $60,000, it is likely they would be earning as much or more in another profession with three additional years of work experience under their belts, without the debt from law school.