2016 State of the Legal Market

January 24th, 2016 / By Deborah J. Merritt

Georgetown Law’s Center for the Study of the Legal Profession has released its 2016 Report on the State of the Legal Market. The data-driven study of mid-sized and large law firms repeats many of the same findings that researchers have reported since the Great Recession. The news, unfortunately, is that there is nothing new. In 2015, as in other recent years, demand for law firm services “was essentially flat,” productivity among lawyers at those firms declined, and realization rates “plummeted.” (A realization rate “is the percentage of standard billing rates that is actually collected.”)

In sum, “2015 will go down as another overall lackluster year in terms of law firm financial performance.” Yikes. What does that mean for law schools?

There’s Not Much Growth There

Schools that still hope for surges in entry-level hiring aren’t going to find that growth at mid-sized or large law firms. Those firms continue to hire some new associates, but client demand does not portend further increases. On the contrary, firms are quietly shedding some of their counsel positions, non-equity partners, and equity partners.

Lawyering Looks Different

At the same time that demand for Big/Medium Law work lags, clients of those firms continue to push for more efficient technologies and staffing models. There’s little room for new associates to learn a well-rounded practice. Instead, knowledge-management systems allow recycling of work product (with savings passed on to the client); self-help software allows clients to perform work that junior lawyers used to undertake; and low-cost units perform specialized work like due diligence.

Firms that have adopted cost-saving approaches like these, the report shows, average better financial performance than firms that have not. Financial incentives, in other words, will continue to spread these changes. Opportunities for contract attorneys, document reviewers, and other specialized workers will persist, but openings for “Cravath model” associates will continue to wane. Law schools that still target graduates at Big/Medium Law need to understand the types of work available.

Inequalities Persist

The flatness in the Big/Medium Law market masks wide disparities. Among midsized firms, “some . . . did exceptionally well, while “a large number of others performed exceptionally poorly.” Similarly, among the 100 largest American law firms, the top 25 reaped more than half of all profits in the group.

Even for law graduates joining mid-sized or large law firms, in other words, career prospects may vary widely. We’ve learned about the bimodal distribution of entry-level salaries for law school graduates; graduates on the high side of that distribution may now have to grapple with increasingly bimodal career outcomes.

Realism

The bottom line for law schools is to be realistic about career prospects for graduates. Top law schools will continue to place a large number of graduates with Big/Medium Law firms; some other schools will continue to place some. The number of these jobs, however, is very unlikely to increase significantly. The nature of the jobs, meanwhile, continues to shift. Even graduates who land “good” positions, finally, face more risk than new associates did ten years ago; as lower-performing firms try to increase profits, they don’t hesitate to lay off lawyers at any rank.

These realities have implications for law school admissions, tuition, and curriculum. Prospective law students won’t be reading any time soon about upswings in BigLaw practice–because that’s not happening. Instead, students may read about more temporary attorneys, more lawyer-saving technologies, and more law firm layoffs. Those realities will make students even more reluctant to assume heavy loan burdens, unless they win spots at very highly ranked law schools.

Law schools, meanwhile, need to continue asking: What other types of legal work are available for our graduates? How do we assure that our curriculum suits our students for that work? How do we provide more secure pathways for our graduates into that work? We need to seek concrete answers to those questions, not from our own imaginations, but from the practitioners in our cities. And then, like legal employers, we have to be willing to change.