Monday, June 29, 2009

The End of an Era: the Bi-Modal Distribution for the Class of 2008

[posted by Bill Henderson, crossposted to ELS Blog]

NALP has just posted its entry-level starting salary for class of 2008--i.e., the lawyers who started their jobs just as Bear Sterns and Lehman Bros unraveled and the credit markets completely froze up. 
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Of the 22,305 law school graduates, a remarkable 23% (5,130 members of the class of 2008) reported an entry-level salary of $160,000.  In contrast, 42% of entry level lawyers reported salaries in the $40,000 to $65,000 range.  Once again, the central tendencies are a poor guide to the distribution as a whole: whereas the mean salary is a $92,000, the median salary was $72,000.   Further, the two modes ($50,000 and $160,000) are separated by $110,000.

Amidst all the layoffs, deferrals, salary cuts, and apprenticeship programs announced in 2009, it is safe to venture that the bi-modal era has peaked.  Every law school class for the foreseeable future will graduate to a much different economic landscape.  Although many students will regret the opportunity to earn such a big payday upon graduation, it brought with it intense billing pressure, client resentment, heavy leverage, and very little substantive training for new hires.  I would argue that profession as a whole (including current and future graduating classes) is better off with a lower entry level salary. 

Admittedly that is a long-term view for the profession as a whole.  In the short term, current students and recent graduates are in a world of hurt.  Specifically, law school debt loads continue to climb.  Thus, law schools are (rightfully) going to be under increased pressure to deliver value to our students.  I don't think most law professors and law school administrators fully appreciate the difficult times ahead.  For a provocative take on the current state of legal education, see Paul Lippe, Welcome to the Future: Time for Law School 4.0.

For some perspective on how this crazy market evolved, see:

After the jump are the distributions from 1991, 2006, and 2007.  The primary takeaway is that the bi-modal did not exist in the early 1990s.  It first emerged in 2000 (with the dot.com salary wars) and became progressively more extreme as the decade unfolded.  On Wednesday, I have an article coming out in the NALP Bulletin, entitled "The Bursting of the Pedigree Bubble," which will provide some additional analysis.

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Comments

My big question is "reported".

Who reports and how closely does that reflect the overall rates.

I checked with Career Planning here at Fordham. We get 85-90% of grads to report - but 95% of those at big firms report to CPC. Assuming that grads would rather report good news than not so good or bad - I would bet that reporting rates are lower at schools less favorably positioned, or which have career planning staffs without beagles.

It can't be the case that 23% of 2008 law school grads started at $160k nationwide.

How about 10%?

- GWC

Posted by: George Conk | Jul 1, 2009 6:55:19 AM

The NALP data is based on data for 22,305 law school graduates. Last year, there were 43,588 total law school graduates. Thus the data above only includes 51% of graduates. NALP's salary data for the class of 2008 is based on a similar portion of graduates. So if the half of graduates that didn't report tend be students who didn't get 145-160k salaries, then, as GWC points out, the actual percent may be much lower than 23% (closer to 12-15%?)

Posted by: Law School Grad | Jul 11, 2009 7:57:55 PM

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