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. 
 
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:

• Henderson, Distribution of Starting Salaries for 2006: Best Graphic of the Year (Sept. 4, 2007)
• Henderson, How the Cravath System Created the Bi-Modal Distribution (July 18, 2008)
• Henderson, Class of 2007:  A More Extreme Bi-Modal Distribution (July 30, 2008)
• NALP, A Picture is Worth 1,000 Words (Sept. 2007).

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.