Writing in the American Lawyer, Aric Press surveys the economic landscape for big law firms, and finds no good news to report:
If present trends continue in the big firm market, we are heading toward–you pick the cliché–a paradigm-shifting, blood-in-the-suites, terror-on-the-campus hiring and retention crisis. The “economic reset” that General Electric’s Jeffrey Immelt has tagged seems likely to force changes in the way firms recruit, pay, and/or retain their lawyers. The market for labor has changed and, for now at least, there’s no normal to which it can return.
Press details a number of current market facts, then goes on to list five changes to watch for in the coming months:
Lower starting salaries: Bumping starting salaries up to $160,000 in major money centers arguably made sense when profits were booming and firms feared that they were losing their best talent to the hedge funds of Greenwich. Those days are over and yet the 160K bogie remains as inviolate as though it were handed down at Sinai. If the market–and not weird lemming-style management–drove the salaries up, then presumably the market should drive them down. How far? Back to $130,000, where they lodged at the peak of the tech boom? Back to $100,000, which one managing partner refers to as a “life-boat offer”–if you take it, we guarantee not to throw you over the side for several years?
Wage cuts: Several firms have announced wage freezes: no automatic raises for serving another year. This is not particularly novel among clients but it has caused a stir in law firms. It saves some money, but law firm managers admit perhaps not as much as they will need to weather the downtown.
Delayed and staggered starts: [L]ook for firms to behave as their clients do, delaying starts of new employees until there is some demand for their services. And look for them to behave unlike their clients-offering stipends for extended vacations, pro bono service and advanced course work, anything to build loyalty-and keep them out of the office.
Sharply reduced summer classes: It’s just your mother’s rule applied to hiring: don’t put more on your plate than you need. A class of ten, say, handpicked from Stanford, NYU, Harvard, Georgetown, UCLA, Emory, Northwestern, Columbia, Michigan and Fordham, is likely to maintain the partners self-esteem without jeopardizing the firm’s economics in September 2011.More layoffs: Next time it will be partners.