Legal News

The Dawning of the End of the Bi-Modal Era?

By Ashby Jones

For several years now, one of the leading academics who focuses on law firms and law-firm economics, Indiana’s Bill Henderson, has been charting what he calls the “bi-modal” distribution of starting salaries for lawyers.

We don’t know about you, LBers, but we went to law school precisely so we could avoid terms like “bi-modal.” In any event, it turns out that its meaning — at least in this context — is fairly straightforward. According to the pictured chart, recently released by the National Association for Legal Placement, the starting salaries for those students who graduated from law school in 2008 clustered around two very different figures — in the range of $45,000 - $65,000 in one cluster, and $160,000 in another cluster. Writes Henderson: “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.”

For anybody who follows the world we cover, this won’t be surprising. The bi-modal distribution has, in fact, grown quite familiar to most LB readers; for well over a decade, the distribution has reflected the fact that the majority of law-school graduates either make a small fortune right away, or make far less than a small fortune right away.

But Henderson predicts the bi-modal era, the dawn of which he attributes to the birth of the “Cravath Model,” way back when, has peaked:

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.

That said, Henderson doesn’t predict the bi-modal boom to go away overnight:

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.

Frankly, when we first stumbled upon Henderson and his Bimodals, we were doubtful that things had ever been different, at least in our lifetime. But if you click on Henderson’s blog post and scroll down, you’ll see the distribution for 1991, which looks a lot lot different than the graph for 2008.

Full post as published by Law Blog - WSJ.com on June 30, 2009 (boomark / email).