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You don't need to be an economist to know that having one lawyer for every 257 Americans isn't good news -- for lawyers, that is. If you're looking to hire an attorney, it's definitely a buyer's market.
Over the past decade, numerous big-wig law firms have folded due to declining profits. Some of them include Brobeck, Proffitt & Wood LLP, Thelen Reid, Thacher, Howrey & Simon, Arter & Hadden LLP, Phleger & Harrison LLP, and Jenkens & Gilchrist.
So who or what is to blame for the current overcrowded and volatile legal market?
BigLaw. Who else? Even Justice Antonin Scalia isn't a fan of them.
A combination of "inept management and the weakness of the partnership model" were crucial factors in inflating the legal market, Bloomberg News reports. The information comes from "Declining Prospects," an upcoming book on law firm economics by Michael Trotter.
Back in 1940 to 1960, the average income for lawyers wasn't nearly what it is today. Even adjusted for inflation, attorneys earned much less.
But then from 1985 to 2010, hourly rates began to skyrocket, especially in the top 50 law firms. Normal combined revenue for these firms based on the rate of inflation at the time should've been $6.9 billion. Instead they earned $48.4 billion. How'd they do it?
These corporate giants became recession-proof by charging higher and higher hourly rates. They lived on their reputations. Consumers associated them with quality. And that's where the problem started.
These firms, the partnership model they popularized, and the promise for money they presented made going into law seem like a sure thing. Remember that figure in the first paragraph? In 1950, the lawyer-to-American ratio was 1:709.
With so many salaried associates who have to be paid regardless of business, BigLaw has become increasingly vulnerable to economic downturns. And having one lawyer for every 257 Americans means you guys are going to have to fight harder than before to score clients.