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Lawyer Salaries: Past and Present, Large and Solo

I came across two interesting blog posts regarding lawyer salaries that make an interesting contrast. The first post comes from Bruce MacEwen, who takes a trip down memory lane, examining Biglaw salaries, past and present. MacEwen nostalgically recalls Biglaw, circa 1982, when Biglaw meant a firm with 150 or more lawyers, and New York partner salaries averaged $232,110 -- or $478,000 today when adjusted for inflation (outside NewYork, median net income per partner was $143,000 25 years ago and around $300,000 in today's dollars). Of course, part of the difference comes from differences in billable hours: The study that MacEwen unearthed showed the average partner billing 1,530 hours per year, while an average associate managed 1,767. To compare, today's lawyers, partners and associates alike bill at least 1,800 and, in many cases, as much as 2,200 hours a year. Of course, even in 1982, billable hours separated top earners Wachtell Lipton from the rest of the pack. MacEwen notes that back then, senior partners at Wachtell earned million-dollar draws, but lawyers also averaged 2,500 billable hours a year.

On the other side of the bar are solo and small-firm practioners, who earn considerably less (though on average, they too bill fewer hours than their large-firm counterparts). Moreover, in contrast to Biglaw attorneys, who typically earn more in large-city locations, solos tend to do better financially outside of urban locations, according to this interesting survey and analysis by professor Bill Henderson. Based on earnings data from 1,200 Indiana lawyers, Henderson found that:   

lawyers working full-time in 1 to 5 lawyer firms in large metropolitan areas [see map below, click to enlarge] made an average of $112,712 (n=318), versus $117,284 in mid-sized markets (75,000 to 200,000 residents) (n=104) and $117,741 in small and rural locales (n = 84).

Henderson described that his results parallel those from a Chicago Lawyers study by Jack Heinz and Edward Laumann, which determined that:

the most salient division [in earnings] was between lawyers who served organizational clients, such as corporations, and those that provided personal services to individuals and small business.  These two groups, which reflect a division that tracks not only clients but income, educational backgrounds, social networks, and bar affiliations, comprise the "two hemispheres" of the legal profession.   In my sample, the attorneys in the 1 to 5 lawyers firms are the segment most likely to provide personal legal services; they also make up 52.3% of the private practice respondents.

Henderson offers some thoughts on why small-firm lawyers earn less money in larger markets. Henderson postulates that many graduates of urban law schools remain in the metropolitan area, thus creating an oversupply of attorneys. Alternatively, lawyers may also simply prefer the big-city lifestyle, thus, making it a more popular option for work. And Henderson suggests that this analysis may not apply in other areas outside of Indiana. 

In my view, I think the results are limited to Indiana, which does not have the same number of large firms as states like California, New York, Massachusetts or Washington, D.C. In larger cities where big firms prevail, many lawyers are leaving to start their own firms -- a trend that I frequently document at my home blog, My Shingle. At the same time, these lawyers are taking their Biglaw practices and lucrative clients with them -- and, in many cases, are not experiencing a significant drop in salary. These Biglaw-turned-solo attorneys raise the average income curve for lawyers in major metropolitan areas. 

Based on the article, it is clear that a huge disparity remains between average Biglaw salaries and average solo salaries. What's not clear to me is whether that gap is growing or whether it's diminishing as technology enables small firms to handle the same-size cases that only a large firm could manage 25 years ago.

Posted by Carolyn Elefant on May 16, 2007 at 05:51 PM | Permalink | Comments (2)

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