The Bimodal Distribution of Lawyer Pay

There has been much grousing in the legal profession and blogosphere about the recent National Association of Law Placement report finding that recent law graduates have a “bimodal” pay distribution: while those who get jobs in big firms have starting salaries around $160,000 per year, few others top $75,000. No doubt, this finding will lead to renewed claims that lawyer salaries are too low, and that we need to restrict the supply of lawyers further. I previously criticized such arguments here.

There is no doubt that only a minority of new lawyers will get 160K starting salaries and that most will earn a great deal less than that. This is not a new finding by any means. Still, the NALP data does not change the fact that most lawyers earn quite impressive incomes. It is important to remember several key points that have been absent from most of the discussion of the data so far.

First, these are merely entry-level first year salaries. In law, as in most professions, pay increases with years of experience. Data on overall lawyers’ salaries compiled by the Labor Department shows that the median lawyer makes some $113,000 per year (meaning that 50% of lawyers make that much or more). Even lawyers at the 25th percentile of pay in the profession make about $76,000 per year. You have to go to the bottom 10% of the profession to find lawyers making under $55,000 per year. Thus, claims that most lawyers can expect to earn “somewhere between $30,000 and $60,000 a year” are misleading at best.

Second, the data for the Class of 2009 are taken from a year that saw the worst economic downturn in some 30 years. In such a period, employment prospects and salaries tend to be down in almost every profession. The relevant time horizon for lawyers, however, is the entire 30 to 40 year period of their expected career. On that score, it is difficult to make any precise forecasts. Still, the continued growth in the scope and complexity of law suggest that the demand for legal services is likely to rise. The demand for lawyers is inevitably closely tied to the growth of government and law.

Furthermore, the NALP data for the class of 2009 show that the median graduate has a salary of about $72,000; in other words, 50% of first year lawyers can expect to make that much or more. Even if you adjust the figure downward a little to reflect reporting rates skewed in favor of large firms, you still get a level of perhaps $65,000 based on the formula that NALP used to recalculate the mean salary (reducing the initial estimate by about 9%). That’s not bad for an entry level salary in the middle of a deep recession.

I certainly don’t wish to suggest that law is the best career path for everyone, or even for more than a minority of college graduates. Some can certainly make more money elsewhere, though there are not many professions that offer comparable salaries to liberal arts graduates with few or no math and science skills. Even among those who can’t earn as much in a different field, it might be reasonable to go into a profession that has more interesting work or shorter hours. In my view, too many people choose law school as a sort of default option without fully considering the alternatives. That said, recent complaints about lawyer pay are overblown, and the NALP data does not change that fact.

Since I am a law professor, some will be tempted to dismiss my comments on this issue on the ground that I have a self-interest in encouraging more people to go to law school. Perhaps so. But I have advocated many policy reforms that are not in the interest of either lawyers or law professors, including reducing the size and complexity of government (which would depress demand for both lawyers and legal academics) and abolishing the legal requirement that people must attend law school before entering the legal profession. In any event, the validity of any argument is independent of advocates’ motives for making it.

UPDATE: I should note that the NALP and Labor Department data do not account for lawyers who are unemployed. Unfortunately, neither these sources nor others I have looked at have shown anything approaching a good estimate of the unemployment rate among lawyers. However, it seems unlikely that there is large Marxian “reserve army” of unemployed lawyers out there. If there were, one would expect lawyer salaries to drop substantially as competition from the unemployed drives down the pay of those who have jobs, especially at the lower ends of the distribution (e.g. – the 10th and 25th percentiles noted in the post). Yet the Labor Department data shows lawyer salaries holding fairly steady. For example, today’s 10th percentile salary of $55,000 per year is actually slightly higher than the prerecession 2007 figure. That would be highly improbable if there were large-scale unemployment among lawyers.