Posted Apr 19, 2012 01:11 pm CDT
The legal profession may be a victim of its own success.
From 1940 to 1960, lawyers were losing ground as their inflation-adjusted income eroded, Bloomberg News reports, citing information from an upcoming book on law firm economics.
The situation changed in recent years, with revenues at large firms outpacing inflation, the story says. If combined revenues at the 50-top grossing firms had increased at the rate of inflation from 1985 to 2010, the total revenue number would be $6.9 billion in 2010. In reality, it was $48.4 billion.
Bloomberg interviewed Michael Trotter, an Atlanta corporate lawyer who wrote the upcoming book, Declining Prospects. “Hourly rates just went up and up,” Trotter told the wire service. According to Bloomberg, “fancy lawyers charged whatever the market would bear.”
The Bloomberg article attributes problems in the legal profession to a variety of factors. “There’s more at work here than the Great Recession,” the story says. “Inept management and the weakness of the partnership model have also played crucial, if lesser known, roles. And as unsettling as this shakeout will be for employees of many large law firms, it’s one that is overdue.”
Law firms made themselves vulnerable to economic downturns by “bulking up so aggressively,” the story says. “Partners at many firms failed to appreciate that all those salaried employees needed to be paid every month, whether or not new business is coming in the door,” Bloomberg says.
The article offers another statistic to illustrate the surplus of lawyers. In 1950, there was one lawyer for every 709 Americans. Today there is one lawyer for every 257 Americans.
“We have a lot of decrepit bridges in this country, factories that could use modernization, and clean-energy technologies that need inventing,” the article concludes.”It’s a moment for more engineers and entrepreneurs, not more lawyers,” Bloomberg says, echoing an observation made by Justice Antonin Scalia.