Don't say I didn't warn you
The BigLaw Layoff Watch of 2007 has commenced.
I was around for the layoffs of 2000-2002, and they were an extremely disruptive and chaotic time for young lawyers to be trying to find their way. They were also, as I have said before, precipitated by unprecedented spikes in associate salaries. It all looked all too familiar as salaries rose this year, and now here we are.
In good times, associates start to believe that we have the power. We can demand premium pay and if we don't get it we can leave our firms in droves for the ones who will pay it. We can hold firm recruiting committees hostage until they match the going rate in their city and we can trash them all over the internet and make them fear they'll never get another qualified law student resume ever again if they don't pony up. But at some point, the partners reassert their control. They suddenly say: you want $145,000 a year fresh out of law school? Fine. But you have zero job security and if you don't bill 200 hours a month AND knock our socks off with your work, we can show you and 30 of your closest colleagues the door.
In the end, associates are almost always fungible. Sometimes we forget that.
6 comments:
I really think you're forgetting that there was a massive economic downturn in 2001-2002 that killed anything related to .com VC deals, and preciptated layoffs. There were, in fact, quite a few layoffs in 2001-2002 from non-legal companies.
Obviously, anyone dealing with subprime mortgages is destined to be fucked now, but I don't think you can draw the straight line between associate salaries and layoffs.
If you want, you can draw it from economic bubbles -> associate salaries up -> bubble pops -> associate layoffs, but I think that's as far as it goes.
But what about the freshwater mussels?!
Richard, I would argue that the consumer credit crisis is really actually a symptom of a looming recession that isn't fully realized yet. We have so many other scary financial indicators out there that I just do not get a good feeling about it. In 2000, the tech bubble bursting set off the recession. This time I think it will be real estate and credit woes. But the result may very well be the same.
"In 2000, the tech bubble bursting set off the recession. This time I think it will be real estate and credit woes. But the result may very well be the same."
I'm not going to disagree with that. However, every time I've seem to write about associate layoffs, you seem to imply that associate rises in salaries cause layoffs, and I don't think that conclusion is warranted by the available evidence, as noted above.
(the first "seem to" should be "seen you." Moral: use preview)
Significant associate pay raises cause law firms to worry more about their bottom line profitability and cause them to expect more from associates in order to justify their crazy high salaries. When there is not enough work to keep those associates billing at a high level, cutting associate salaries is the easiest way to reduce overhead quickly. I don't think raises in associate salaries cause a lack of work, but generally go-go-go economies fuel associate raises and are then followed a year or two after by the inevitable market correction if you're lucky and recession if you're not. So while I don't think raises cause layoffs, I think it's all a cycle and raises like these are often predictive of what will happen in a few years as the economy cycles through to the next phase.
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