Why Do Lawyers Make So Much Money

Why Do Lawyers Make So Much Money?

By Anonymous • May 01, 2014•Careers, Other Career Issues

Avvo regularly publishes topical pieces on law and our most recent piece is concerning factors that influence lawyers' salaries.

There are two common answers to this question, both of which leave lawyers and clients unsatisfied. Lawyers propose the long hours they work and the level of expertise when justifying their fees. Unfortunately, this argument falls upon deaf ears when clients are charged upwards of $200 an hour for seemingly simple services. Ironically, both arguments provide little room for compromise and resolution, an area where lawyers are supposed to excel in. Opinions aside, the median annual salary of lawyers was $112, 760. That figure, which boils down to $54.21 an hour, is becoming a point of scrutiny when compared to the national median of just $16.27 an hour. Given the ruckus about the glut of degree-toting lawyers, economics (and common sense) would suggest that prices for legal services should decline to reach equilibrium with supply. This phenomenon has yet to occur, but the reason has little to do with greedy lawyers or the level of expertise required to provide (many, not all) legal services.

When Life Gives You Lemons…

…Lawyers charge more for their expert services. The divergence of wages between amateur and expert lawyers has been clearly documented in the chart below from The Association for Legal Career Professionals

DistributionCurve2012

The implications of this divide are clear when you look at the market for legal services today. Although JDs are promised average salaries of $80,000 upon graduation, you should notice that most lawyers earn about $50,000 a year. While that figure is respectable, the realities JDs face when juggling massive student loans and inflated expectations turns many away from the prospect of taking an entry-level legal position. Looking at the other end of the distribution, a select group of veteran lawyers do earn about $160,000 a year, which seemingly validates the conception of why lawyers charge so much for legal services. The select few who make these salaries more often than not work for prestigious firms such as ones on the Am Law 100 or NLJ 350, resulting in a dearth of skyrocketing wages for most lawyers.

Empty Promises

Lawyers tend to be very competitive and often use prestige as a proxy for success. According to a well-circulated Quora thread on this topic, these hyper-competitive personalities help lawyers "win cases and negotiate tough deals, but it spells trouble when it leads to irrational decisions." The cycle starts at law schools, where admission into a T10 is a huge step towards finding the legal Holy Grail. These schools buoy empty promises about median wages (see above), and in doing so justify the six-figure debts many students accumulate in law school. Top graduates from T10 law schools will find attractive offers from prestigious business law firms such as the aforementioned members of Am Law 100 and NLJ 350. Others, however, are chasing a diminishing pool of jobs at mid-sized law firms as many continue to seek mergers to gain market share (and justify higher legal fees). In order to maintain market share, top law firms must attract the best talent by offering the highest starting salary, and the cycle repeats itself when schools cite these numbers to eager students.

To be clear, the above chart only displays starting salaries of associates. To see the full picture of legal billing rates, we should note that rates and salaries (despite departments) move in the same direction at law firms. For example, associate salaries are to years of practice, not services provided. While this stabilizes salaries for lawyers and firms, it also increases the prices of legal fees for clients.

The Elephant in the Room – Legal Marketing

According to a 2012 study conducted by LexBlog and Avvo, more than 60% of lawyers planned on spending more time in marketing efforts. Marketing one's legal practice is no longer just about offline client relationships and Yellow Page listings. Successful legal marketers today are ones who are able to attribute client leads to actionable online marketing campaigns. In the same survey, 54% of lawyers responded that they handle their own marketing, a troubling statistic in terms of cost-effectiveness. Lawyers who handle their own marketing must navigate fields such as search and social media marketing, content strategy, video marketing, and conversion rate optimization on top of their legal duties. This increases legal costs because lawyers are forced to pull longer hours while juggling legal and marketing duties and the lack of expertise lawyers are able to wield due to the heavy workload. So… What's the Solution?Unfortunately, the aforementioned trends will only expand given the legal market today. Judith Collins, Director of Research at NALP, surveyed the changes of legal salaries over time and concluded that little change is on the horizon for the skewed distribution. Surveying the legal field provides little insight into how clients can find the most cost-effective legal services for their needs. Many lawyers are looking to sell the quality of their services, not price as a means of differentiating their product offerings. Regardless of hourly cost, it's important for the consumer to find a trustworthy lawyer who can get the job done quickly and effectively. Avvo included, there are a wealth of networks today to help consumers find the right lawyer for their needs.

Check out AVVO'S LEGAL CAREER CENTER! Where our career portal is updated daily with new job openings so individuals, undergraduates, and alumni can easily find opportunities to apply! http://careers.avvo.com