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JewishJournal.com

May 25, 2010

Economic Downturn Is Giving Law School Students the Summertime Blues

http://www.jewishjournal.com/cover_story/article/economic_downturn_is_giving_law_school_students_the_summertime_blues_201005

Danielle Warner, USC (Photo by Dan Kacvinski)

Danielle Warner, USC (Photo by Dan Kacvinski)

“I was interested in writing,” said Elana Zarotsky, class of 2010 at UCLA School of Law and co-president of its Jewish Law Students Association. “For an English major, there’s not much to do other than law school. It’s a great living, and there are a lot of things you can do with it.”

Zarotsky’s line of thinking has echoed for generations between parents and their children — a lion’s share of Jews among them — and in countless family rooms, college dorms and cubicles across the United States. The legal profession has traditionally been one of the most prudent career paths in America. But what once seemed a secure route to a bright future has hit a bottleneck as job prospects in the industry have become, at best, anemic, since the beginning of the economic crisis in 2008. Students saddled with huge debt now face graduation with frighteningly few options, even those coming from the nation’s best law schools.

The Web site Law Shucks determined that “2009 will go down as the worst year ever for law-firm layoffs,” based on its archive of press releases, leaked e-mails and news reports. The data show that 4,633 lawyers were let go last year from the group of high-powered, high-paying national firms loosely known as “Big Law.” And those numbers don’t even include lawyers whose firms dissolved completely, who were the victims of “stealth layoffs” masquerading as firings, or who were laid off by smaller firms. In other words, Law Shucks concluded that, in 2009, “More people were laid off by more firms than had been reported for all previous years combined.”

“Whenever you see layoffs like that, people are going to get very worried about their job future,” said Scott Schaefer, a professor of finance at the University of Utah. Schaefer and Stanford professor Paul Oyer published an academic study in March titled “What Drives Turnover and Layoffs at Large Law Firms?” based in part on the Law Shucks numbers. “Because of [the layoffs], this year’s law grads are facing a very difficult job market,” Schaefer said. “There are a lot of last year’s class, the year before, and even the year before that who are now competing with this year’s graduates.”

Much of that competition is rooted in the pre-recession Big Law salaries of 2007-2008, which peaked at $160,000 per year for beginning attorneys. The dream of earning that salary in one’s 20s or early 30s — and paying off student loans — was enough for many young lawyers to bear the 80-plus-hour weeks and the routine night and weekend work. Now, though, salaries anywhere near that range are exceedingly rare, and many students will simply settle for a job.

Before the recession, law students looking to earn the top salaries had to follow a straight and narrow but somewhat navigable road: The first step was to earn top grades at a good school in the first year. Next, students had to gain some legal experience — through public service or at a firm — during the first summer that, in combination with those excellent grades, would wow Big Law interviewers the following fall. Ideally, that would lead to a lucrative “summer associate” job at a firm the following year. Finally, in the fall of the third year, students would tensely wait for firms to extend offers of full-time employment to their best summer associates.

But today, even the most impressive law students with fantastic grades and advanced degrees are routinely eliminated every step of the way, making it ferociously difficult to stay on the path to Big Law.

“With the way the economy has been going the last couple of years, it’s created an added level of stress for students,” said Matt DeGrushe, dean of career services at USC’s Gould School of Law. In addition to the usual help with job searches and resumes, DeGrushe said students are signing up for a special program that has his staff constantly following up with them to make sure they are following every possible employment lead.

“The one thing we’ve relied on mostly, and I think most law schools will say this, is the one-on-one counseling,” DeGrushe said, “because there really is no easy fix that can be taught in a workshop about what you need to do to find a job in a recession.”

Bryan Wasser, USC

The 2010 Graduates’ Narrow Escape

From the beginning of law school at UCLA, Zarotsky had no illusions about her goals. “A lot of law students go into law school idealistic about what kind of law they want to do,” she said, “but once the loans start building up and reality sinks in, I think they start to change their mind.

“For a public school, you don’t expect [UCLA] to cost $35,000 per year,” Zarotsky said. “They’ve increased our tuition every year, and that’s on top of the fact that half of us don’t have jobs. It’s crazy.” Although she said her $115,000 in student loan debt is “not bad” compared to that of many other students, Zarotsky knew she wanted her first step out of school to be at a big firm.

Zarotsky’s class of 2010 may have been the last before the lean years fully set in at Big Law. When she secured a summer associate position at a prominent Los Angeles firm during her fall 2008 interviews, “They didn’t really know [yet] how bad things were going to be,” and hired seven students. The following year, that same firm hired only two summer associates. “That’s five potential UCLA law students who now have to find another summer job,” Zarotsky said. “If all the firms are doing that, and they are, it really hurts the second-year law students.”

By the end of summer 2009, it was clear to Zarotsky that her firm was having difficulty offering full-time positions after graduation, even for its best summer associates. “They had just done layoffs right before we got there,” she recalled. “So it was a little tense showing up and having the lawyers working there [see] their friend just got laid off, and here are new people waltzing in.”

The firm ended up offering a few of its 2010 summer associates jobs contingent on a six-month deferral after graduation, starting them full-time in January 2011. Others, including Zarotsky, were asked to take an 18-month deferral and start in January 2012. In the interim, Zarotsky says she is lucky to have found a job as a law clerk for a judge. “Otherwise, I don’t know what I’d be doing for a year and a half. Starbucks or something.”


Unwelcome Surprises for Class of 2011

Generally speaking, the more recently the student entered law school, the tougher it has been to find jobs. While some in the class of 2010, like Zarotsky, formed good relationships with firms before the downturn hit, most of the classes of 2011 and 2012 did not make it in time.

“When I applied [to law school], the financial crisis hadn’t hit yet,” said Bryan Wasser, a second-year USC law student. “It still seemed that the environment was ripe with opportunity in 2007. After putting so much time and effort into the LSATs and applications, I had sort of made my bed, and I had to lie in it.”

Wasser, president of USC School of Law’s Jewish Law Students Association, is a prime example of a top-notch second-year student hurt by the economy. He had already earned a master’s degree in accounting and had four years of experience as an auditor with Deloitte & Touche before starting law school. Still, despite his financial experience and USC’s excellent reputation, firms would not hire him for either his first or second summer.

Part of the difficulty was that in his first year, Wasser did not earn the near-perfect grades that so many big firms demand. Then the economy went into freefall. “When I started reading about how job prospects were scarce and that more emphasis was going to be put on GPAs, I was worried,” Wasser said. During his first year, Wasser and other first-year students would compare their backgrounds and job prospects. “They said, ‘You were already a CPA, you had a job, and now you’ve come here seeking a new career and you might be stuck without one.’”

Elana Zarotsky, UCLA (Photo by Dan Kacvinski)

By his first summer, it was clear the job market at his level had dried up. “There were maybe one or two job postings from large firms looking for first-year associates,”  Wasser said. Fortunately, he found a summer job in Washington, D.C., working for the Securities and Exchange Commission (SEC) in its law students honors program, which pays a modest government salary.

In his second year, Wasser was more confident of securing the pivotal Big Law summer associate position. “I was hoping that I could parlay my experience at the SEC and as an accountant into them overlooking my lower-than-median GPA.” But no firm would offer him a job. So this summer, Wasser will be back at the SEC, this time in the Office of the Commissioner. “Even though I don’t have the sought-after [second-year] summer associate job, I still think that as business picks up, these firms are going to realize they need more associates.”

In the meantime, law school at USC costs $46,774 per year in tuition alone, not including room and board, books, transportation and other costs of living. “It’s definitely worrisome,” Wasser said of the debt. “But I think there are a lot worse [types] of debt you can accumulate.” Wasser said he is looking into government debt forgiveness programs for graduates who enter public service.


Eyes Wide Open for Class of 2012

If the classes of 2010 and 2011 faced the rude awakening of the recession while already in school, the class of 2012 made its choice with eyes wide open. “If you’re a first-year student, you kind of came into law school knowing what you were getting yourself into. They’re definitely rolling up their sleeves and [saying], ‘I know I have a challenge ahead of me,’” USC dean DeGrushe said.

Danielle Warner just this month completed her first year at USC. Like Wasser, Warner had earned a master’s degree before law school, hers in government and diplomacy. She had worked at the American Embassy in Israel, but found that diplomacy was not the path for her. “Even in my master’s program, I was drawn to the international law courses. When I came back to the States, I applied to law school.”

Despite the slowdown in the legal field, the lack of jobs in other industries made choosing law school easier. “I had to find a job with my master’s degree for the year [before law school], and it was really hard. I don’t think the employment market is any better for any other profession,” Warner said.

Like Wasser and Zarotsky, Warner hopes to land a Big Law job to relieve debt worries and, of course, to become as successful as she can. “Everyone in my class was at the top of their undergraduate class and did amazing extracurricular activities and are very hard-working, self-driven people. So I think it’s common for them to expect that, eventually, that will lead to a lucrative career.”

But reality doesn’t always live up to expectations.

Warner has already accomplished the first crucial step, getting top first-semester grades at a top school, but hit a roadblock when she attempted to find a firm job for her first summer. “I interviewed at a bunch of big firms, but at the end of the day, they are interviewing seven or eight people and only taking one,” Warner said. She was not chosen.

Coming out of those interviews, Warner told The Jewish Journal, “I feel frustrated and disheartened. It’s been an emotional roller coaster. I’d been told, ‘That’s the ticket. Once you get those awesome grades, everything will fall into place.’ So to have all the qualifications and for [firms] to just say ‘sorry’ was a really big letdown.”

Worse, when the second-year students fail to secure summer associate positions, they will drop down to compete with the first-years. “Even the typical first-year jobs that aren’t with big firms are being taken by second-years. I think a lot of people are really frustrated about that,” Warner said.

In the end, Warner found a job with USC’s own Small Business Clinic, which helps law students gain experience by giving legal advice to small businesses that cannot afford market rates. She was one of two students taken from a pool of 50. “I’m thrilled to have a paying and interesting summer job,” Warner said.

But during the time she was searching for summer work — as late as April — Warner contemplated taking out even more loans to support herself over the summer. “Many of my classmates are still searching for summer jobs or have taken volunteer positions,” she said. “A lot of people, if they are from out of state, are going back home and living with their families [for the summer].”

For the class of 2012, the reality that they may not obtain top-dollar jobs has sunk in early. “It’s disheartening to work so hard and it’s still not enough. Who knows what the person who got that summer associate job had that I didn’t?”


Looking Ahead

Schaefer, co-author of the study on law students, doubts the current exasperation over jobs will last forever. “I think this is more of a short-run blip than a permanent change in career prospects for law grads,” he said. “I think the market is going to come back, but it will take some time. How long is hard to say.” Until then, young attorneys will bear the brunt of it. “These [Big Law] firms seem to be using a LIFO rule: last in, first out.”

Peter Zeughauser, a consultant to major law firms across the country, agrees. He predicts that within one to two years, demand will rise to “pre-Lehman Brothers” levels among those firms that were hiring prudently before the recession. For those who hired huge numbers of new graduates without foreseeing the recession, the recovery could take even longer. In any event, for now, “firms are still being cautious, and hiring classes are going to be small,” Zeughauser said.

But Zeughauser also thinks the recession may have accelerated some long-term changes afoot in the legal industry.

“I think there will be more unbundling of the work that law firms do and more outsourcing to lower-cost vendors for some work — particularly work that entry-level associates have done.” Big Law associates traditionally begin their careers in their first few years by putting in long hours sifting through thousands of pages of documents and evidence. Now such work can often be done more cheaply by outside contractors, including those in other countries, without hiring so many full-time associates here.

Still, Zeughauser is confident about the prospects of the Big Law American firms and, by association, of their employees. “Overall, I think the market for legal services is going to be robust as the world recovers from the recession,” Zeughauser said, “[and] three-quarters of the world’s largest law firms are indigenous U.S. firms.”

Failing that, there is always solo practice. “That may not be the silver spoon that going to Latham & Watkins or Cravath or Morrison Foerster or Paul Weiss or other [Big Law] firms may offer,” Zeughauser said, “but there clearly is demand for legal services to be delivered by bright young lawyers.”

For soon-to-be young lawyers like USC Law’s Wasser, the question of whether law school was the right choice still looms large in his thoughts. “It’s a constant debate I have with myself,” Wasser said. But he remains optimistic. “I don’t know if it’s a fool’s hope, [but] it seems highly unlikely that someone with my background would be unemployed.”

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