November 17, 2005
A Rust Belt Economy for Lawyers
Posted by Bill Henderson

During the past year, I have been developing a large data set on the Am Law 200—i.e., the 200 largest U.S. law firms based on annual revenues. My research contains several discrete strands, including an examination of the economic geography of large corporate law firms.

Here are some interesting factoids on law firm growth:

  • Between 1993 and 2003, the number of lawyers working at Am Law 200 firms increased from 54,520 to 99,105 (+81.8 percent), which is great news for law students interested in high salaries.
  • New York City added nearly 10,000 Am Law 200 lawyers during this period (11,290 to 21,210; +87.9 percent). In absolute numbers, D.C. came in second (8,596 to 13,512, +57.2 percent).
  • The remaining top 10 domestic markets—in order of size: Chicago, L.A.,San Francisco, Boston, Philadelphia, Atlanta, Houston, and Dallas—increased from 20,973 to 34,561 (+64.8 percent).
  • The number of foreign Am Law 200 lawyers exploded (2,061 to 9,969; +383.7 percent), with London leading the way.

The missing market segment is non-Top 10 domestic locations (“Regional Market”). Between 1993 and 2003, the number of Am Law 200 lawyers in the Regional Market grew from 11,600 to 19,853 (+71.1 percent). However, the growth was very uneven. Consider the growth patterns of four “Old Economy” cities in the Regional Market, all with one or more Am Law 200 headquarters.

                     Chg. Lawyers     % Growth     New Offices
    Cleveland MSA      96             13%                 -1
    Detroit MSA          95             17%                  2
    Indianapolis MSA  176             42%                  0
    Milwaukee MSA     78             14%                  0

(Note: Detroit's two new offices were in Ann Arbor.) Now consider the growth in four “New Economy” cities in the Regional Market:

                     Chg. Lawyers     % Growth New Offices
    Austin MSA         428             185%              6
    Charlotte MSA     481           1266%             10
    Miami MSA          546             103%              9
    San Diego MSA    613             142%             14

I am originally from Cleveland. Andy Morriss, who is on the faculty at Case Law, told me that a prominent Cleveland politician suggested to him that the city’s “national law firms” [there were six Am Law 200 firms at the time] could be an important driver of the city’s economy in the years to come. Perhaps growth in corporate lawyers requires growth in local industries; I know a few Cleveland lawyers whose primary job is to sell off the assets of "legacy" industrial companies.

Yet, these statistics also suggest that graduates of regional law schools in struggling legal markets will face stiff competition for coveted big firm jobs. In a recent paper for the Indiana Law Rankings Symposium (I am estopped from providing the SSRN link), Andy and I showed that the growth of high-end corporate law jobs (i.e., Am Law 200) has a significant effect on the market for high LSAT students. In other words, when choosing among schools in Tiers 2 through 4, students with marginally higher LSAT scores will often trade down in USN&WR rankings in order to attend a school that feeds into a vibrant legal market. Hence, the median LSAT scores for non-elite schools in major legal markets are trending upward.

The law firms data suggests lots of other interesting trends, but I don’t think most people realize how the decline of the industrial Midwest has impacted the market for lawyers and law students.

Economics, Law Schools/Lawyering | Bookmark

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