Skyrocketing legal salaries in the US have prompted all manner of angst among those – mainly – who aren’t receiving them. But there has been a fair cry coming from clients too who are particularly upset about the fees-increases after many years when Big Law has had to stomach flat fees or even worse – a drop.

But before you weep for Big Law it might pay to consider the facts of the matter, as outlined by Todd Henderson, a University of Chicago Law School professor, in a Forbes article.

Referring to the Cravath Swaine-lead increases, where the firm increased pay for new graduates by almost 13 per cent to $180,000.

But, says Professor Henderson, the answer quite simply is supply and demand:

According to data from the Corporate Executive Board, the average hourly rate charged by major law firm partners nearly doubled since 2000, while average hourly wages for both blue-collar and white-collar workers have increased less than 20%. Lawyer pay has also outpaced economic growth, which has averaged less than 1% per year in real terms over this period.

He points to the ABA’s “state-approved cartel”, which artifically limits legal services.

In a recent white paper, the White House came out against occupational licensing in general, and breaking the ABA cartel would be a good first step in addressing the staggering growth in lawyer pay.

Complex regulations 

Next up is regulations and the increasing volume of them emerging from Washington.

Whether its the Dodd-Frank Act or something else, the sheer volume of regulation creates a necessary demand for lawyers to explain what the heck they all mean.

When law extends beyond the minimal necessary to prevent force and fraud, businesses and individuals react to avoid it or bend it toward their selfish ends. These reactions require more advanced regulation, which then causes additional avoidance.

This vicious cycle means that exponential growth in complexity is baked into the system. It is no wonder that all measures of government size–whether it is the budget, the number of pages of federal regulation or the wealth of Washington, D.C. (home to seven of the ten richest counties in America)–are increasing.

There is another, rather less savory fact about all this too.  The relationlship between compliance professionals and regulators means that both are incentivized to make rules and regulations complex.

It makes them and their work more lucrative.

It is, the professor says, a “revolving door” between business and government.

 

And lawyer salaries are just going to increase as a result.

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