Legal services and law firms industry

Industry Snapshot

GENERAL INDUSTRY: Law, Public Safety, and Security

CAREER CLUSTER: Law, Public Safety, and Security

SUBCATEGORY INDUSTRIES: Corporate Law Offices; Criminal Law Offices; Estate and Tax Law Offices; Family Law Offices; Intellectual Property Law Offices; Labor Law Offices; Law Firms; Legal Aid Services; Notary Offices; Paralegal Services; Process Servers; Public Interest Law Offices; Title Abstract and Settlement Offices

RELATED INDUSTRIES: Civil Services: Public Safety; Criminal Justice and Prison Industry; Environmental Engineering and Consultation Services; Federal Public Administration; Local Public Administration; Political Advocacy Industry; Public Health Services

ANNUAL DOMESTIC REVENUES: US$300 billion (First Research, 2022)

ANNUAL GLOBAL REVENUES: US$901.8 trillion (Grand View Research, 2021)

NAICS NUMBER: 5411

Summary

The law firm and legal services industry provides legal advice, assistance and representation to individuals, groups, and corporations. By engaging in legal research, preparing and filing legal documents, drafting contracts, giving advice, petitioning courts, attempting to persuade opposing parties, litigating, and appealing adverse judgments, lawyers use many diverse tools to help their clients. Law firms predominantly employ attorneys, paralegals, and administrative assistants and range in size from multinational corporations employing thousands globally, to solo practitioners doing business in small towns. Lawyers in private law firms usually charge clients for the legal services they provide, although some types of lawyers are paid only by opposing parties when they win judgements at trial that include legal fees, and many lawyers represent select clients for free (pro bono). A law firm’s success is largely dependent on its financial stability. In this respect, it is very similar to any other private business.

The legal services industry is substantially similar in function to law firms. Hundreds of legal service organizations exist in the United States alone. They range from small, local offices in rural areas to large international organizations with offices globally. Much like law firms, these organizations provide legal services for clients, but their fee structure and business goals are drastically different. Legal service organizations seek to assist individuals who otherwise may not be able to afford legal representation and, accordingly, legal service providers generally charge reduced fees. They may also provide pro bono legal representation. Instead of focusing on profits, many of these organizations are nonprofit; they solicit and accept donations from the public, the government, and business owners in order to cover their overhead costs.

History of the Industry

The legal industry has existed, in some form, for thousands of years. In ancient times, many countries and religions developed their own sets of rules, which were essentially common laws: laws that are not written out in books but that are implicitly adopted by society over generations of legal practice. In ancient Greece, common citizens argued legal matters on behalf of other citizens, notwithstanding the absence of formal training. They were not allowed, officially, to accept fees for their representation. Ancient Rome developed a much more comprehensive legal system under which attorneys practiced law as a vocation and could accept fees for their representation. This system was the genesis of the modern practice of law. Notably, however, neither Roman lawyers nor the judges they practiced before had formal legal educations.

The practice of law became more regulated in the first few centuries of the Byzantine Empire (330–1453). By the sixth century, a course of study was required in order to be admitted to the practice of law. By the thirteenth century, many other countries had followed suit, requiring some formal education and an oath of admission in order to practice. The United States developed many of its laws, as well as the traditions and customs surrounding the practice of law, based on the English model. By the time the United States had declared its independence from Great Britain, English legal scholars had drafted important treatises concerning, among other things, principles of property law, civil law, and criminal law. These treatises helped form both U.S. common law and, later, the country’s statutory body of laws.

The first dedicated law school in the United States was the Litchfield Law School, established in 1784 in Litchfield, Connecticut, by American lawyer Tapping Reeve. At that time, no official law degree was required in order to practice law; to the contrary, individuals became lawyers by apprenticing with practicing attorneys. This form of apprenticeship existed into the 1890’s, when the newly formed American Bar Association (ABA) strongly encouraged states to begin requiring potential lawyers to receive formal education in order to be considered attorneys. The first American law firms employing multiple attorneys appeared just prior to the Civil War (1861–65). In 1906, the Association of American Law Schools (AALS) adopted a rule that law students must receive three years of study to earn their degrees. By 2019, there were approximately 203 ABA-accredited law schools, though one was only provisionally accredited.

In order to attend law school, most state laws require applicants to have completed undergraduate degrees, to have achieved satisfactory grade point averages (GPAs), and to have successfully completed the Law School Admissions Test (LSAT). In order to be admitted as an attorney, an applicant must satisfactorily complete law school, must fill out a comprehensive application (including a complete job history and criminal background check), and must successfully pass the state’s bar examination, which is traditionally administered twice each year.

A large proportion of newly admitted attorneys enter into private practice at law firms. Law firms may employ anywhere from one to thousands of attorneys and staff, located in one small office or spread throughout dozens of offices in major cities around the world. A small percentage of attorneys chooses to practice at legal service organizations, such as local legal aid offices or Nongovernmental organizations (NGOs) such as Amnesty International. Much like law firms, these organizations run the gamut from operating as small businesses to, in the case of Amnesty International, functioning as national or multinational organizations with significant influence and lobbying power.

There are many other areas in which an attorney can seek employment. For example, attorneys are employed at nearly every corporation as in-house counsel. Similarly, federal, state, and local governments employ attorneys as prosecutors and judges. Furthermore, most every governmental agency employs staff attorneys who work on general legal matters within the agencies’ spheres of influence, and legislatures employ legal counsel to aid in investigations and to produce the legal language from which new laws are crafted.

The Industry Today

A law firm is composed of a group of attorneys—anywhere from one individual to thousands globally—who combine skills, resources, and revenue and who work under a shared name. Some law firms practice in only certain areas of law in which the attorneys have particular expertise. For instance, it is very common to find small personal injury litigation firms, or small plaintiffs firms, which are law firms that represent victims of car crashes, slip-and-falls, and other personal injury claims. The attorneys in this type of firm have particular expertise in plaintiffs’ injury litigation, and they often provide very efficient and effective representation in this area of the law.

In contrast, many larger firms advertise themselves as full-service firms. This designation suggests that the firms are capable of handling any legal question or issue with which a client is concerned. Traditionally, individual attorneys at large firms retain expertise in one or two areas of the law, meaning that each attorney is not a general practitioner. When the attorneys and their diverse fields of expertise combine forces at a large firm, however, the firm is able to handle most legal issues. In general, particular legal practice areas include civil personal injury litigation, criminal cases, contract negotiation, property and real estate law and transactions, tax law, estate and probate law, intellectual property, patents and trademarks, mergers and acquisitions, administrative law, and appellate law.

At law firms, newly admitted attorneys are commonly referred to as first-year associate attorneys. Depending on the particular firm, they may carry that title for as little as one year or as many as ten years. After an associate’s required service, the partners (part-owners) of the law firm vote to decide whether an associate will become a partner. The partners evaluate, among other things, associates’ performance, work habits, and the amount of business they bring to the firm. Not only is the receipt of a partnership both a promotion and a recognition that an associate has performed well for the firm, but it is also financially rewarding. As a part-owner, the partner earns a share of the firm’s annual revenue, rather than just a set salary with the potential for a bonus—simply stated, when the firm succeeds financially, so do the partners. Partners’ shares at the largest American law firms can be millions of dollars per year. It is also important to note, however, that if the firm loses money, partners also share in the losses. In order to gain their part shares, moreover, equity partners must buy into the partnership, so the promotion requires an outlay of capital on the part of the employee. In addition to partners and associates, law firms employ paralegals, legal assistants, and a host of other employees to assist the firm.

Hundreds of legal service organizations exist in the United States alone. Although these organizations may receive some state or federal funding, many are private organizations. They seek to provide legal services for those who cannot ordinarily afford to hire an attorney. Commonly, legal service providers provide assistance in the following areas: civil and criminal law, property law (especially landlord-renter disputes and foreclosure cases), immigration law, administrative proceedings, and constitutional issues involving civil rights and liberties. An example of the latter might be assisting a high school student who wrote a controversial school newspaper article and was subsequently disciplined by school administrators in a freedom of speech case.

Some legal service providers are able to provide services free of charge for clients who satisfy certain financial eligibility rules. Others provide services and representation at rates that, when compared to comparable fees at private law firms, are drastically reduced. Traditionally, many legal service providers receive assistance from the federal or state government and seek donations from individuals and corporations to help cover overhead costs. Additionally, the operating costs of a legal service provider are significantly lower than those of a law firm, because the salaries paid to employees are often lower. Most legal service providers are local or operate within one particular state. Other legal service providers, such as the American Civil Liberties Union (ACLU) and the National Right to Work Legal Defense Foundation, operate on the national level.

Small firms generally employ between one and ten attorneys. They usually handle relatively few cases at a time, although some branches of legal practice require a heavier caseload in order to earn sufficient income. In addition, sole practitioners may be “of counsel” to firms, meaning that they are neither associates nor partners but they are contracted by the firms to help with specific cases as necessary.

Potential Annual Earnings Scale. The ABA Journal reported in 2018 that a lawyer at a small firm or a solo practitioner earned $198,000 a year on average in 2017, with a median income of $140,000. Many legal service organizations are nonprofit organizations and, accordingly, do not generate revenue in the sense that a private law firm does. The median salary for all lawyers was $135,740 in 2022.

Clientele Interaction. One hallmark of small law firms is the importance of client interaction. When a firm employs only a handful of attorneys, the attorneys are generally very accessible to clients. To be sure, some small firms do not employ full-time legal assistants or paralegals. When a client dials the main phone number or e-mails an attorney at such a firm, it is probable that the attorney him- or herself will answer the phone or personally respond to the e-mail. Thus, the degree of client interaction can be very high, as the buffer between the client and the firm is greatly reduced. Many clients feel reassured by this heightened interaction and believe that they can better track how their legal issues are being resolved. The buffer between client and counsel at a legal service provider is also relatively small, as these organizations seek to keep costs down while providing efficient and effective service.

Amenities, Atmosphere, and Physical Grounds. Small firms and small legal service providers often struggle to find office space suitable for their needs. Unlike major law firms, which typically occupy multiple floors or even entire buildings, small law firms operate like many small businesses—they seek to find affordable space sufficient for their needs. Accordingly, many small firms lack the aesthetics of large firms. Often, the proprietors of small firms finance their office leases and must consider rent or ownership as direct overhead costs that detract from the firms’ profits. While waiting rooms for clients in large firms may have amenities such as coffee bars, plush leather sofas, and a bevy of magazines for perusal, the waiting room in a small firm may consist of no more than a small space with a few chairs.

In a small firm or in a legal service provider that operates as a nonprofit, the emphasis is on client contact and cost-effective representation, not glitz and glamorous surroundings. To that end, the physical grounds of a small firm could be a former house that has been converted into a law office, rented space in an office building, or simply an office with an administrative assistant that is shared by other solo practitioners. Whereas in large law firms, interior and exterior maintenance typically are outsourced to specialized businesses, the attorneys at small firms concerned with overhead costs may spend their Saturdays cutting their firms’ lawns and attempting basic maintenance repairs, much as they might at their personal residences. It may also be common for attorneys to share office space in an effort to save rent. That being said, the physical grounds of most small firms generally present a very professional atmosphere, much like those of large firms.

Typical Number of Employees. Small firms and legal service providers may consist of only a solo practitioner or they may employ from two to ten attorneys. Aside from their attorneys, firms usually employ a few paralegals and administrative assistants to assist with the preparation and maintenance of files. Such firms are usually owned by just one or two individuals, so there exists an incentive to keep the number of employees relatively low. As long as the work is getting done in a timely and professional manner, hiring additional employees will only take away earnings from the rest of the office.

Traditional Geographic Locations. Small firms and legal service organizations may be found anywhere where people are in need of legal representation, and they can be found in most communities, both large and small, throughout the United States. Although there may exist a stereotype that small firms are only located in sparsely populated communities, this is not true, as small firms are just as likely to be located in large cities. Similarly, legal aid organizations often are located in cities because that is where the greatest need for low-cost or free representation is. If given a choice, proprietors of small firms may choose to locate their businesses near the courthouses in which they most regularly practice. Because the cost and time of travel to court hearings eventually gets passed on to the client, and because most small firms and legal service providers are concerned with keeping the costs of their representation competitive, it may be beneficial to be located within walking distance of court.

Pros of Working for a Small Firm. Small-firm owners are their own bosses, and they may not be expected to work the grueling hours that so-called big law attorneys are expected to work. Accordingly, many nights and weekends are free, and for some the job resembles a traditional forty-hour-per-week occupation, thus allowing attorneys to have lives outside of work. Additionally, for those who view client contact as particularly important, operating a small firm may be a great fit, as clients who can easily communicate with their lawyers are likely to feel that they are receiving better representation. Finally, small firms can be very successful financially. Like any small business, a small firm is built on trust and reputation; after establishing the trust of a community, life in a small firm can be emotionally and financially satisfying. Similarly, attorneys running small legal service organizations generally find the work to be both important and rewarding—both professionally and financially.

Cons of Working for a Small Firm. Although there are many benefits associated with running a small firm, there are also opportunity costs. First and foremost, the opportunity for financial success can be limited. Because the owner of a firm is responsible for paying salaries, rent, utilities, and a host of other bills, if the firm has a slow month, there may not be enough money left for the owner to pay her- or himself. Additionally, owners of small firms and legal service providers may find themselves working several hours per week on nonlegal matters, such as building maintenance or personnel issues, thus detracting from their ability to represent clients and build the business of their firms. Finally, the owners of small firms must decide what benefit packages to provide to their employees. Providing health care and a retirement plan can be very costly and can significantly detract from profit margins. Though an attractive benefit package can entice qualified employees into accepting offers of employment, the cost of providing benefits can be difficult for small businesses to afford. In legal service organizations, the benefits are generally very good, but often the attorneys in charge of these organizations sacrifice the potential for high salaries. Although they may love their work, they are often compensated at lower rates than those in the private sector.

Costs

Payroll and Benefits: The proprietors of small firms are responsible for paying the salaries of and providing benefits to their employees. This is likely to be the largest cost associated with operating a small business. In a legal service organization, it is possible that the state or federal government, or even individual private donors, may provide some funding to help offset the costs of providing salaries and benefits.

Supplies: Small firms and legal service providers must be equipped with, at a minimum, computers, Internet access, printers, fax machines, and telephones. In order to research legal issues for clients, they must also purchase law books or subscribe to an Internet-based legal research provider. These are costly investments, but they can save attorneys significant time. Additionally, most firms subscribe to law journals and trade magazines, as well as to newspapers and other periodicals, primarily for use by attorneys seeking to keep abreast of the law.

External Services: Small firms may contract lawn care and external building maintenance, as well as interior cleaning and maintenance services. Some attempt to take care of reasonable maintenance and lawn care on their own.

Utilities: Small firms must pay for electricity, heat, and sewage and trash-removal services, among other utilities.

Taxes: Traditionally, law firms pay their associates’ state employment taxes associated with holding a license to practice law. If they own their office space, they must pay any state and local property taxes. Moreover, small firms must pay corporate income taxes. Legal service providers may be nonprofit entities, in which case their business tax liability, as well as other financial burdens associated with private practice, may be less significant.

Midsize law firms generally employ between ten and fifty people. They are usually local or regional in nature, serving clients predominantly in one general locale. Midsize firms almost always have associates in addition to partners, whereas small firms may consist solely of partners.

Potential Annual Earnings Scale. According to the U.S. Bureau of Labor Statistics (BLS), the mean annual salary for a lawyer in 2022 was $135,740. The mean annual salary for a paralegal or legal assistant was $59,200. All other things being equal, employees of midsize firms can generally be expected to earn salaries in line with these averages.

Clientele Interaction. Midsize law firms and legal service providers place importance on client interactions. However, because there are more attorneys, paralegals, and administrative assistants in midsize firms than in small ones, there is likely to be less direct contact between attorneys and clients, as some of the client-relations tasks will be handled by these other employees. Additionally, corporations can also be clients of midsize firms, and it is often possible to handle certain legal needs of a corporation with less face-to-face contact than an individual client would expect. Consequently, depending on the nature of the services the midsize firm or legal service organization provides, there is likely to be a somewhat lower degree of interaction with clients than experienced at small firms and organizations.

Amenities, Atmosphere, and Physical Grounds. Midsize firms generally employ anywhere from ten to fifty attorneys, in addition to several paralegals and administrative assistants, whose services are often shared among attorneys. As a result, the office space needed by a midsize firm is greater than that needed by a small firm. In fact, some midsize firms may need two or more offices, especially if their clientele is spread across a larger geographic area. Depending on the size of the business, a firm may have its own freestanding building, or it may share space in a larger office building. Because the appearance of the building and grounds is important to generating business, larger firms may pay more attention to their physical grounds, amenities, and atmosphere. For instance, clients at a midsize firm may notice an elegant waiting room and may be offered coffee or tea as they await legal assistance.

In a ten-attorney firm, shared office space or a renovated single-family house may be sufficient for the firm’s needs. With fifty attorneys, paralegals, and administrative assistants, however, a firm would likely need several thousand square feet of office space and may be inclined to have its own freestanding building or an entire floor in a large office building. Maintenance, including lawn work, plumbing, and electric repairs, is likely to be outsourced to private companies, as the larger a firm is, the lower the ownership interest is among the most senior attorneys.

Typical Number of Employees. Firms that employ between ten and fifty attorneys are generally categorized as midsize. If a firm has only ten attorneys, it may be able to get by with just a few paralegals and administrative assistants, as well as a receptionist. The total number of employees at a ten-attorney firm, then, might be somewhere between fifteen and twenty. If the firm employs fifty attorneys, the demand for legal and administrative support will be much greater. Such a firm might have a total staff of well over one hundred.

Legal service providers, such as legal aid offices, often operate under fixed budgets. Despite the great demand for their services, the resources often do not exist to hire all the personnel necessary to maximize the efficiency of the firm. In a legal service provider, attorneys may perform some of the same tasks that traditionally would be assigned to paralegals or administrative assistants at private firms.

Traditional Geographic Locations. As with small firms, midsize firms may be located anywhere there are clients and business to attend to. Cities, suburbs, and rural communities all host midsize firms.

Pros of Working for a Midsize Firm. With a sufficient number of attorneys, a midsize firm may truly be a full-service organization, effectively representing clients in nearly every type of legal dispute. Whereas sole practitioners and small firms often concentrate on one or two areas in the law, a midsize firm can practice in all areas, thus increasing both its clientele and its revenue. Additionally, because the firm is larger, each partner may carry fewer nonlegal burdens than they do at small firms. Midsize firms should generate more revenue and, consequently, have fewer cash-flow problems. Because their cash flow is generally higher, the opportunity for increased compensation should also exist. As with small firms, many midsize firms offer a good quality of life to their employees. Their benefit packages may be very competitive, but attorneys may not be required to work as many hours in order to succeed as are their counterparts at large firms or multinational corporations.

Cons of Working for a Midsize Firm. Although midsize firms and legal service organizations often provide excellent benefits and allow the attorneys to have a life outside the office, the potential earnings of managing partners pale in comparison to those of managing partners at large firms. Additionally, the owner or managing partner of a midsize firm often faces the same concerns as the owner of a small firm. Depending on the success of the firm, there could be cash-flow issues, employee termination issues, and issues affecting the firm’s reputation in the community. Though these are important concerns, they are just as important as client responsibilities and the traditional day-to-day practice of the law necessary to generate revenue. Finally, as with small firms, the cost of providing benefits for employees and their dependents is difficult for many midsize firm owners. It is usually necessary to offer benefits (sometimes including paying the new associate’s bar examination and study course fees) in order to attract top talent, but the return on investment for the firm may not be seen for some time.

Moreover, while attorneys at midsize firm may work fewer hours than those at major corporations, they still must work far more than forty hours per week. Because benefits and support staff represent significant expenses, many firms hire one new attorney instead of two, paying the attorney a high salary and expecting at least eighty hours of work per week in exchange. The firm thereby saves money by paying for only one benefits package and one secretary, even if the salary itself is equivalent to the combined salaries of two lawyers who are expected to work forty-hour weeks.

Costs

Payroll and Benefits: The single largest expense in a midsize law firm or legal service organization is payroll and benefits. Because associate attorneys typically earn higher salaries as the size of their firms increase, the overhead at midsize firms can be very high. Additionally, the benefits packages offered to these employees can be very attractive—but costly for the owner to provide.

Supplies: As the size of a law firm increases, so do the costs of supplying employees with the necessary day-to-day materials. Computers, software, paper, pens, and phones all combine to represent large costs that must be borne by the firm.

External Services: The larger a firm, the more likely it is to outsource services such as lawn care, maintenance, and even marketing or public relations, should those services be necessary. Additionally, as the number of attorneys increases, the degree of ownership or responsibility a managing partner may feel decreases proportionally.

Utilities: Just as with small firms, midsize firms and legal service providers are required to pay their electric, heat, Internet, mortgage or rent, and other costs.

Taxes: Law firms usually pay the yearly taxes and fees that their attorneys are required to pay in order to practice law in a given state. They also pay corporate income taxes, payroll taxes, and property taxes. Legal service providers may be tax-exempt nonprofit entities, but they must still pay payroll taxes on employee income.

Large law firms employ more than fifty attorneys, sometimes far more. The largest are multinational for-profit entities and nonprofit NGOs that practice on multiple continents and represent the interests of their clients across national borders.

Potential Annual Earnings Scale. According to the BLS, the mean annual salary for a lawyer in 2022 was $135,740. The mean annual salary for a paralegal or legal assistant was $59,200. At the hundred largest firms, equity partners earned about $2 million a year on average in 2019. The American Lawyer reported that in 2019, the thirty-seven large law firms in the United States each reported revenues of $1 billion or higher.

Clientele Interaction. Attorneys at the largest law firms typically have less interaction with their clients than do attorneys at smaller firms. For example, it is common for associate attorneys to work on files for dozens of clients without ever meeting one. Traditionally, associates receive assignments from partners, complete the requested work, and then returns the relevant files to the partners who gave them the assignments. It is the partners who then meet with clients, if necessary, or attend court hearings. Because many clients are sophisticated entities, rather than individuals, it is sometimes not even necessary to meet face-to-face with clients or client representatives. At big firms, attorneys are paid solely to do legal work. There are hosts of paralegals, administrative assistants, and secretaries to do everything else. Additionally, when clients call, they reach attorneys’ assistants, not the attorneys themselves.

Amenities, Atmosphere, and Physical Grounds. The largest law firms cater to the wealthiest and most sophisticated clients, who can afford to pay the highest fees in exchange for the best legal representation. Accordingly, most large law firms are lavish when compared to their small and medium counterparts. The grounds are well kept, the offices are large and well equipped with the newest technology, and it is not uncommon to find art adorning the walls. Because attorneys are paid to bill hours, on-site incentives exist to keep them inside, such as on-site coffee bars, dry-cleaning services, and even meal and car services for those attorneys who stay after hours to work.

The largest law firms and legal service providers require ample office space. Consequently, they often occupy multiple floors in skyscrapers or other defining buildings. Many of the firms are also multinational, and some individual locations may employ hundreds of people, taking into account all levels of attorneys, paralegals, and administrative support.

Typical Number of Employees. Firms employing fifty or more people are generally considered to be large firms. While fifty attorneys could be housed in one central in-state office, one thousand attorneys must be spread throughout several offices. Large firms and legal service organizations generally have the financial resources necessary to hire the proper number of attorneys and administrative personnel to enable the firm to operate at maximum productivity. A single big law firm may employ thousands of people worldwide.

Traditional Geographic Locations. The most successful law firms often have offices in large U.S. cities such as New York, Boston, Chicago, Los Angeles, and Washington, D.C., as well as in international metropolises such as London and Tokyo. Additionally, many firms have smaller offices in smaller cities that are commonly referred to as satellite offices. These regional offices do not employ as many attorneys and administrative support staff, but they help build and maintain the national and international presence of the firm. Large legal service providers, such as legal aid agencies, are traditionally located in large cities, as such locations provide the greatest service to the largest number of individuals in need of representation.

Pros of Working for a Large Firm. Those in charge of large firms are among the most well compensated attorneys in the world. They are equity partners and, accordingly, get a share of the success of an extremely large business. In the largest firms, most partners earn nearly $2 million annually, including bonuses. Partners are treated very well within the firm, as they have several associate attorneys working on their files and reporting to them; they have wealthy and successful clients; and they enjoy a high standard of living. For other attorneys, and even administrative employees, compensation at these firms is very competitive, as are the benefit packages. Though the work may be difficult and the hours long, employees are compensated for these sacrifices. In fact, large firms pay bonuses to associates and will even assist with bar exam fees, relocation expenses, and other professional fees associated with the practice of law.

Cons of Working for a Large Firm. The life of a partner in a large firm is not without sacrifice. The hours spent at the office can be grueling. As a general rule, attorneys at large firms are required to bill a minimum of eighteen hundred hours per year. The term “billing” does not refer to all time spent at work, however. Rather, this term describes only time that can legitimately be billed to clients; that is, time actually spent on files, including such activities as researching, writing, deposing a witness, or attending court. Furthermore, there are often limits for certain projects. As a result, while an attorney may spend ten hours working on a particular project, he or she may only be able to bill five or six of those hours toward his or her annual billable goal.

After vacation and holidays, a typical billable requirement averages around forty billed hours per week. Since not all time spent at work is billable, big firms’ attorneys are at work many more than forty hours per week (seventy-, eighty-, and even one-hundred-hour work weeks are not unheard of in big firms). This leaves little time for a social life or a family. Additionally, the environment is often stressful. Attorneys’ work products are carefully scrutinized and, if not satisfactory to their superiors, must be perfected. Finally, attorneys must wait many years at large firms before learning whether they will become partners. In large firms, the wait is often at least ten years.

Costs

Payroll and Benefits: Despite the requirement to bill a certain number of hours, most attorneys are paid salaries. They may also earn bonuses, however, and each employee at a large firm is offered a very competitive, and expensive, benefits package. In order to attract top graduates from the best law schools, firms will offer to pay many nonlegal expenses. For example, some firms offer a onetime bonus to reward and attract associates who, following their graduation from law school, served for a year as a law clerk for a prominent judge or at a high-level appeals court.

Supplies: Large firms and multinational legal service providers must have an integrated network, through which an attorney in New York can communicate with an attorney in Tokyo. Accordingly, state-of-the-art computer and phone systems, printers, fax machines, and network capabilities for thousands of employees are necessities. Firms also require vast amounts of paper, pens, copiers and copying supplies, and other general office supplies and equipment. As technology changes, the largest firms must constantly adapt to keep pace with their competitors.

External Services: Big firms outsource almost everything unrelated to the practice of law. In addition to traditional services such as building maintenance and groundskeeping, these businesses may even outsource such functions as public relations and litigation management. They may also hire experts to help with such functions as jury selection or to act as consultants in cases requiring expertise, such as those involving the precise effects of exposure to particular chemicals. Because many of these costs eventually are absorbed by wealthy clients—clients who expect their attorneys to work only on legal issues—big firms can afford to outsource and hire experts.

Utilities: Even multinational corporations must pay for building usage, electricity, heat, and other associated costs. With so many employees in several different buildings, such costs can be extensive. Before deciding to open new offices, firms must be sure that the demand for their services in that particular geographic area is sufficient to overcome the overhead costs.

Taxes: Like any other business, big firms and their employees must pay taxes on income. Further, it is almost a given in big firms that the firm pays the cost of its attorneys’ employment-related taxes, such as bar licensure fees and any other mandatory fees attorneys must pay in order to practice law in a particular jurisdiction.

Industry Outlook

Overview

Like many other industries, the law firm and legal services industry rises and falls, to an extent, as the economy rises and falls. This was the case when the United States faced a significant economic downturn beginning in late 2007. As a result of larger national and global economic problems, attorneys at most levels noticed a negative change in the years 2008 and 2009. When significant numbers of clients and potential clients are themselves being laid off or are having their wages and hours reduced, they are less inclined to seek legal counsel. With less money to spend, individuals are less likely to purchase property, enter into complex contracts, or engage in other activities that may traditionally require the service of lawyers. Similarly, corporations that have experienced financial losses and that have had to reduce their workforce are less likely to engage in mergers and acquisitions of new businesses, and they may be less likely to make complex employment decisions—ventures that traditionally would require the services of employment attorneys.

Attorneys may always be terminated for poor performance. Industry-wide layoffs, however, are usually relatively rare. In 2009, though, some of the largest—and traditionally the most successful—law firms undertook unusual measures aimed at surviving the tough economy. Some firms laid off attorneys, while others instituted pay cuts or froze wages. Finally, some firms delayed the traditional fall hiring of the new class of first-year associates. Though new attorneys still gained positions with these firms, they had to wait six months, or even a year, before beginning their employment and earning a paycheck.

Positions at legal services providers may be more stable than positions in law firms during economic downturns. Because many of the former entities are nonprofits, their bottom line is not associated solely with finances. Additionally, the salaries of attorneys, paralegals, and administrative assistants employed by legal service providers are traditionally lower than the salaries of those same positions at large law firms. To underscore this point, a staff attorney at a legal service provider, such as a legal aid agency, may earn approximately $60,000 annually. A first-year associate attorney at one of New York’s largest law firms may earn approximately $190,000 annually. When a for-profit firm struggles economically, it is an easier decision to lay off the attorney making $190,000, than it is for the legal aid agency to lay off an attorney making $60,000.

Nevertheless, the long-term outlook for both the legal services and the law firm segments of the industry is encouraging. In the period from 2022 to 2032, the BLS estimates that there will be an 8 percent increase in the number of lawyers in the United States, as well as a 4 percent increase in the number of paralegals and legal assistants.

Employment Advantages

The U.S. law firm and legal service industry has been consistently stable since the country’s inception. Individuals who enjoy solving problems, interacting with people, conducting research, writing, and public speaking should consider a career in this industry. Moreover, becoming a licensed attorney does not limit one’s employment prospects, should one decide later not to practice law in the traditional sense. Many people with law degrees work in business, marketing, academia, government, and many other employment sectors. Similarly, the skills of a paralegal and administrative assistant are easily transferable to other industries, and they provide excellent work experience for people who decide to attend law school and become attorneys.

Notwithstanding economic difficulties, as evidenced by the 2007–9 global recession, there are always parties and corporations that need legal advice and assistance. This industry has persisted for centuries and is an ingrained segment of society, business, and the economy. For those who enjoy challenging and intellectually stimulating work, and those who desire to make a difference in their clients’ lives, a legal career may be rewarding.

Annual Earnings

As of 2022, there were approximately 1.38 million people employed nationally in the legal industry. This figure includes practicing attorneys, judges, paralegals, and other legal support workers. According to the market research firm First Research, the industry’s total US revenues in 2022 were about $300 billion. According to the BLS, the median wage in the legal profession in 2022 was $95,170 annually, while the median wage for lawyers in particular was $135,740. More than 60 percent of those in the legal profession worked as attorneys, while about one-quarter were paralegals and legal assistants. The median wage of a paralegal or legal assistant was $59,200 annually.

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