Man may labor from sun to sun . . .

Over at Unfogged, LizardBreath had a recent post on the way that professions which bill by the hour are sort of inherently hostile to women. There's a suggestion in the comments that things would be better if law firms switched to contract pricing.

It's sort of a mystery to me how professional services decide whether to be project-based or hourly rate. There's a broad dicta that when output can't be measured, input will be . . . but I can't exactly draw a bright line between investment bankers, who take a commission on deals, and securities lawyers, who are paid by the hour.

That said, I think it's a fantasy that project billing would make law firms more mother-friendly. Investment banks are not exactly hotbeds of femininity, either. If law firms are really goldbricking, a switch to project-based pay would simply encourage them to take on more cases. Professional firms have a great deal of firm-specific human capital invested in their workers, and an incentive to split the partnership pie with as few people as possible. As long as the work remains extraordinarily highly paid, firms will try to squeeze as many hours as possible out of their employees.

It is interesting to contemplate why we've seen such a lifestyle switch over the last century. White shoe lawyers used to work much less hard than laborers. Now they probably clock at least twice as many hours a week as a typical warehouse worker. I have a hunch that it has to do with communications leaving less downtime, and also with increasing returns to knowledge, but I suspect that the decline of inherited wealth probably also plays a role. And probably many other things besides.

Comments

I suspect that the big difference between hourly and project billing is uncertainty. If you know how long something is going to take, you prefer to bill by project. That way, you can get a higher effective rate per hour when you turn out to be able to do it quicker.

But when you don't know how long it will take, you are better off billing hourly. That way, you get paid for all the time that it ends up requiring.

It may be relevant to point out that government contractors love getting "time and materials" contracts. And resist fixed price contracts whenever they can.

In the end, it's not so much whether billing is hourly or by project. What's important is a) how much it pays, and b) how many hours (per day or week, not overall) you are going to have to work on it. The lower the former, and the higher the latter, the less friendly the job is -- to everybody who isn't a compulsive workaholic, not just to women.

Posted by wj | April 16, 2008 3:00 PM

to your last point about the switch hours worked, I would attribute it to the increased importance of financial assets to the economy. When I started practicing securities law 30 years ago, even at the big NY firms, the deal velocity was a small fraction of what it is today. There is definitely a knowledge premium, but that has always been there. What is different today is the amount of money that people make from financial assets and the velocity of transactions in the market place.

Posted by Steven Donegal | April 16, 2008 3:05 PM

I think it's the increasing returns to knowledge. Why do some people get paid so very much? Assuming that the market is working (which we could debate for years, of course), the reason for the premium is to induce certain people to make the most of their very valuable time. Very high salaries are needed to get people to give up so very much of their leisure time that they don't have much of a life.

They could still take a lot of time off, of course, but the opportunity cost is huge, both for them and potentially for their employer.

Posted by Ann | April 16, 2008 3:28 PM

The last time I hired a lawyer (for a real estate deal), it was flat contract rate, not by the hour. Worked out very well for me, as the number of hours went higher than we originally expected. Either way, I liked being able to budget for the cost ahead of time.

Posted by meep | April 16, 2008 3:30 PM

This post has been deleted for profane, and more importantly, extremely bad, puns. The two other identical posts were deleted as well.

Posted by Palmer Eldritch | April 16, 2008 3:46 PM

White shoe lawyers used to work much less hard than laborers. Now they probably clock at least twice as many hours a week as a typical warehouse worker.

Three things:

1) is there a larger disparity in real income nowadays between laborers and lawyers than before? If so, it's not surprising that lawyers are working harder for it.

2) Baumol's cost disease. Although lawyerly productivity is rising, it's probably not rising as much as for jobs previously done by unskilled labor. That means lawyers have to work harder relative to factory or warehouse workers just to maintain the gap in standard of living.

3) Increasing complexity. You need lawyers for more stuff than you used to, and they need to spend more time than they used to. Since only a limited number of people can actually be good lawyers, the demand for their services (and hence the price, and via the income effect, their hours worked) rises.

Posted by Rob Lyman | April 16, 2008 4:07 PM

wj has it exactly right... stuff that might go non-linear has a good chance of being billed by the hour.

But so do you... I keep on whispering to my fellow travellers that a process for quantifying ROI needs to be developed in our own industry, but the prospect boggles. My pleas are met with silence.

Posted by ben | April 16, 2008 4:19 PM

Re: more hours for lawyers. Another change is the complexity of practice. When I go back and read briefs and opinions (especially at the trial level) from the early 80's, they are much more terse. I blame easy legal research and word processing for lawyers throwing everything and the kitchen sink into nearly every brief on every subject. Once one side starts doing it, then the other is obligated to keep up. More writing means more hours and, of course, more billing. I may be wrong, I've only been in law for fifteen years, all in the computer era, but this is my impression.

Posted by mdm | April 16, 2008 4:27 PM

The first commerically successful typewriter was invented in 1867. So, my question, were legal documents written out in longhand and then typeset...just longhand? And, as I understand it, if you needed a copy you had to send it to a scriviner. Getting a copy of a document to your client in San Francisco for review, and getting a response, would take at least a month I would imagine.

If you were an attorney at that time, the only way to communicate with clients would be: meeting physically, mail or, at great expense, telegraph. Given the amount of time it takes to attend meetings, compose correspondence, etc. Perhapse, given the glacial speed of information at the time, 6 hours a day was about as much as an attorney could be expected to work.

Posted by jmo | April 16, 2008 4:27 PM

Well, as one of those corporte lawyers, I have to note that the i-bankers get paid one HELL of a lot more than we do on the same deals, and they don't generally spend more time. If law firms thought they could charge anything close to comparable percentages of deal value, I think they'd happily switch to a flat fee model (though there are serious ethical problems with lawyers charging a success fee, as the bankers do, so the percentage would obviously be lower). Perhaps clients would like it, too, for budgeting reasons - or perhaps not, because it would give them less of a basis for arguing down fees for services already rendered, or make them paranoid that the lawyers would try to reduce the time spent to their detriment.

That said, I don't think it would help women with the "second shift" problem much, for the reasons noted, though maybe we'd be paid as much as the i-bankers and be able to fund extended time off or "retire" early (i.e.: go do something fun that doesn't pay well). With the retention problems at top firms (generally, but particularly for women), a number of shops are realizing that they need to do something about the time/money balance or see all their experience walk out the door. I'm not sure what that something is, though.

And, Rob, I think I disagree with your point 2, though it may be true for many other white-collar jobs - lawyerly productivity has risen HUGELY, because the legal industry has been able to make use of computing advances in a way I'm not sure most other businesses have. The introduction of word processing software alone was industry-changing (as was photocopying, for that matter - just ask an old partner who remembers fighting over the secretary with the heaviest fingers to type through more carbons), and don't get me started on time spent handmarking changes vs. redlining or doing document distributions via hard copies and Fed Ex vs. e-mail. Factory automation has nothing on us.

(jmo definitely has a point about increased lawyerly blather, but I don't think it has cancelled out the effect of, say, MS Word or e-mail, though the balance may be different for we transactional types who basically deal with multi-party negotiations of multiple versions of really long documents day in and out. Of course, maybe the blather is just the flip side of that old rule - computers let you work twice as fast, and create three times as much work.)

Posted by Kathryn | April 16, 2008 4:47 PM

Just realized (i) I meant mdm; jmo was making a similar point as me about technology, and (ii) I think I inadvertantly implied that litigation legal blather might have increased more than transactional legal blather, which is pretty laughable on its face, though I do think transactional efficiency has probably benefited more from the basic computing advances of word processing, e-mail and redlining software, given how document intensive we are.

jmo - my understanding of the history on this is that, pre-1900 or so (when typewriters actually started to be used more commonly), things were written longhand and stayed in longhand. You wrote your draft longhand, had a meeting, noted changes, someone took it home and rewrote it out longhand, and everyone got together, proofread it, initialed final changes and signed. The someone who wrote it out was not generally the laywer, but a professional clerk who was basically hired for his accuracy and good handwriting. Once you had typewriters things weren't much different - until the photocopier, you had serious problems with typos sneaking in each time you reproduced a doc, and the same problem each time you produced a new version until word processing software, so actual drafting work was kept to an absolute minium. (I made a point of getting a history lesson from a very old partner when I was just a green sprig of an associate shocked to discover a purple, mimeographed document in a file.)

Now, I'll routinely have documents that go through 10 or 20 negotiated drafts, and people will make comments about spacing and punctuation, when in the past you'd probably be shot for wasting time with such immaterial stuff. Like I said - twice as fast, but 3 times as much work.

Posted by Kathryn | April 16, 2008 5:05 PM

This argument that project billing is more family friendly than hourly billing only works if you assume either that hourly billing rewards slow workers while punishing fast workers, or that hourly billing promotes wasteful work.

While this padding may exist to some extent, I don't think it is a major component. Clients care about their bills, so wasted work or slow work generally won't be tolerated, and clients will go to more efficient law firms.

Whether you work by the hour or by project, the person leaving at 5 PM is not going to get as much work done as the person leaving at 11 PM, assuming they both came in at the same time. The billing structure is not driving the problems so much as the desire to increase the productivity of the individual.

Posted by Rob | April 16, 2008 6:21 PM

Rob Lyman sez: "Since only a limited number of people can actually be good lawyers, the demand for their services (and hence the price, and via the income effect, their hours worked) rises."

How to explain the actual situation, then, where there are far more lawyers than there are good lawyers, yet their pay is still very high?

Posted by Anthony | April 16, 2008 6:27 PM

Every law firm partner I've ever heard asked about billable hours vs. fee-for-service has said that the firms want to experiment with alternate payment structures, and that pressure to bill by the hour comes from the client side. Whether or not that's true I couldn't say, except that I'd expect a change to be slow even if a different billing structure would be better for both sides. There's just such an enormous informational asymmetry that contracting is going to be very difficult except between parties who really trust each other.

Posted by Trevor | April 16, 2008 6:34 PM

Trevor is right - billing by the hour at least generates very detailed bills.

When you give a client a 7 figure bill and deliver to them a document or set of documents (whether for a deal, motion papers for a case, whatever - it's usually a stack of paper) a few hundred pages long... they wonder if they're getting ripped off. Usually not, but that's not always obvious to the client.

Also note, Wachtell Lipton, one firm famous for alternative billing arrangement is also famous for charging a LOT. They bill more like investment bankers... and their prices are more like investment bank prices.

Posted by MichaelB | April 16, 2008 6:40 PM

How to explain the actual situation, then, where there are far more lawyers than there are good lawyers, yet their pay is still very high?

Pay for mediocre lawyers at no-name firms is often much lower than it is for really good ones. Plenty of lawyers make $50k a year scraping by on wills, real estate transactions, and the occassional tort contingency. Millionaire lawyers are actually quite rare.

But on the flip side, there is a substantial information asymmetry that does pump up the pay of mediocre lawyers with big reputations.

Posted by Rob Lyman | April 16, 2008 6:58 PM

I would think that much lower marginal tax rates for higher income workers since the Eisenhower administration has been a major factor. Because of benefits, paying an existing employee twice as much to work twice as long is an attractive deal for employers, but what employees care about is their income after taxes.

Posted by Will McLean | April 16, 2008 9:38 PM

Here's some history. When I started practicing in the early 70's, billing was generally not on an hourly basis. Instead, the lawyer (this was at a large NY firm) in charge would decide what the services were worth and would bill it. The courts had worked out a variety of factors you could take into account, e.g., the experience and skill of the attorneys who worked on the matter, the difficulty of the results obtained, the value to the client of the results, the hours worked, and several other similar factors.

Then in the mid to late 70's corporate clients rebelled. The charge was led by Carl Liggio, a former associate at the White & Case law firm who left to become general counsel at the accounting firm of Arthur Young. He and other in-house lawyers began a movement to "objectify" billing, and began insisting on hourly billing and, in many cases, budgeting.

That is the main reason we have such pervasive hourly billing today. For many centuries before, lawyers based their bills on their view of value delivered.

Posted by johnF | April 16, 2008 10:48 PM

White shoe lawyers used to work much less hard than laborers.

Do we actually know this?

Anyway, I have an explanation: in 1850 a lawyer was working by candle or gaslight, had no phone or other means of communication other than mail, and just couldn't do hours of work after dark without serious eye strain. This established a default work limit that stayed for generations.

Once it was technically possible to work hard at paperwork after dark (about 1900) it still took ages for the "way we do things" to change. Probably until the guys who started in the gaslight era retired. And that takes you through to the 1950s.

Posted by doctorpat | April 17, 2008 1:40 AM

johnF: Thanks. That's very interesting.

Posted by jult52 | April 17, 2008 8:35 AM

What I don't understand is why law firms that would pay one person $200k (including benefits) to work for 80 hours a week can't pay two people $100k (including benefits for both) to work 40 hours each. There's some loss involved in having two people coordinate the work, but I doubt it would be more than the loss of focus and productivity seen when one person is simply exhausted.

Many people (not just women) would be happy to work for a total compensation package of $100k, especially if they knew they could maintain control of their time outside work. And many more would like the more intense schedule at some points in life, but the less demanding one at other points. Making it easy to move back and forth would help firms retain talent.

Posted by M.C. | April 17, 2008 9:03 AM

Since only a limited number of people can actually be good lawyers, the demand for their services (and hence the price, and via the income effect, their hours worked) rises.

I think Rob hit it well on this one. There's a similar effect in the Computer/Tech industry - see Google or read stuff from Joel Spolsky.

Basically, there's only so many great lawyers out there, and doubling their pay doesn't suddenly double the supply. So when everyone is competing for the limited supply, if you have hired a great lawyer, it is more efficient to force more work out of him/her (even if this means tripling salary, or offering huge perks) than to hire a second great lawyer.

I believe there's a similar effect with doctors - you can't just decide to cut your ER doctors' pay by 30%, give them reasonable hours and shifts, and hire 30% more doctors. There's only so many good doctors out there to hire.

Posted by Geoff | April 17, 2008 9:55 AM

"What I don't understand is why law firms that would pay one person $200k (including benefits) to work for 80 hours a week can't pay two people $100k (including benefits for both) to work 40 hours each. There's some loss involved in having two people coordinate the work, but I doubt it would be more than the loss of focus and productivity seen when one person is simply exhausted."

You actually don't understand law firms. The law firms are really run by a relatively few equity partners who typically have a five year horizon. They are trying to make as much money as possible in the next five years before their client book goes "poof" or they retire, get pushed out, etc.

If you are in a final 5 year dash after 20 years of slogging it out, do you care if you burn out some young associate? Do you care if you leave the firm in better stead than when you came there? Not if you are a baby boomer with alimony and a kid at Swarthmore you don't.

Occasionally some firm managing partner makes some noise about attrition among the ranks, and how that costs too much. Don't bother listening to it. Watch what they do, not what they say.

Posted by Spartee | April 17, 2008 10:44 AM

You may not care if you burn out an associate under most conditions, but what if the only one who knows your work decides to bail in the middle? Even five years is a fairly long time, and my understanding is that law firm attrition goes faster than that.

Maybe it's just that the people who make partner in the current system all have a certain personality that prevents them from thinking the problem through systematically. It may be the same personality that gets them saddled with alimony in the first place.

Posted by M.C. | April 17, 2008 10:58 AM

There are a variety of reasons why law firms don't offer half the work for half the pay.

Perhaps most importantly, they have adapted to the current way of doing things, and it works well enough. Profits are going up. So they don't face dramatic pressure to do things differently. This dramatically strengthens the "that's not how we do things" inertia.

Second, new hires don't respond to those incentives. Lots of people say they'd be happy to work fewer hours for less money. At law school job fairs though, there's a line out the door to interview at the highest paying, hardest workings firms... and the less work/lower pay firms have a much tougher time attracting people.

Third, the nature of the work is that it sometimes involves long hours. Many kinds of transactional work have to be done on short timelines. That sometimes means working 40 hours straight, or 100 hours a week. Working 9-5 is difficult with the demands of the clients, because leaving at 5 is often leaving literally right in the middle of the job. Litigation sometimes involves similar time pressure.

Fourth, and perhaps the thing that should make us most pessimistic about this changing any time soon... work that can be done effectively on a 9-5 schedule is often the kind of work that corporate clients can do more cheaply with in house counsel. Corporate counsel staffs have been growing, and it's that work that can be planned and staffed on a long term, predictable hour basis that they tend to do internally. Stuff that can't be predicted like that tends to go to law firms.

Posted by MichaelB | April 17, 2008 11:50 AM

Lawyers just out of school are exactly the ones who would want to work the long hours. Then they hit their thirties, have their kids, and perhaps develop other priorities. Until the kids start applying to Swarthmore, of course, in which case the parents are likely to go looking for extra income.

Retention is about flexibility over the lifespan, which includes a lot of different phases. Especially for women.

Out of curiosity, what percentage of female lawyers in their 30s and 40s seek out these in-house jobs with predictable hours? I bet the number is pretty high.

Posted by M.C. | April 17, 2008 12:06 PM

Doctorpat: "'White shoe lawyers used to work much less hard than laborers.'

Do we actually know this?"

Annecdotally, a lot of former lawyers I know who did top-firm work before the 1980s but got out think we are all lying when we tell them what current billables are. (Lawyers of that vintage still in big firm practice tend to warn their children not to go to law school.)

One former Cravath lawyer I know insists that, when he was there (circa 1970), everyone complained about the work but went home around 6 and billed around 1300-1400 hours per year. (For those not familiar with large firm billing practices, one generally works somewhere in the neighborhood of 30% more hours than one bills (non-billable work being stuff like pro bono, billing and other administrative tasks, supervising junior people (including fixing their training-related screw ups), client pitches, article writing, recruiting, continuing legal education, client schmoozing, etc.), so that works out to a fairly normal 40 hour/week schedule.) He firmly believes that this is still the case.

Meanwhile, when I was job hunting during the early-mid '90s, I spoke to a number of former Cravath associates who maintained that billing close to 3000 hours per year was not uncommon - and in fact, they said they felt billing pressure if they were only at the 2500 mark. Now it's even worse - a few people at my "lifestyle" firm (and, comparatively speaking, it is) bill close to 3000 per year, and the average is around 2000, so God knows what average billables are at places like Cravath, Skadden or Wachtell, which are not known for being kinder & gentler places to work.

I also agree with Rob that there is not a lot of padding going on - the amazing invisible hand squashes that sort of inefficiency out of the system.

M.C. may have a point as well: the law is sort of a tournament business - not on the scale of professional sports or rock stardom (or drug gangs), but very few lawyers will every make partner at a firm with profits per partner in the 7-figure range, or even associate at a firm paying $160K starting salaries. It takes a certain personality to achieve that - and that personality generally does not protect and nurture underlings. However, increasingly, the truly smart baby lawyers figure out pretty quickly that they can do something else with themselves that is (i) more enjoyable, (ii) less abusive and/or (iii) likely to make them more money. Certainly the people who stick around to make partner (or not) are excellent lawyers - but a lot of people who would have been just as good or better, and brought more enterprenurial drive (and humaneness) to the business clear out early on because, frankly, being a big-firm lawyer kind of sucks.

Posted by Kathryn | April 17, 2008 12:25 PM

M.C. -

The National Association for Law Placement (NALP) keeps some statistics on turnover. I don't have a cite, but I believe the current number is 80% attrition over 5 years for NALP firms. NALP firms basically means all the large and medium sized firms in the US.

That 80% goes a lot of places, some to other firms, some to in house, government, public interest, non-legal jobs, leaves to raise a family, etc. Women tend to leave law firms at a much higher rate then men. They've been about equal proportions of law school classes and large firm hires for many years, but they leave in much higher numbers then men. Many students have that as an explicit plan - go to law school, borrow a lot of money to pay for it, work at a firm for a few years, and then quite.

My point certainly isn't that the current model is ideal, only that there are some economic forces that provide strong incentives to keep things the way they are.

Posted by MichaelB | April 17, 2008 12:39 PM

M.C.: "Out of curiosity, what percentage of female lawyers in their 30s and 40s seek out these in-house jobs with predictable hours? I bet the number is pretty high."

High enough that it has become a sterotype.

At my firm, in my department, I am the only remaining woman who isn't a junior associate or partner, and no female associates have been made partner for at least 15 years (though a couple laterals have come in, and a number of women have been made partner in departments where the hours are more predictable). We've had more women than men in incoming associate classes as long as I have been here (more than a decade). That's an attrition rate in the very high 90s for women after 3 or 4 years, and I'd say nearly 1/2 of those went in-house (as opposed to other firms or just quitting entirely). Total surprise was openly expressed when I returned to work full time after I had my first kid. And my firm is reputed to be a good place for women to work and advance, which, for a law firm, I agree it is.

That said, in-house isn't exactly the 9-5 job it is advertised to be, either - what is, anymore?

Posted by M&A Mommy | April 17, 2008 1:04 PM

For those wondering about the efficiency of one worker for 80 hrs a week making $200,000 and two workers at 40 hrs a week making $100,000 the efficiencies are not even close to comparable. They may look reasonably close if you look at take home pay for the workers, but they are far from close if you look at cost of employment for the employer. The pay to employees in these two cases is the same $200,000. But the employer must also shoulder the cost of health insurance, 401k matches, expenses, stock programs, company cars, payroll taxes, etc. Let us suppose that these average $65,000 per worker per year. Our comparison now is $265,000 for one 80 hr a week workaholic, or $330,000 for two non workaholics at 40 hrs a week each. Factor in the inefficiencies of having two people communicate instead of 1 guy who knows it all, and it's a no brainer for employers to try and find the workaholic. He probably doesn't take vacations either, so is even cheaper to employ than the #'s suggest.

Posted by Eric Gagen | April 17, 2008 1:39 PM

My scenario assumed that benefits were included in the total compensation. Maybe the numbers should have been higher for the law firm case -- $250 salary plus bennies for one person vs. the exact same amount divided over two people (who might get either lower benefits or less than half the take-home pay). That part of it is easy enough to structure.

I'm only interested in the other part -- difficulties of coordinating two workers vs. difficulties inherent in having one person who is too tired and stretched to work at full capacity over the next increment of time. People do get less productive past a certain point, and I have to say I've seen some serious garbage emerge from a few of these law firms. Sleeplessness shows, as anyone who ever pulled an all-nighter in school discovered upon reading the paper that came out of it. But that's hard to quantify, I suppose, and so it doesn't get counted.

The other main cost to the current system is attrition, as previously noted. What does the firm lose by spending several years training someone who burns out fast and quits?

Posted by M.C. | April 17, 2008 2:25 PM

M.C. The problem with the assumption that including benefits is that benefits are often a fixed or nearly fixed amount on a per employee basis regardless of how many hours each employee works. Most workers will not accept (and most firms will not offer) widely diverging benefit packages to employees with similer jobs. In the case of lower paid workers, the general rule of thumb is that there is $1 for benefits for every $1 of salary. For higher paid workers this rule tends to diverge to variable salary amounts and fixed benefits. Most people get raises for good performance or promotions - not an improved benefits package. Thus I stand by what I stated before - it will be very difficult to the point of impossibility to get two people to each perform 1/2 as much work as one person for the same amount of money. This is a general rule in any business/industry where the employees get reasonably good benefits. For example, the company I work for pays employees four ways - salary for office workers, salary and a daily bonus for field workers, salary and a % of sales bonus for salespeople and hourly pay for 'shop' workers. All employees partake of the same 401K package, profit sharing package, health care options, etc. so the benefit cost per employee is more or less a fixed #. The variable # depends entirely on how much work each employee does. Less work per employee would make them more expensive, so all the perks and improvements in status are tied to getting more work done per employee.

Posted by Eric Gagen | April 17, 2008 4:40 PM

I got cut off before I could finish. Attrition is probably a huge issue for the long term performance of law firms. I used to work for a company that had a similar work/life balance to what seems to be the norm for law work. They also had problems with attrition (one reason I don't work there any more myself) but it was simply seen as a necessary part of the cost of doing business. Nobody even tried to analyze or quantify the cost of constant turnover of highly skilled people who recieved considerable training at company expense. The company I work for now operates completely the opposite - there is plenty of work but no slavedrive culture of deprivation, and pay is at the top of the norms for various job types to encourage people to stay with the company. In general I would say it's a much more succesful business model, and in particular the long term profitability of my current company is much higher.

Posted by Eric Gagen | April 17, 2008 4:49 PM

But surely a lot of benefits scale to salary. Social Security certainly does, but of course the law firm example would involve people who are ALL paying the max. 401k matches scale to what people contribute, which tends to be lower for people who make less. People who aren't high-flyers seldom get company cars. Two employees who work different hours may even double up in an office. And I don't know that law firms have profit-sharing as such for associates. The usual scheme is bonuses, which I assume would depend on the hours expectation covered by a person's base pay.

The main sticking point is likely to be health benefits, with lesser problems for company facilities like gyms and day-care centers. But the usual solution I've seen is to pro-rate the benefit to the percentage of a full-time schedule worked. Employees then make up the difference in cash, so this results in a slight decrease in take-home pay. Never heard of any problems from this scheme -- people know what they are signing up for.

It's kind of fake to have benefits on a separate track from other compensation, really. I'd like to see the distinction abolished over time so that all employees are paid in money and get to choose the goodies they want. We're past the barter system for almost everything else.

Posted by M.C. | April 17, 2008 5:26 PM

MC: law firms generally don't match 401k contributions for lawyers (though a fair number do for staff). I don't know the benefits side of things myself, but I'm told it has something to do with losing the tax benefits if your plan is used by highly paid employees a lot more than regular ones - a significant problem when you have a large number of very highly paid employees with a lot of cash they'd just love to stash in a tax-advantaged account. I'm told that's also why some firms won't let attorneys contribute after-tax income at all. Though I don't know the reason (other than simple cheapness), I believe a lot of firms also have lawyers cover the vast majority of their own health care premiums, essentially subsidizing the firm covering more cost for lower paid staff, so I'm not sure doubling the health benefits would be as big an issue as one would assume. I've heard of a couple of firms with gyms (and a lot providing gym memberships), but I'm not yet aware of one providing free daycare for lawyers. If you are, please let me know where to forward my CV.

In any event, assuming you could get two people for, say, 75K/year to do the same job 40 hours per week each that that you'd pay one person 200K/year to do for 80 (or however it worked out), and that you could get any coordination sorted out (which probably wouldn't be a big issue, since lawyers, being knowledge workers, aren't fungible - you wouldn't really have the 2 doing 1 person's job, you'd just see different staffing patterns generally), I think the real problem would be selling it to clients.

First, you'd have the problem of clients' expectation of 24/7 availability - because, after all, both lawyers would still bill out at the normal rate, so the client wouldn't see any discount for limited access.

Second, there seems to be some visceral reaction to seeing more names on the bill - they assume that more people means more billings, even if they must know intellectually that it isn't so. Believe me, clients are aware of the diminishing returns on the work of someone at the end of a 16 hour (or 36 hour) day. But they demand it anyway. I see something similar (and even less rational) with clients not wanting to staff junior associates on things, even though they must know that means they are paying a senior associate $400-500/hour to, essentially, type, proofread and check that the paralegals aren't goofing off.

But don't get me started on weird billing guidelines that serve only to ensure matters are managed inefficiently and bills add up for navigating unnecessary administrative BS, I'll never stop.

Posted by Kathryn | April 17, 2008 6:46 PM

Wouldn't two lawyers be able to cover MORE hours between them? They wouldn't necessarily have to work the same shifts.

Posted by M.C. | April 18, 2008 10:06 AM

I think the problem is that the two lawyers would probably be covering the same (business) hours between them. Otherwise (i) you've got to pay one of them a premium for taking the graveyard shift, leaving still less than half-minus-benefits of standard take-home pay for the lawyer working a "normal" 40 hour work week during business hours, or (ii) you're back to the same problem of hours inflation due to being on-call all the time, but not getting paid for it (which, incidentally, is why part time schedules don't often seem to work for lawyers - you try to leave but just get calls at home at all hours, and then you're billing nearly the same time but sucking up a huge pay cut).

Right now, big-firm lawyers are basically on call 24/7. You can't cover more hours than that.

Posted by Kathryn | April 18, 2008 11:25 AM