Median U.S. lawyer income dropped over past two decades, economists find

(Reuters) - Lawyers are making less money today than they were in 2001 when accounting for inflation, a new study has found.

The median “real income” of U.S. lawyers fell nearly 2% from $129,389 in 2001 to $126,930 in 2020, according to a paper slated to appear in an upcoming edition of the Journal of Economics and Finance.

By contrast, the real income of all U.S. workers — which refers to an individual’s purchasing power — increased nearly 4% during that period. Median real income among family physicians grew 20%, while economists saw their median income grow nearly 11%, the study found.

The study relies on national lawyer earnings data from the U.S. Bureau of Labor Statistics and includes data on different sectors of the profession. Solo practitioners and those working in government and non-profit settings tend to make significantly less than lawyers at large firms that serve corporate clients.

Across sectors, lawyers' median real income peaked at $134,005 in 2010 and has gradually decline since, the data show.

Authors James Koch and Barbara Blake Gonzalez, who are on the faculty of Old Dominion University’s economics department, analyzed data ranging from lawyer pay and populations, to national spending on legal services, bar pass rates and paralegal ratios over the past two decades to better understand why real income among lawyers has stagnated while it has grown among other workers.

They concluded that the combination of an oversupply of lawyers and declining demand for lawyer’s services is driving the trend.

“Demand side influences on lawyers’ incomes loom large,” they wrote in the paper, titled, “Why has the median real income of lawyers been declining?”

Legal services constituted 0.58% of U.S. gross domestic product in 2001 and 0.28% in 2019, the authors found, meaning Americans are spending proportionally less on legal services now than they were two decades ago. They cited the automation of legal tasks, an increase in paralegals and a decline in litigiousness in some areas as all playing a role in declining demand for lawyers’ services. The number of lawsuits filed in federal courts has declined on both per capita and per lawyer bases since 2001, the paper said.

“The decline in payments to lawyers for their services that has occurred over the past 15 years has been substantial and by itself can account for a substantial portion of the decline in lawyers’ real median incomes,” it said.

Koch and Blake Gonzalez did not immediately respond for requests to be interviewed.

As demand for legal services has fallen, the number of lawyers per every 1,000 workers in the U.S. rose from 4.15 in 2001 to 4.4 in 2019, the researchers found. They noted law is slow to react to labor market changes in part because it can take four years or more between a person deciding to pursue law and when they can join the bar.

“The United States may have too many lawyers if the goal is to avoid further declines in lawyers’ real incomes,” the authors wrote.

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