What would a post-Covid19 employment market look like for law graduates of 2020/21? Lawyers who worked in the legal industry on Black Monday from 1997-98 and the 2008 GFC tell you what to expect. Will the past imprint itself on your future as a graduate lawyer?
On 8th of June New Zealand lifted all COVID restrictions declaring the country Covid19 free. On an international perspective, 35 million Americans have filed jobless claims (week ending 4th July 2020).[1] Australia and New Zealand's exports will continue to plunge due to the decrease in Chinese demand, which accounts for 25% of Australasia goods.[2] After four weeks of level 4 lockdown in May, local businesses upended, causing mass furloughs and cessations. A sizable economic meltdown is very probable, merely being a question of when.[3]
There is a preconception that people will always need lawyers, and the legal industry is ironclad, sturdy and foolproof in the event of a crisis. This assumption is only partially correct as some legal fields are ancillary towards commerce and the public sector, firms are usually pressured to downsize and freeze hiring due to a stagnant market. While the legal industry has yet to receive any significant setbacks as of this point, firms are still anticipating the aftermath of the virus from both international and domestic clients. It is a bleak time for us aspiring legal eagles to establish a foundation for our careers. To better prepare ourselves, we talk to folks that have lived through those times, a time where businesses could not afford legal representation despite having tens of thousands of unemployed lawyers on the streets.
Black Monday, 19th October 1987, the mother of all crashes
It was the era of 'yuppies', a term used to describe young people with well-paid jobs, living in the middle and upper echelons of society. High profile Mergers & Acquisitions and merchant banking work was the gold standard of a law career progression in the 1980s. Young lawyers graduating from the Ivy Leagues are eager to enter into the opulent sphere, to be drinking champagne that cost thousands with senior bankers and lawyers.
However, the party had to come to an end. On 19th October 1987, the Dow Jones dropped by 508 points, the most significant drop in the history of the index.[4] The Australian All Ords dropped by 25%, the largest in its history as well.[5] New Zealand suffered in particular, losing 60% of its market cap by February 1988.
The financial crises that happened in 1997 and 2008 were inflexion points for the legal industry. Law firms implemented significant law reform to aid impaired banking systems in Australasia. People were hesitant to approach the stock market, and commercial dealings became much more conservative. A decrease in industrial activity will always lead to a reduction in demand for legal work.
Booms are temporary, and hard times persists (1997 Asian Financial Crisis)
Ms L. was a young lawyer in Malaysia when the Asian Financial Crisis happened. She was a media lawyer working for a national T.V. station when Malaysian Ringgit lost half of its value in 1998. There were no increments on promotions, and companywide retrenchments were the norm. She recalled the harrowing experience as playing Russian roulette on a large scale, knowing that half of the 25 colleagues at lunch would be retrenched kept her on the edge of her seat. There was an instant where she went to court, pregnant with her first child, just to pay court fines with her own money to bail her boss.
She has a valuable piece of advice for budding legal bambinos, which is to establish yourself as an asset to your firm. Looking back, she once had to strap up her business boots as a rookie lawyer, directly negotiating against entertainment titans for ad hoc broadcasting rights. To be calm and composed and be able to think out of the box when times are going nonlinear, is an invaluable skill to hone.
Before the crisis happened, Asia's markets were bullish on an unstoppable boom. Australia was riding on the wave, having several investment funds investing in Asia and has been very welcoming for Asian companies to join the Australian Stock market.[6] New Zealand was enjoying a sharp rise in immigration and a recovery on household incomes.[7] But as usual, the fun had to come to an end when the Thailand government copped a plea to the IMF to keep the Baht afloat. To fan the flames of a global recession, the Russian government had defaulted on their domestic and external debt, which further caused the global financial confidence to plummet.
While New Zealand had severe setbacks from the 1997 crisis, they were having their fair share of troubles with an agricultural drought brought by El Niño events. Mr K and Mr L established their Law firm in Auckland New Zealand, 1995. Their firm was one of the premier firms that catered to Auckland's growing Asian population. When the crisis struck, a lot of their clients faced troubles, but their firm was well-prepared. They were able to provide quick services to their clients.
It is crucial to adopt a business acumen to be able to contribute to your firm when its sustainability is under threat. A lot of firms are looking towards the idea of being alternative legal service providers (ALSP). ALSP is a niche type of provider that abandons the hourly billing model and the role of being the single point of contact for all legal problems. Instead, they solely focus on providing services such as electronic discovery or I.P. management that most law firms regard as too expensive or too time-consuming to do in-house. Some law firms even contract out services to ASLP firms for the sake of efficiency and not having to bill an attorney. ALSP is not a new phenomenon, with companies such as Axiom and Lexis Nexis with annual profit in the hundreds of millions.
Back on my feet because the bank took my car (2008 Financial Crisis)
The financial crisis happened in a time where most of us are still children, but the older readers remember when the Lehman Brothers filed for chapter 11 bankruptcy. Australasia was rather unaffected, with the only impact of declining equity prices, with a mild 10% decrease in household income.[8]
In many countries, a training contract is an apprenticeship fresh law grad apply during or after their legal practice course. Depending on the country you are from, the training can last from 6 months to up to 2 years. The average probability of getting permanent employment right after a training contract rests at approximately 95% pre-2008. The already competitive process that was further exacerbated by the recession. In 2008/09, the probability of getting a permanent role after the training period was at a ghastly 60%.
At this time, Mr M had just moved to Europe to work at BigLaw, at a magic circle firm. A decade later he started his firm in New Zealand, and we get his take as the founder of a law firm. He states that grades are essential tenfold in times of recessions because of the shrinking job market; employers are compelled only to hire the crème de la crème. Certain practices in law will always be recession-proof such as insolvency, restructuring & redundancy and medical. So it is good to be flexible and take up one of those potentially lifesaving fields.
Here we go again (Possible future recessions 2020)
In contrast to past crises, this one would likely happen because of the stunt it capital markets instead of collapsing financial pillars. By now many of us are already very pessimistic about this catch-22 situation while we are getting our degrees soon in mail or PDF form. But we have made it and should be proud of ourselves. Sure, some of us will stray off our perceived career aspirations, but borrowing a quote from my favourite writer:
"It is our failure to become our perceived ideal that ultimately defines us and makes us unique. It's not easy, but if you accept your misfortune and handle it right, your perceived failure can become a catalyst for profound reinvention".
By Terry Ang
Sources
Unemployment weekly claims U.S. Department of Labor
Carlson, Mark A. (2007). A Brief History of the 1987 Stock Market Crash with a Discussion of the Federal Reserve Response (PDF) (Technical report). Finance and Economics Discussion Series. Washington, D.C.: Federal Reserve Board. 13.
Hunt, Chris (2009). "Banking crises in New Zealand–an historical perspective" (PDF). Reserve Bank of New Zealand Bulletin. 72 (4): 26–41.
Lindsey, Richard R.; Pecora, Anthony P. (1998). "Ten years after: Regulatory developments in the securities markets since the 1987 market break" (PDF). In Stoll, Hans R. (ed.). Stock Market Policy Since the 1987 Crash: A Special Issue of the Journal of Financial Services Research. Boston, MA: Springer Science & Business Media. pp. 101–132.
Fordham Law Review Volume 57 Issue 2 Article 2 1988 The Crash of 1987: A Legal and Public Policy Analysis Lewis D. Solomon Howard B. Dicker
David Richardson, Asian Financial Crisis, Current Issues Brief https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9798/98cib23
[1]Beehive N.Z., Some perspectives on past recessions, Bulletin Volume 71 No 2
[2] https://statisticsnz.shinyapps.io/trade_dashboard/ https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook44p/china
[3] Finance Minister Grand Robertson on Stuff https://www.stuff.co.nz/business/industries/119844953/finance-minister-lays-out-three-possible-coronavirus-scenarios-including-worst-case-pandemic?rm=a
[4] United States Presidential Task Force on Market Mechanisms; Brady, Nicholas F. (1988). Report of the presidential task force on market mechanisms (Technical report). U.S. Government Printing Office.
[5] Hunt, Chris (2009). "Banking crises in New Zealand–an historical perspective" (PDF). Reserve Bank of New Zealand Bulletin. 72 (4): 26–41.
[6] David Richardson, Asian Financial Crisis, Current Issues Brief https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9798/98cib23
[7] Beehive N.Z., Some perspectives on past recessions, Bulletin Volume 71 No 2
[8] Australian Bureau of Statistics
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