Job Security Is Not Coming Back
Shed a single tear, if you haven’t gone entirely dry, for America’s beleaguered, struggling, and anxiety-ridden law-firm partners.
Sara Randazzo, writing in the Wall Street Journal, chronicles the lamentations of the lawyers: “Being named a partner once meant joining a band of lawyers who jointly tended to longtime clients and took home comfortable, and roughly equal, paychecks. Job security was virtually guaranteed and partners rarely jumped ship. That model, and the culture that grew up around it, is all but dead. Law firms are now often partnerships in name only.” Equity-owning partners still share in the profits of the firm, but the second-class “partners” — nominal partners — are unpropertied salarymen, taking home a mere few hundred thousand dollars a year or so in comparison to the millions paid out to the real partners.
You can practically hear that awful Sarah McLachlan song wailing in the background, and one begins to glance around for Sally Struthers. I’ll give you a second to regain your composure.
Law firms are not what they used to be. The markets in which they play have become more competitive and more efficient, and in many cases firms have grown more specialized. The days of long lunches and 3 p.m. tee times are long gone. That is true of many high-paying occupations whose practitioners once enjoyed remarkably leisurely work days. From Wall Street to the grocery business, the high-earning high-flyers are increasingly expected to keep up with the frantic pace of a Silicon Valley startup. It’s not that there are no easy jobs left — it’s just that you don’t really want one of them.
As Randazzo reports, the newly demanding and data-driven model of the law firm has changed the culture of the business entirely. “Full-time chief executives, some without law degrees, have replaced the senior partner running human resources and accounting,” she writes. “Law firm names have trended toward the shorter and snappier, more befitting a tote bag than a law library.” No more Dewey, Cheatham, & Howe.
These are frantic times. In the early 1960s, the average “life expectancy” of a corporation on the Fortune 500 was a little over 75 years; today, it is about 15 years — and falling. Many of our fathers and grandfathers worked for one or two companies over the whole of their working lives; the Bureau of Labor Statistics expects that today’s workers will have about 15 different employers over the course of a career — and ten different ones before age 40. Americans as a whole do not move as often for work today as they did a generation ago, but high-earning workers move relatively frequently and change employers more frequently than do lower-earning workers.
It may be time to update “The Nature of the Firm.”
That’s the name of the famous paper by Nobel laureate Ronald Coase, who, like a lot of geniuses, found himself obsessed by a question so obvious that nobody had ever thought about it: “Why do corporations exist at all?” Most businesses, he noted, have both employees and outside contractors. But if markets are efficient, why have full-time employees at all, when it is inevitable that a business ends up paying them for times when they are doing no real work? Why not outsource everything? The answer he came up with was “transaction costs.” A transaction cost is the price you pay in time and trouble in addition to the financial cost of any given exchange. For example, if you want to hire a lawyer, you don’t just order one from Amazon Prime. You do some research, ask around about who is the best specialist in the particular area you need at the moment, maybe interview three or four firms. And you pay somebody to do that. The same thing for hiring a receptionist: You don’t just take the first person to wander in off the street, and once you’ve hired one, it takes time and effort to train him, to show him where everything is, to get him used to your office procedures, etc. Once you have one you can count on, you don’t want to go to market the next day to see if you can get a better deal. Coase argued that transaction costs make it more efficient for a business to have regular employees and to maintain the other features of an ongoing enterprise because the inefficiencies inherent in that are less costly than the transaction costs involved in bidding out everything.
But information technology and other innovations have lowered many transaction costs. Businesses that had once employed their own janitors and groundskeeping staff began outsourcing custodial and maintenance work, mostly to specialized firms that came into existence to meet that need. Many rote clerical and administrative positions were eliminated and those tasks jobbed out. In the 1980s, a region with twelve newspapers would probably have twelve printing presses, twelve press crews, twelve fully staffed composing rooms, etc. By the early 21st century, they were sending out their pages electronically to consolidated printing operations.
In manager-speak, businesses have increasingly pared down operations to their “core competencies.” Understood from the Coasean point of view, a firm is only a temporary partnership between and among certain kinds of capital and labor turned toward a common end. It lasts for exactly as long as that is the more efficient arrangement. (In theory.) When that no longer is the case, the business dissolves, is acquired, or changes in some fundamental way. The corporate name may survive, but the underlying enterprise is essentially a new and different thing. As the world grows more connected, and as both markets and supply chains grow ever more globally integrated, the lifespan of any particular arrangement of capital and labor grows shorter. That means that the intelligence and energy of the people who work there become more valuable in some other configuration more quickly and more frequently. Hence the job-hopping among the highly skilled and most in-demand workers.
(There are some exceptions to this rule: A few big technology firms such as Google and Facebook have in effect undergone a reverse corporate evolution, creating such gigantic streams of revenue from one core business that they can sustain all manner of sidelines and experiments without thinking too hard about the near-term profitability.)
As I argue in The Smallest Minority, the thing that we call for lack of a better word “globalization” has helped to make us the richest, healthiest, longest-lived, best-provided-for people in the history of the human race. But like the early stirrings of primordial capitalism at the end of the Middle Ages, the developments that have made us richer and better off have also upset longstanding social arrangements and put longstanding status relationships up for renegotiation. Americans were a heck of a lot friendlier to China and India when those countries were starving. The Brits liked the Poles a lot better when they were languishing under Communism than now, when they are fixing British plumbing.
Here is a thought experiment for you: What percentage of your current income would you give up in exchange for an irrevocable guarantee that your new salary would never go down? Do the math and you’ll have some idea of what “job security” is really worth to you.
But some things money can’t buy, and the idea of job security increasingly is a thing of the past. Many highly skilled and high-earning workers are perfectly happy with that: They get to move on to something new and challenging more frequently, and they generally earn more in each new position than in the last one. Life is good at the top. It usually is.
But not everybody is an entrepreneur, a dealmaker, or a mercenary tech geek happy to fly from one gig to the next. Many people would prefer a greater degree of predictability in their lives. For them, the thought of having to look for a new job is a nail-chewing, can’t-sleep-at-night proposition, not an occasion for daydreaming and excitement. They are not thinking to themselves, “I wonder what kind of apartment I’ll have in Abu Dhabi.” They are thinking, “How am I going to pay the mortgage?”
The Tucker Carlson school of anti-capitalism gets this much right: An economy that rewards geographic mobility, professional flexibility, and financial risk-taking brings unintended social consequences with it, from undermining local relationships and civil society to encouraging norms of delayed marriage and parenthood. There is some reason to believe that these fall most heavily on economically middling males: They have neither the income and social status associated with high-flying careers nor the comforts of deep community ties nor those of being a husband and father. Even church congregations have a different character in communities in which people relocate constantly. Even those who claw their way up through the elite educational institutions into a partnership at a big law firm do not get the deal they might have been hoping for. (But that $800,000 a year isn’t too bad.) Those without that option may feel stuck, hopeless, and — perhaps worst of all — useless. Many of the traditional distinguishing male virtues such as physical strength and courage are passé from the point of view of the 21st century economy.
(Nobody needs those virtues — until they do.)
But information technology is not going away. Markets are probably going to continue to grow more integrated, more efficient, and more competitive. The quest for returns is not going to be brought to a halt by the desire for predictability. Partly that is a matter of pure economics, but partly it is also a result of the fact that policy decisions are dominated by the people who are most comfortable with a more entrepreneurial and less predictable model of work. That is a big part of what has populists of the Left and Right riled up at the moment, even though many of them cannot quite articulate their complaint. The critics have a point, but what they do not have is an alternative, at least one they are willing to publicly defend. (The actual alternative, which dare not speak its name, is: relatively predictable stagnation.) The Left demands a bigger and more generous welfare state in the mistaken belief that we can socially engineer and redistribute our way out of this particular pickle, while the populist Right has embraced a daffy form of neo-mercantilism in the mistaken belief that the fundamental problem is Americans’ feckless victimization at the hands of the scheming Chinese or job-stealing immigrants. Populists Left and Right implicitly share the belief that what’s really ailing us is a deficit of cleverness in Washington, even as they rail against the clever people in Washington as conspirators against the public interest. But there’s plenty of cleverness in Washington — a surplus of the stuff, in fact.
The great songwriter Steve Earle, who involves himself in a lot of silly left-wing political activism, says that he is a “romantic,” that he is interested in “the way the world should be, not the way the world is.” That is a lovely and poetical sentiment, and, like most poetical sentiments, it offers a good reminder of why it is better that we are not governed by poets. Our policymakers must deal with the world as it is, and our schools and families should prepare children for the world as it is, not as we might wish it were. Imagination and creativity are necessarily to human flourishing, but neither of those excuses a mulish refusal to consider and deal with the world as we actually find it. And if a poetical cast of mind is no license for such a refusal, how much less an excuse is patriotism, “nationalism,” the desire for “economic justice,” or an unalterable commitment to one’s own particular corner of Oklahoma or Kentucky?
“Idealism is fine,” a wise man once said, “but as it approaches reality, the costs become prohibitive.”
