Parsing Unemployment

By Megan McArdle

A Big Firm lawyer friend passes on this Thomas Friedman column, and some well-aimed bile:

Friedman writes: "A Washington lawyer friend recently told me about layoffs at his firm. I asked him who was getting axed. He said it was interesting: lawyers who were used to just showing up and having work handed to them were the first to go because with the bursting of the credit bubble, that flow of work just isn't there. But those who have the ability to imagine new services, new opportunities and new ways to recruit work were being retained. They are the new untouchables."

Having had the great good fortune of

(a) being at a firm which did several rounds of layoffs
(b) taking a (very) small part in discussions leading to the designation of some of those who got laid off, and
(c) surviving said rounds of layoffs myself and winding up in a good situation so far

I can vouch for the fact that what Friedman's friend said (and I don't doubt that he said it; as I have heard others say the same) is almost certainly a mixture of truth and SHEER [censored] UNMITIGATED [expletive deleted]. Specifically, the type of SHEER [censored] UNMITIGATED [expletive deleted] that certain senior people who must decide to lay people off - which is a horrible, horrible task - say to make themselves feel better (and not coincidentally, blame the laid-off)

It is SHEER [censored] UNMITIGATED [expletive deleted] on two levels, which you can see from the main categories of those who have been laid off:

1) Most big firms who have had to lay off scads of lawyers have concentrated those layoffs amongst two categories: first, the most junior attorneys - i.e., those who cost a lot of $$ and haven't yet gotten enough experience to make themselves useful (plus, because of the pyramid structure on which big law firms are organized, they are the most numerous group of non-partner attorneys at any one time)

While most firms would of course try to not lay off the better performers at the most junior levels, it is very difficult to distinguish the more junior you get - especially when most have them have had very little work to demonstrate their abilities, and learn enough for the future.  So saying that those attorneys just sat at their desks and waited for work to be handed to them is pretty unfair as a general matter.

(For what it's worth, at the internal deliberations I took part in at [firm name removed], the partners were pretty honest that they were probably going to end up firing plenty of people who would have been just fine if there had been any work for them) Friedman's friend's maxim becomes more true about attorneys who were more senior - plenty of whom have lost their jobs as well -- but this leads to the second level of SFUB . . .

2) Hello, structural changes in the economy? Ever heard of 'em? If you devoted your life to, say, mortgage-backed securitizations (or tech IPOs back in the Internet bubble), you may be the most flexible, creative guy in the world, but your chances just went way down due to circumstances beyond your control (unless you're going to blame the lawyers for crashing the economy - I haven't heard that yet).

Not coincidentally, the second category of lawyers who have been laid off en masse by big firms have been concentrated in those sectors hardest hit by the credit crisis. Sure, plenty of securitization lawyers have been able to retool, but they're swimming against a very strong tide.

Sorry for the rant, but I have heard too much SFUB from BigLaw ever since the credit crisis hit. Though some minority of the people who were laid off undoubtedly deserved it, I don't want to fall into the trap of blaming all the people who had to lose their jobs to justify my own privileged position (not to mention "talking your book" to clients - much of the SFUB comes from firms' reluctance to admit that layoffs are being driven by the parlous state of their own finances ).

Of course, I don't want to deny that there is truth to what Friedman's friend said; that flexibility is more important than ever before in this economy--though you think our schools can impart that? Our schools which have sucked wind for 40+ years? Good luck on that one!

But to posit that as the dividing line between those who have lost their jobs and those who have not? That's serious arrogance. [exhale] As you were

This is worth exploring as a reason for the resistance to making unemployment benefits more generous in time of recession.  When the economy is at full employment, the people who get laid off tend to be either people who have been turfed out of their firm either because they are in a dying firm/industry, or because they were bad fits for their jobs.  (I'm not denying the existence of unjust firings, but they're not a huge proportion of the overall unemployment rate, especially when tight labor markets make it difficult to find replacements.)  So generous unemployment benefits do significantly raise the unemployment rate, because they encourage people in dying sectors to look around for something close to what they used to do, rather than moving on.

But I've heard any number of conservative economic types claiming that this is a problem with Obama's current unemployment benefit boosts, and that strikes me as profoundly unlikely.  When the unemployment rate is up around the 10% line, the problem is not people waiting around for perfection; it's that there aren't any jobs for them to take.  Increasing peoples' incentive to take a job offer will not do anything to increase the number of job offers; at best, you're just shuffling the unemployment around some.  Indeed, at a time when aggregate demand has collapsed, more generous unemployment benefits could plausibly make the unemployment rate lower.

There's something in us that needs to believe that awful things must happen for a reason.  And in some cosmic sense, they do--there are no uncaused causes running around the universe.  But that doesn't mean that the reason they happened is that the person they happened to did something to deserve it.

This article available online at:

http://www.theatlantic.com/business/archive/2009/10/parsing-unemployment/28827/