The Bankruptcy Decision

by Reihan Salam

Noam Scheiber describes the decline of “Big Law,” primarily through the lens of the recent history of Mayer Brown, a Chicago-based law firm that has gone through a tumultuous half-decade. Several of his stories are very revealing, including the following:

In May, I spoke to a former Mayer Brown associate who joined the firm’s finance group out of law school in 2001 before transferring to the pensions department so she could work saner hours. The associate, call her Helen (not her real name), survived two rounds of layoffs, then got pregnant in 2009. Helen had previously felt she was on track to make partner—her performance reviews were consistently strong—but she began to worry as she was preparing to go on maternity leave. “We would have these group meetings where we’d talk about billable hours, how down they were for our group. I knew that, if there was another layoff, we were going to be hit.”

Helen’s son was born on March 19, 2010. Just before he turned three weeks old, she received the call she’d been dreading. Mayer Brown gave her the rest of her maternity leave, plus another three months pay as severance. It was, under most circumstances, a fair offer. But Helen was in a bind. Her husband was a stay-at-home dad, and the couple owned a condominium in downtown Chicago. “I sent out a ridiculous number of resumés,” she says. “If I didn’t have a job lined up by time the time the severance ended, I didn’t have a way to make payments on my house.” She landed two or three interviews and no offers. “The market was so bad in the spring of 2010. Not a single law firm was hiring.”

Inevitably, the bank foreclosed on her condo. She and her husband relocated to the Michigan town where he grew up, and she eventually joined a local firm. Her annual salary when she left Mayer Brown was $230,000. Last year she made $40,000. It was barely enough to put food on the table and clothe her children, much less keep up with tens of thousands of dollars in law school debt. “There’s probably a bankruptcy in our future. I don’t think there’s a way out of it,” Helen told me. “In ten years, hopefully we’ll be financially recovered, we can buy a house, have a credit card again.” Before we hung up, I pointed out that the legal market had improved since 2010. Why not look for another fancy job in Chicago? “There’s no way I would go back to Big Law,” she said. “I’m doing a lot of criminal law now. I love it. It’s originally what I’d intended to do when I went to law school.” 

Any life story is enormously complex, and because Noam’s article isn’t about Helen alone, it’s entirely fair that he’s left a number of questions about her life unanswered. But a few questions nevertheless come to mind when Noam invokes Helen’s dire state of affairs: is it strictly necessary that her husband remain a stay-at-home dad, particularly if Helen is struggling to put food on the table and clothe her children? And if the chief reason that Helen is contemplating bankruptcy is that she would prefer not to return to Big Law, it’s not obvious to me that her story is particularly compelling. Given that Helen has returned to her Michigan hometown, it could be that other factors are at play, e.g., aging parents in need of care, or aging parents who are available to provide childcare while Helen’s husband seeks employment, etc. But we’re left with a story of a skilled professional who experienced a negative income shock and who appears to have chosen not to take a number of straightforward steps that would help address her financial distress. Again, I have to assume that there is more to the story, but the story as it stands is a headscratcher. I have to assume that most Americans who turn to bankruptcy are in worse shape.

P.S. Noam Scheiber kindly fills in some of the details in a series of tweets, prompted by tweets by Dylan Matthews and Matt Bruenig:

talked to her at length, i don’t think there was a ton else going on. basic details are: (1/3)

husband had been out of labor force a while, didn’t have a lot of skills. and she bought more house (2/3)

than she could afford, anticipating future bonuses, pay increases, which clearly didn’t arrive. (3/3)

only other thing is that she always struggled w/work life bal. after losing job, just decided big law (1/2)

wasnt for her. i asked her at end if she’d go back. she said no way–realized for best lifestyle wise (2/2)

“Realized for best lifestyle wise” takes some of the sting out of the notion that many U.S. families really do struggle to put food on the table and to clothe their children. It is certainly not a crime to earn less than your potential income. But when Helen says, “I don’t think there’s a way out of it” when referencing a future bankruptcy, it’s a bit galling.

One other aspect of this story that struck me is that it is a reminder of why there is such a powerful trend towards assortative mating. Had Helen’s husband been in a position to earn even a modest income when she lost her job, her family would have been in far better shape. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.