That system simply is not tenable in a tighter legal market, Nanda said.

In the past, associates have climbed the pay-scale in lock-step with their recruiting class at set intervals. Associates are guaranteed job advancement and firms faced steadily escalating costs in the absence of a system that incentivizes high performance. According to Wilkins, a competency-based system would force associates to meet bench-marks before gaining a promotion.

Reforming this system poses a typical adversarial cooperation problem for firms who fear that other firms might cheat the system by keeping the old methods in place and attracting the best recruits with a cushy compensation system. But Wilkins said that the financial crisis has placed sufficient pressure on the legal industry to make cooperative reform possible.

“Some types of financial transactional work in structured financial products which required high leverages—that work has gone away and for a long period of time,” said Nanda.

Much of that transactional work had been the responsibility of summer associates and entry level associates. But now firms are reducing the overall number of summer associates and are placing greater demands on the few that they do hire, said Brian T. Aune, a third year student who has spent the last two summers working at Sheppard Mullin Richter & Hampton.

If the financial sector returns to its previous size, law firms may recover some of the positions lost to a decrease in transactional work, but that is unlikely to occur in the near future, Nanda said.

Nanda and Wilkins both say that associates can expect that much of their bread and butter work will be outsourced in the future, potentially decreasing demand for associates.

“There are alternate of forms of delivery for that type of work,” Nanda said. “Discovery and other large volume work will likely go to India and the Philippines.”

According to Wilkins, the bottom line is this: associates can expect to see lower entry-level salaries.

“Some of my students might not appreciate this, but I think it’s a good thing,” he said with a laugh.

—Staff writer Elias J. Groll can be reached at egroll@fas.harvard.edu.