‘the great associate salary spike’

Long but interesting article on the economics of law firms, why first-year associates in the top firms now make $160K per year, and what might be broken about this. (For comparison, once you count bonuses, this is more than the salary of Supreme Court Justices.) (See also.)

3 thoughts on “‘the great associate salary spike’”

  1. “Nice try, but it bears only the remotest connection to the way labor markets actually function. If they functioned the way the cost-plus crowd hypothesizes, I could afford my own Gulfstream V, Provence villa, and 5-bedroom penthouse with Central Park views: After all, I just increased my “costs,” so the workings of the market would appropriately subsidize me on the wage side, right?”

    Things such as ever-increasing law school debt are a prerequisite for entering the law profession. They’re not a “gulfstream jet” perk that you always fantasized about and just happened to incur. They’re an up-front expense that must be incurred to enter a given profession and (more importantly) must be paid back. It makes sense that as *law-school* debt rises, the expected entry-level *lawyer* salary rises similarly to offset the increased debt incurred. Or else people will decide that the $100k investment (not “cost”) in themselves isn’t worth it and become a garbageman instead, causing a relative scarcity of new lawyers. Which should drive up entry-level salaries even further. Free markets and all that.

  2. Yes and no; people take on that much debt from the elite schools in part because they know they can pay it off quickly if they are careful. The non-elite schools are less expensive. If the top firms were paying $70-$80K/year, the schools would have a lower cost- virtually no one in their right mind would take on another $150K in expenses after the $160K in college expenses in order to earn that kind of money.

    He’s also talking about a lot besides the education. The city-center rents and lifestyle have a lot to do with it too. Aside from buying a solid, appropriate work wardrobe, your expenses as a first-year associate don’t have to be high. You could live out of the city and commute; you could drink at bars in the suburbs where drinks cost $5 instead of $15 or $25. Many associates don’t choose these options, in large part because they know they get paid a shit-ton of money, and because the really aggressive ones know they can leave for other options- as he points out later in the article.

  3. He does mention other expenses, but his argument suffers for including school debt. Sure, an entry-level associate doesn’t *need* to live downtown in a penthouse or hob-nob in top-line bars (though doing so may help their career ambitions and upward mobility. I’ve lived next to a ritzy building with lots of entry level lawyers, and without fail they saw their address as an investment. It’s all about who you know and appearances, after all.).

    But a lawyer without fail requires a law-school education. My impression is that top-notch firms that pay big bucks prefer to hire folks from elite law schools. And elite law schools have an expectation that their students will go to work at top-notch firms that pay out big, and therefore they can get away with charging their students more. It’s a catch-22. The elite schools won’t start charging less until fewer students want to attend them. And that will only happen when top-notch firms start passing over elite-school grads en-masse. The salary spike starts at the top, not with the students.

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