Exhibit #4352: the great salary war of 2007. Recall that it was only a year or so ago that big New York firms pushed their first-year starting salaries from $125K to $145K. Now many are going up again, this time to $160K. This, in turn, will eventually pressure big firms in other cities to nudge up their starting salaries also.
As before, we might wonder how much of this is marketing hype as opposed to a real increase in associate pay. We also can't know whether billable hour requirements are also being yanked up (possible, though at many places they're already at the outer edge of human capacity.)
The precipitating factor for this round of salary increases seems to be the continuing trend of comical levels of attrition among associates at big law firms. If we pay them more, the reasoning seems to go, then they'll stick around.
Here's what makes it dumb. For many years, law students have taken the view that big firms were tolerable as a first job because the high salary made it easy to pay off law school debt. Once the debt was paid off, other career opportunities could be considered. Sure, some folks were committed to making partner, but clearly the big law firm model is not built around promoting as many people as possible. It's built on promoting as few as possible. But everyone knew this was the deal, and everyone was happy.
So you're a law firm. Assume you're not totally naive, and you understand the incentives that are in play. What will happen when you raise starting salaries?
Think about it for a second.
Which would be three times longer than any of these firms thought about it.
You're not making your big firm more attractive than other types of jobs (small firms, government, public interest) because you're already paying way more than any of them.
But you are helping the first-year associate pay down their law school debt faster. Since salaries are going up much faster than the cost of living, most of those increases can flow directly to the associate's bottom line.
So what you've done is shorten the timeline for the associate to pay back their debt and arrive at the point where they feel free to consider other career options.
Do you see where I'm going with this?
The result of salary hikes is not better associate retention. Instead, it's far more likely to reduce associate retention. By paying associates more, the big firm dilutes the economic leverage that's been key to keeping young associates under their thumb (a traditional ingredient of indentured labor).
And once you observe that, you might wonder: did the 2006 salary hike really reduce attrition? No, it went up after that. How about the 2005 salary hike? Nope, it went up after that one too. I think it's quite plausible that these rapid salary increases have been accelerating attrition, not reducing it.
This is great news for law students, for sure. But, let's keep the secret to ourselves, okay?
29 Jan 07
Always appreciate your anti-biglaw stance.
My solution to biglaw's attrition problem: less money, less hours. How about instead of giving one schmuck $160K to work 100 hours/week, you give two reasonable people who want to see their families $80K to work 50 hours/week? I think a lot of law students who go into places like the AG's office or small firms would give biglaw a second look.
I think you're right that it's all marketing hype. For my classmates that are 24 years old and who have never had a real salary, how do they know the difference between $100K, $125K, $160K, etc.? But being able to say you're paying X amount more than the firm across the street - that's instant credibility there.
Although in a perverse way, wouldn't you think that the most prestigious firms wouldn't have to match the highest salaries? Shouldn't that be seen as an act of desperation from less prestigious firms?
Posted by: Bruce at January 31, 2007 09:04 PMI'm not sure I follow the logic. If you take the big money out of biglaw, what's left? 50 hours of document review instead of 100?
Posted by: MB at January 31, 2007 10:47 PMI'm speaking without any experience: I assume there are other attractions to firm life than just the big bucks. I think it does still smell of prestige, has sweet pro bono litigation opportunities down the line, benefits of a fully resourced office, etc.
Posted by: Bruce at February 1, 2007 05:15 PMYou're overlooking some key issues.
1) one employee is always cheaper than two, because you avoid the fixed costs of putting someone on staff (office space, Blackberry, health care, etc).
2) this is shit work, and firms aren't really looking for people with families, hobbies, and other interests outside the office.
3) there would be more pressure to promote, and even today, there's not that much room for new partners.
4) getting used to 50 hrs/wk would be bad training for being a partner. The CEO of Dewey Ballantine billed 3300 hours last year.
And so on.
Posted by: MB at February 2, 2007 10:35 AM