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Biglaw_Associate_V20 wrote:

Big Shrimpin wrote:

Biglaw_Associate_V20 wrote:I told you guys. I don't understand the eternal optimists on this site sometimes.

Nothing wrong with having high hopes with realistic expectations.

How is it realistic to expect higher bonuses in a year of (on average) declining RPL at biglaw firms?

I meant realistic expectations to refer to no bonus growth. Like, I HOAPed for MOAR, but I didn't expect MOAR.

TLS came into existence and started generating a persistent user base right around the end of boom-times and beginning of ITE. It's important for perspective, because we became aware of our surroundings in a universe of 160K salaries and (short-lived) 35K first year bonuses, but there was a tremendous and rapid period of increase. I think salaries were down around 105K or 110K market just a few years before STB brought it to 160, which wasn't that long before the bottom fell out of the economy.

I'd be very curious to see a chart going back to 2000...

Exactly what I expected. Nothing too surprising here.

If anyone hasn't seen:

Class of 2013 — $10,000 (pro-rated)
Class of 2012 — $10,000
Class of 2011 — $14,000
Class of 2010 — $20,000
Class of 2009 — $27,000
Class of 2008 — $34,000
Class of 2007 — $40,000
Class of 2006 — $50,000
Class of 2005 — $60,000

Also, kind of funny that ATL quotes a first semester 1L in their coverage of bonuses:

“As a current 1L, this is still enough money for me to work my ass off for. Any hints of hope as to Biglaw hiring are very welcome.”

thesealocust wrote:TLS came into existence and started generating a persistent user base right around the end of boom-times and beginning of ITE. It's important for perspective, because we became aware of our surroundings in a universe of 160K salaries and (short-lived) 35K first year bonuses, but there was a tremendous and rapid period of increase. I think salaries were down around 105K or 110K market just a few years before STB brought it to 160, which wasn't that long before the bottom fell out of the economy.

I'd be very curious to see a chart going back to 2000...

http://www.elsblog.org/the_empirical_le ... avath.html

Looks like the vast majority of grads in 1991 didn't expect biglaw going into law school, and even if they did, salaries in biglaw don't appear to have been that much higher than at smaller firms.

when does a first-year associate's salary increase from 160k to 170k? Let's say you started working sept/oct of 2013, does your salary increase to 170k on Jan 1 2014? or is it sept/oct of 2014? or is it Jan 1, 2015?

lawstudent_87 wrote:when does a first-year associate's salary increase from 160k to 170k? Let's say you started working sept/oct of 2013, does your salary increase to 170k on Jan 1 2014? or is it sept/oct of 2014? or is it Jan 1, 2015?

I think it depends on the firm. At my firm, it's Jan 1, 2015. At every biglaw firm, you get paid your first year salary during your "stub" year and then again for the entire subsequent year, so no firm would, in your hypo, give you 170k starting Jan 1, 2014.

Biglaw_Associate_V20 wrote:

lawstudent_87 wrote:when does a first-year associate's salary increase from 160k to 170k? Let's say you started working sept/oct of 2013, does your salary increase to 170k on Jan 1 2014? or is it sept/oct of 2014? or is it Jan 1, 2015?

I think it depends on the firm. At my firm, it's Jan 1, 2015. At every biglaw firm, you get paid your first year salary during your "stub" year and then again for the entire subsequent year, so no firm would, in your hypo, give you 170k starting Jan 1, 2014.

Yep.

And if you factor your SS, taxes, etc. in, your paycheck doesn't really change from like September of your 1st year until the following September. Something about hitting the max contributions in Q4 or something.

PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

You must not understand how firms work/the state of the industry.

I wrote a magnum opus poast about this some time back (maybe ITT?). Check it out.

Big Shrimpin wrote:

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

You must not understand how firms work/the state of the industry.

I wrote a magnum opus poast about this some time back (maybe ITT?). Check it out.

Link?

Anyway, this sums up my feelings:

Above the Law Commentor wrote:I would love to see some sort of estimate of the proportion of firm profits given to bonuses pre-ITE vs. the proportion of firm profits given to bonuses ITE / post-ITE. Within the V10 at least, profits have generally gone up. Bonuses have come crashing down (though they now appear to have stabilized). The salary structure has been stagnant. In short, every year, associates are getting a smaller and smaller share of the compensation pie. While being asked to work more hours and dealing with decreased job security.

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

Associate compensation is tied to the supply/demand of, wait for it... associates. Never in history have law schools pumped out as many graduates as they did shortly before, after, and during the boom years. Unfortunately, for people in these class years, they will forever have to practice law competing against this giant army of graduates. Also, you have to factor in that many firms are creating lower-paying "staff attorney" positions that are being eagerly filled by said army and these people will have essentially the same skill set and compete for the same kinds of positions as traditional associates, at least for their first few years at firms.

thesealocust wrote:TLS came into existence and started generating a persistent user base right around the end of boom-times and beginning of ITE. It's important for perspective, because we became aware of our surroundings in a universe of 160K salaries and (short-lived) 35K first year bonuses, but there was a tremendous and rapid period of increase. I think salaries were down around 105K or 110K market just a few years before STB brought it to 160, which wasn't that long before the bottom fell out of the economy.

I'd be very curious to see a chart going back to 2000...

Looking at past data, it seems the early-to-mid '90s was the first coalescence of a "market wage", at least among the white-shoe types. Those were the few dozen firms paying $85k from '92ish to '96. In '96 they went to $100k, up to $125k in '00, $145k in '06 and finally $160k in '07, the last bump coming a year before the start of the recession.

Cravath-scale bonuses, first-year (pro-rated):

2000: $40k
2001: $20k
2002: $17.5k
2003: $17.5k
2004: $30k
2005: $30k
2006: $35k
2007: $45k
2008: $17.5k
2009: $7.5k
2010: $7.5k
2011: $10k (including spring)
2012: $10k
2013: $10k

Total first-year comp (real value, 2013 dollars):

2000: $165k ($224k)
2001: $145k ($191k)
2002: $142.5k ($185k)
2003: $142.5k ($181k)
2004: $155k ($191k)
2005: $155k ($185k)
2006: $180k ($209k)
2007: $205k ($231k)
2008: $177.5k ($193k)
2009: $167.5k ($182k)
2010: $167.5k ($179k)
2011: $170k ($176.5k)
2012: $170k ($173k)
2013: $170k ($170k)

Cravath PPP (real value, 2013 dollars):

2000: $2.25M ($3.05M)
2001: $2.13M ($2.81M)
2002: $1.96M ($2.54M)
2003: $2.08M ($2.64M)
2004: $2.21M ($2.73M)
2005: $2.60M ($3.11M)
2006: $3.02M ($3.50M)
2007: $3.30M ($3.72M)
2008: $2.52M ($2.73M)
2009: $2.72M ($2.96M)
2010: $3.17M ($3.40M)
2011: $3.10M ($3.22M)
2012: $3.43M ($3.49M)

Law school tution, Penn (real value, 2013 dollars):

2000: $27k ($37k)
2001: $28k ($37k)
2002: $29k ($38k)
2003: $31k ($39k)
2004: $33k ($41k)
2005: $35k ($42k)
2006: $37k ($43k)
2007: $39k ($44k)
2008: $42k ($46k)
2009: $44k ($48k)
2010: $45k ($48k)
2011: $48k ($50k)
2012: $50k ($51k)
2013: $52k ($52k)

Anonymous User wrote:

Big Shrimpin wrote:

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

You must not understand how firms work/the state of the industry.

I wrote a magnum opus poast about this some time back (maybe ITT?). Check it out.

Link?

Anyway, this sums up my feelings:

Above the Law Commentor wrote:I would love to see some sort of estimate of the proportion of firm profits given to bonuses pre-ITE vs. the proportion of firm profits given to bonuses ITE / post-ITE. Within the V10 at least, profits have generally gone up. Bonuses have come crashing down (though they now appear to have stabilized). The salary structure has been stagnant. In short, every year, associates are getting a smaller and smaller share of the compensation pie. While being asked to work more hours and dealing with decreased job security.

Dude, I feel the same way. It would be nice to get a bigger piece of the pie, but as V20 mentioned, that just ain't the way it is.

Funny how bonus season invariably turns the defenders and minions of America's corporate overlords into socialists.

Biglaw_Associate_V20 wrote:

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

Associate compensation is tied to the supply/demand of, wait for it... associates. Never in history have law schools pumped out as many graduates as they did shortly before, after, and during the boom years. Unfortunately, for people in these class years, they will forever have to practice law competing against this giant army of graduates. Also, you have to factor in that many firms are creating lower-paying "staff attorney" positions that are being eagerly filled by said army and these people will have essentially the same skill set and compete for the same kinds of positions as traditional associates, at least for their first few years at firms.

Historically, this relationship almost never existed, as the financial health of firms was a cyclical factor and law school enrollment was counter-cyclical. That's not to say the relationship didn't exist, just that the other factors are so confounding that it is impossible to demonstrate.

Regardless, it seems like associate supply/demand has exerted much more effect over who actually gets hired versus what the compensation is. The associate position in its loosest sense of the requirement--just having a JD--obviously runs a perpetual surplus--many more people who want $160k positions than number of such positions available. Firms that engage in lockstep behavior are generally not behaving as though they're beholden to market forces anyway, so it seems that rather than adjusting compensation based on supply/demand, they just adjust the standard for who is competent enough to be an associate. E.g. median at UCLA circa 2007 has a decent shot but is almost dead in the water ITE.

The whole market slowed down though. No need to retain people with extra cash because they don't have greener pastures. Etc. Plus even if PPP is high now, you know these partners have adjusted their expectations for the future. They're hoarding profits while they can in anticipation of the industry getting further squeezed. I bet it feels a lot different now to throw $35k at some guy who only just got admitted to the bar than it did five years ago.

dixiecupdrinking wrote:Funny how bonus season invariably turns the defenders and minions of America's corporate overlords into socialists.

I'm conflicted about that idea.

It seems like a lot of it is a bunch of mostly childless twentysomethings bitching about making a quarter of what partners are making when they couldn't give two shits about the paralegals who make a quarter of what they do. E.g. playing the inequality card might be risky for people who are still in the top 5% of income in America. But if you're paying back debt on an aggressive schedule ITE you might actually be living paycheck to paycheck.

Compensation is stagnant, of course, and we're definitely not at a peak like 2000 or 2007. But it's worth remembering that in the late '40/early '50s Biglaw paid barely above the median US income. Roughly comparable to if Biglaw paid $70k today. Law basically went on a fifty-year winning streak from 1950 to 2000. Has any other profession ever done that for such an extended period of time--just continued to get better and better year after year? Not everyone can come in at the absolute peak, and law is still a paragon of financial stability when compared to the other options for a 25-year-old ITE.

And then another part of me just wonders about greed. I'm almost always of the belief that market wages are market wages for a reason, but if a 50-year-old partner with a $10M net worth is going to make $2M this year...I mean, at that point what the hell do you even spend money on? Sometimes it seems like people with more than enough money to live comfortably the rest of their lives are clawing for every penny for no reason. I guess an efficient market operates as long as they continue to demand millions of dollars, but it seems like there's just no end for them. I know I have a "stopping point" net worth where I would just have absolutely no use for money beyond it. If I had been making millions for a decade I really doubt I'd keep putting up with Biglaw stress. And even if I did keep working, it definitely wouldn't be about the money.

Monochromatic Oeuvre wrote:

Biglaw_Associate_V20 wrote:

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

Associate compensation is tied to the supply/demand of, wait for it... associates. Never in history have law schools pumped out as many graduates as they did shortly before, after, and during the boom years. Unfortunately, for people in these class years, they will forever have to practice law competing against this giant army of graduates. Also, you have to factor in that many firms are creating lower-paying "staff attorney" positions that are being eagerly filled by said army and these people will have essentially the same skill set and compete for the same kinds of positions as traditional associates, at least for their first few years at firms.

Historically, this relationship almost never existed, as the financial health of firms was a cyclical factor and law school enrollment was counter-cyclical. That's not to say the relationship didn't exist, just that the other factors are so confounding that it is impossible to demonstrate.

Regardless, it seems like associate supply/demand has exerted much more effect over who actually gets hired versus what the compensation is. The associate position in its loosest sense of the requirement--just having a JD--obviously runs a perpetual surplus--many more people who want $160k positions than number of such positions available. Firms that engage in lockstep behavior are generally not behaving as though they're beholden to market forces anyway, so it seems that rather than adjusting compensation based on supply/demand, they just adjust the standard for who is competent enough to be an associate. E.g. median at UCLA circa 2007 has a decent shot but is almost dead in the water ITE.

Even if there are multiple compounding factors, my point still holds. 160k + the current bonus structure is indisputably enough to attract far more minimally qualified graduates than there are associate positions. Firms will not raise compensation for associates until there are not enough minimally qualified law graduates to go around (however this is defined). I agree that law firms have a shifting definition of who is "minimally qualified" to do biglaw work. I'm not sure if this change in definition has been client-driven or if firms just like to fuck with us, but it's certainly not a good sign for recent graduates that median UCLA students were landing biglaw jobs before the recession. I mean, there are a lot of similarly talented graduates who would be delighted to land a biglaw job but are currently jobless, underemployed, or underpaid (at least in their eyes).

dixiecupdrinking wrote:The whole market slowed down though. No need to retain people with extra cash because they don't have greener pastures. Etc. Plus even if PPP is high now, you know these partners have adjusted their expectations for the future. They're hoarding profits while they can in anticipation of the industry getting further squeezed. I bet it feels a lot different now to throw $35k at some guy who only just got admitted to the bar than it did five years ago.

I mean, ITE $160k is still WAY above the alternative. The next best thing for a twentysomething is probably BB analyst, who are making maybe $115k in their first year? It seems like the main reason firms don't cut associate salaries is because it would imply negative things about the firm's financial health, even if it were doing fine. It's not like graduates wouldn't still be clamoring for those jobs if first-year salary were cut to $145k. It's still 50k-ish graduates a year competing for maybe 4k Biglaw jobs. So they're not going to pay more than they need to. But a lot of this was true even in boom times--firms didn't need to throw $35k at first-years to get them to come, especially because they mostly weren't competing with one another. So the supply/demand theory has historically done an inadequate job at explaining compensation.

Biglaw_Associate_V20 wrote:

Monochromatic Oeuvre wrote:

Biglaw_Associate_V20 wrote:

Anonymous User wrote:PPP is at a record high--far higher than 2007. Is it unreasonable for me to hope associate compensation would also be at record highs?

Associate compensation is tied to the supply/demand of, wait for it... associates. Never in history have law schools pumped out as many graduates as they did shortly before, after, and during the boom years. Unfortunately, for people in these class years, they will forever have to practice law competing against this giant army of graduates. Also, you have to factor in that many firms are creating lower-paying "staff attorney" positions that are being eagerly filled by said army and these people will have essentially the same skill set and compete for the same kinds of positions as traditional associates, at least for their first few years at firms.

Historically, this relationship almost never existed, as the financial health of firms was a cyclical factor and law school enrollment was counter-cyclical. That's not to say the relationship didn't exist, just that the other factors are so confounding that it is impossible to demonstrate.

Regardless, it seems like associate supply/demand has exerted much more effect over who actually gets hired versus what the compensation is. The associate position in its loosest sense of the requirement--just having a JD--obviously runs a perpetual surplus--many more people who want $160k positions than number of such positions available. Firms that engage in lockstep behavior are generally not behaving as though they're beholden to market forces anyway, so it seems that rather than adjusting compensation based on supply/demand, they just adjust the standard for who is competent enough to be an associate. E.g. median at UCLA circa 2007 has a decent shot but is almost dead in the water ITE.

Even if there are multiple compounding factors, my point still holds. 160k + the current bonus structure is indisputably enough to attract far more minimally qualified graduates than there are associate positions. Firms will not raise compensation for associates until there are not enough minimally qualified law graduates to go around (however this is defined). I agree that law firms have a shifting definition of who is "minimally qualified" to do biglaw work. I'm not sure if this change in definition has been client-driven or if firms just like to fuck with us, but it's certainly not a good sign for recent graduates that median UCLA students were landing biglaw jobs before the recession. I mean, there are a lot of similarly talented graduates who would be delighted to land a biglaw job but are currently jobless, underemployed, or underpaid (at least in their eyes).

Okay, sure. But it's somewhat tautological because firms get to adjust "minimally qualified" for however many graduates are coming out of schools and however much work there is to go around, basically. It's not very useful to say these firms are conforming their behavior to the market if they're constantly redefining the market based on their behavior. The fact that Biglaw deems such a small percentage of law students to be minimally qualified to work demonstrates that they're likely not ever going to be subject to actual market forces. That wouldn't happen until they literally couldn't get enough JDs to fill the positions they have.

I guess it would affect them only to the extent the client gives a shit. They probably would notice if the work done by an HLS grad was suddenly being done by Cooley students. But they could probably give two shits about the difference in work product if a salary decrease made it necessary to reach from UVA median to UVA 60%. Clients are already generally pissed off about shitty work product from junior associates, but I doubt they're in hiring partners' ears screaming "You need to hire more preftigious attorneys dripping with Ivy or we're done here!"

If there were inter-firm competition, of course, that might change. But unless you're at WLRK/BSF or a place paying significantly above market, there's no bidding war for the cream of the crop. Straight H's at YLS is getting paid the same at the top quarter kid from Fordham. And good firms don't have to worry about needing to bid for good students because the students are already obsessed with COPPING DAT PREFTIGE and that's why they're absolutely desperate to get jobs at CSM/S&C despite those job being, benefit-wise, either the same or worse than the Cadwaladers and DLA Pipers of the world.

Monochromatic Oeuvre wrote:

thesealocust wrote:TLS came into existence and started generating a persistent user base right around the end of boom-times and beginning of ITE. It's important for perspective, because we became aware of our surroundings in a universe of 160K salaries and (short-lived) 35K first year bonuses, but there was a tremendous and rapid period of increase. I think salaries were down around 105K or 110K market just a few years before STB brought it to 160, which wasn't that long before the bottom fell out of the economy.

I'd be very curious to see a chart going back to 2000...

Looking at past data, it seems the early-to-mid '90s was the first coalescence of a "market wage", at least among the white-shoe types. Those were the few dozen firms paying $85k from '92ish to '96. In '96 they went to $100k, up to $125k in '00, $145k in '06 and finally $160k in '07, the last bump coming a year before the start of the recession.

Cravath-scale bonuses, first-year (pro-rated):

2000: $40k
2001: $20k
2002: $17.5k
2003: $17.5k
2004: $30k
2005: $30k
2006: $35k
2007: $45k
2008: $17.5k
2009: $7.5k
2010: $7.5k
2011: $10k (including spring)
2012: $10k
2013: $10k

Total first-year comp (real value, 2013 dollars):

2000: $165k ($224k)
2001: $145k ($191k)
2002: $142.5k ($185k)
2003: $142.5k ($181k)
2004: $155k ($191k)
2005: $155k ($185k)
2006: $180k ($209k)
2007: $205k ($231k)
2008: $177.5k ($193k)
2009: $167.5k ($182k)
2010: $167.5k ($179k)
2011: $170k ($176.5k)
2012: $170k ($173k)
2013: $170k ($170k)

Cravath PPP (real value, 2013 dollars):

2000: $2.25M ($3.05M)
2001: $2.13M ($2.81M)
2002: $1.96M ($2.54M)
2003: $2.08M ($2.64M)
2004: $2.21M ($2.73M)
2005: $2.60M ($3.11M)
2006: $3.02M ($3.50M)
2007: $3.30M ($3.72M)
2008: $2.52M ($2.73M)
2009: $2.72M ($2.96M)
2010: $3.17M ($3.40M)
2011: $3.10M ($3.22M)
2012: $3.43M ($3.49M)

Law school tution, Penn (real value, 2013 dollars):

2000: $27k ($37k)
2001: $28k ($37k)
2002: $29k ($38k)
2003: $31k ($39k)
2004: $33k ($41k)
2005: $35k ($42k)
2006: $37k ($43k)
2007: $39k ($44k)
2008: $42k ($46k)
2009: $44k ($48k)
2010: $45k ($48k)
2011: $48k ($50k)
2012: $50k ($51k)
2013: $52k ($52k)

WOMP

Edit: still happy I got into this game before the model collapses.

Biglaw_Associate_V20 wrote: Even if there are multiple compounding factors, my point still holds. 160k + the current bonus structure is indisputably enough to attract far more minimally qualified graduates than there are associate positions. Firms will not raise compensation for associates until there are not enough minimally qualified law graduates to go around (however this is defined).

I don't know how much impact the supply of grads really has. Biglaw for years has paid far more than just about any other option available to top law school students, and even in the best of times Biglaw hired fewer than 20% of new grads, yet first year salaries have gone up three times since 1999. At least in 1999 the firms had to worry about associates taking better paying in-house positions, but they didn't need to raise first year pay.

That's a super interesting chart, thanks!

TheSeaLocust's inflation-o-meter still reads 0 though. The day the $5 footlong from subway dies is the day I admit any inflation has existed at all in any sector since I became self aware.

thesealocust wrote:TheSeaLocust's inflation-o-meter still reads 0 though. The day the $5 footlong from subway dies is the day I admit any inflation has existed at all in any sector since I became self aware.

Don't go to SF.