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Are the BIG LAW raises generous?

Yes
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No
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I'm just glad I got something
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Pomeranian

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Re: Do you think a $20k raise is generous?

Post by Pomeranian » Sat Jun 18, 2016 3:12 pm

Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.

Big law clients can't be happy about this, especially the struggling big banks that are getting killed by Dodd-Frank regulations and the record low near 0% interest rates that is needed to keep the "recovery" afloat. Bank of America came out with a statement saying that there was basically no economic based rationale for raising big law salaries at this time, and that they would not be bearing the costs.

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Re: Do you think a $20k raise is generous?

Post by Monochromatic Oeuvre » Sat Jun 18, 2016 3:14 pm

Lexaholik wrote:
jbagelboy wrote:This only looks like "mover" and "copy-er" on the surface because one of a number of highly profitable peer firms acted first, but it could have been any of them and the same activity would have resulted.
Cravath didn't have to move first. It could have waited until someone else raised, and then matched. Why didn't just wait it out? It would have saved themselves (ie partners) a lot of money.

The answer is that there was probably some factor unique to Cravath that made them say, okay we have to move first.
Sure, by definition Cravath moved because it felt that by that point it would make more money in the long run by raising salaries. But that only means Cravath had that impulse first. I wouldn't call it "unique" if all the peer firms had the same issues (midlevel retention) that would have made their unilateral raises imminent anyway.

Basically, just because Cravath won the race doesn't mean ten other horses aren't on the same track.
Last edited by Monochromatic Oeuvre on Sat Jun 18, 2016 3:20 pm, edited 1 time in total.

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Re: Do you think a $20k raise is generous?

Post by LaLiLuLeLo » Sat Jun 18, 2016 3:15 pm

Pomeranian wrote:Bank of America came out with a statement saying that there was basically no economic based rationale for raising big law salaries at this time, and that they would not be bearing the costs.
Yeah, but they're wrong. Of course there's an economic based rationale. Just because they don't like it doesn't mean it was some irrational move by Cravath. The GC of BoA is just a cheap fuck (and BoA is notorious for being cheap even among big banks).

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Re: Do you think a $20k raise is generous?

Post by Monochromatic Oeuvre » Sat Jun 18, 2016 3:16 pm

Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
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unlicensedpotato

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Re: Do you think a $20k raise is generous?

Post by unlicensedpotato » Sat Jun 18, 2016 3:17 pm

As has been pointed out elsewhere, the motivation for Cravath in particular to move might have been that partners decided $180k was fair and would fix their issue but didn't want to risk some other firm initially moving to higher than 180.

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Re: Do you think a $20k raise is generous?

Post by bern victim » Sat Jun 18, 2016 3:21 pm

Pomeranian what are your thoughts on auditing the Fed?

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Re: Do you think a $20k raise is generous?

Post by Lexaholik » Sat Jun 18, 2016 3:22 pm

Monochromatic Oeuvre wrote:Sure, by definition Cravath moved because it felt that by that point it would make more money in the long run by raising salaries. But the only means Cravath had that impulse first. I wouldn't call it "unique" if all the peer firms had the same issues (midlevel retention) that would have made their unilateral raises imminent anyway.

Basically, just because Cravath won the race doesn't mean ten other horses aren't on the same track.
I don't think other firms have as big of a midlevel retention problem as Cravath.

Remember, other firms can hire lateral associates to plug in their needs. Cravath has always said they do not hire lateral associates. (I'm not sure if that's necessarily true but let's take them at the word.) If that's the case, AND we combine that with the fact that they probably underhired for the c/o 2011 (present day fifth years) we get a unique, and serious understaffing issue for midlevels.

That's a problem that S&C, Simpson, etc. don't have.

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Re: Do you think a $20k raise is generous?

Post by Pomeranian » Sat Jun 18, 2016 3:23 pm

Monochromatic Oeuvre wrote:
Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
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The only thing keeping the U.S. economy afloat is Federal Reserve cheap money. We are in a huge bubble and once the smoke clears it won't be pretty!

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Re: Do you think a $20k raise is generous?

Post by smaug » Sat Jun 18, 2016 3:24 pm

Pomeranian wrote:
Monochromatic Oeuvre wrote:
Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
(Guy from 2011)
(Guy from 2012)
(Guy from 2013)
(Guy from 2014)
(Guy from 2015)

The only thing keeping the U.S. economy afloat is Federal Reserve cheap money. We are in a huge bubble and once the smoke clears it won't be pretty!
how can the youths of today best position themselves for the coming bubble

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Re: Do you think a $20k raise is generous?

Post by Lexaholik » Sat Jun 18, 2016 3:28 pm

LaLiLuLeLo wrote:
Pomeranian wrote:Bank of America came out with a statement saying that there was basically no economic based rationale for raising big law salaries at this time, and that they would not be bearing the costs.
Yeah, but they're wrong. Of course there's an economic based rationale. Just because they don't like it doesn't mean it was some irrational move by Cravath. The GC of BoA is just a cheap fuck (and BoA is notorious for being cheap even among big banks).
Right, the economic rationale was in the labor market, not the market for legal services. I saw that as a signalling/negotiating tactic by BAC to their law firms to reduce fees. I don't know BAC's reputation for paying legal fees, but I do know that when they got sued for MBS problems, they didn't choose who would handle their cases based on who paid their associates the least.

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Re: Do you think a $20k raise is generous?

Post by bern victim » Sat Jun 18, 2016 4:19 pm

smaug wrote:
Pomeranian wrote:
Monochromatic Oeuvre wrote:
Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
(Guy from 2011)
(Guy from 2012)
(Guy from 2013)
(Guy from 2014)
(Guy from 2015)

The only thing keeping the U.S. economy afloat is Federal Reserve cheap money. We are in a huge bubble and once the smoke clears it won't be pretty!
how can the youths of today best position themselves for the coming bubble
buy gold

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Monochromatic Oeuvre

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Re: Do you think a $20k raise is generous?

Post by Monochromatic Oeuvre » Sat Jun 18, 2016 4:38 pm

Pomeranian wrote:
Monochromatic Oeuvre wrote:
Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
(Guy from 2011)
(Guy from 2012)
(Guy from 2013)
(Guy from 2014)
(Guy from 2015)

The only thing keeping the U.S. economy afloat is Federal Reserve cheap money. We are in a huge bubble and once the smoke clears it won't be pretty!
Oh my bad, I didn't realize you had insight that institutional traders don't have. Well, given that it's that obvious, I guess you'll be putting your life savings into shorting the S&P. Send me a postcard when you make your first billion.

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Re: Do you think a $20k raise is generous?

Post by smaug » Sat Jun 18, 2016 4:51 pm

bern victim wrote:
smaug wrote:
Pomeranian wrote:
Monochromatic Oeuvre wrote:
Pomeranian wrote:Just my opinion, but that Big Law even raised is stunning, especially as all leading economic indicators point to another recession looming in the near future.
(Guy from 2011)
(Guy from 2012)
(Guy from 2013)
(Guy from 2014)
(Guy from 2015)

The only thing keeping the U.S. economy afloat is Federal Reserve cheap money. We are in a huge bubble and once the smoke clears it won't be pretty!
how can the youths of today best position themselves for the coming bubble
buy gold
i did this in godspeed's stock market game recently.

i'm winning.

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Re: Do you think a $20k raise is generous?

Post by lolwat » Sat Jun 18, 2016 6:15 pm

Answer to question in topic = depends how you define generous. I don't think anyone realistically can complain about the compensation. Hours and QOL sure, but not the comp.

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Re: Do you think a $20k raise is generous?

Post by lolwat » Sat Jun 18, 2016 6:15 pm

Answer to question in topic = depends how you define generous. I don't think anyone realistically can complain about the compensation. Hours and QOL sure, but not the comp.

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Re: Do you think a $20k raise is generous?

Post by Tiago Splitter » Sat Jun 18, 2016 8:26 pm

Capitol_Idea wrote:
Monochromatic Oeuvre wrote:The long-term trend is still gonna be toward bifurcation. As long as Hogan and Bracewell and Mayer Brown are matching, the market isn't gonna be done moving. That may not mean comp increases (some of those forms will just merge or fold), but we're still not at equilibrium yet.
I agree with this 100%. The difference in profitability and growth within the AmLaw 100 is just staggering - no way they can all keep moving without some more significant mergers/dissolutions. But I think eventually someone's gonna balk hard instead of folding, and others will follow.

Not this time though, by the look of it.
What makes you guys think the long term trend is toward bifurcation? It seems like the Cravaths of the world have had plenty of opportunities to pull away from the rest but aren't interested in doing so.

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Re: Do you think a $20k raise is generous?

Post by TLSModBot » Sat Jun 18, 2016 8:41 pm

Tiago Splitter wrote:
Capitol_Idea wrote:
Monochromatic Oeuvre wrote:The long-term trend is still gonna be toward bifurcation. As long as Hogan and Bracewell and Mayer Brown are matching, the market isn't gonna be done moving. That may not mean comp increases (some of those forms will just merge or fold), but we're still not at equilibrium yet.
I agree with this 100%. The difference in profitability and growth within the AmLaw 100 is just staggering - no way they can all keep moving without some more significant mergers/dissolutions. But I think eventually someone's gonna balk hard instead of folding, and others will follow.

Not this time though, by the look of it.
What makes you guys think the long term trend is toward bifurcation? It seems like the Cravaths of the world have had plenty of opportunities to pull away from the rest but aren't interested in doing so.
Nah, we've had an increasing trend of 'the rich getting richer and the poor getting poorer' in large law firms (the most successful in the AmLaw 100 are getting more so, and those having rough years are not really keeping up with the big players in terms of growth even when they pull out of the lurch). Traditionally, even though they operated in different bands or whatever, the CWTs and Cravaths could get along in the world because A. there was enough work to go around and more was always coming in and B. partner lateraling was pretty rare. Now we have an insanely hot partner lateral market and revenue is flatlining at the industry level. More successful firms can take other firms' lunches by snagging their best partners, and can fund initiatives, expansions, and raises in a way their competition no longer can.

Why I think we'll see bifurcation instead of just a bunch of firms dissolving is that there is a growing trend of firms operating in the low-end and high-end of the markets. Cravaths become the luxury good stores and firms that handle commodity work cheaply but more efficiently than anyone else (see, e.g. Jackson Lewis) become the big-box discount stores (Bruce MacEwen of AdamSmithEsq has some interesting categorization of firms in his "Growth is Dead" book. I have some issues with his exact categorizations but it's a good starting point for this kind of discussion).

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Re: Do you think a $20k raise is generous?

Post by Tiago Splitter » Sat Jun 18, 2016 8:47 pm

Ok so there is bifurcation among firms generally but when does that show itself in associate salaries?

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Re: Do you think a $20k raise is generous?

Post by TLSModBot » Sat Jun 18, 2016 8:52 pm

Tiago Splitter wrote:Ok so there is bifurcation among firms generally but when does that show itself in associate salaries?
Well the low-end firms basically survive by doing shit-tons of commodity work, better than anyone else so the cost of entry is higher than their anticipated profits. To make that profitable, I can't imagine they're paying 180K (or 200K or whatever the breaking point is). So some firms basically throw in the towel and just say "we're not paying market any more" and a two-tier system is firmly entrenched.

I thought 160K was pushing it for some of these firms (it sort of was, the number of firm dissolutions and crisis mergers has skyrocketed), and that 180K would be untenable for a lot of firms, so I've been rethinking things a bit given how so many firms have leapt to match so quickly. Maybe firms really ARE just going to continue trying to keep up with the Cravaths of the world until they obliterate themselves. I just hoped for more rationality in law firm leadership.

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Re: Do you think a $20k raise is generous?

Post by Lexaholik » Sat Jun 18, 2016 9:43 pm

Capitol_Idea wrote:
Tiago Splitter wrote:Ok so there is bifurcation among firms generally but when does that show itself in associate salaries?
Well the low-end firms basically survive by doing shit-tons of commodity work, better than anyone else so the cost of entry is higher than their anticipated profits. To make that profitable, I can't imagine they're paying 180K (or 200K or whatever the breaking point is). So some firms basically throw in the towel and just say "we're not paying market any more" and a two-tier system is firmly entrenched.

I thought 160K was pushing it for some of these firms (it sort of was, the number of firm dissolutions and crisis mergers has skyrocketed), and that 180K would be untenable for a lot of firms, so I've been rethinking things a bit given how so many firms have leapt to match so quickly. Maybe firms really ARE just going to continue trying to keep up with the Cravaths of the world until they obliterate themselves. I just hoped for more rationality in law firm leadership.
In the long run it's true that there'll be bifurcation. The Luxury Firms serve clients with inelastic demand (giant deals, bet the company litigation) while the Commodity Firms serve clients who are very cost conscious. But you won't see that dynamic translate into differentiated associate salaries for a really long time, because of a combination of these factors:

- Equity partners of Commodity Firms will continue to match salaries and bonuses, and maintain their PPP by reducing associate headcount (layoffs or planned attrition). For example: CWT laid off 131 associates in 2008, saw a jump in their PPP in 2010..
- Top law students will continue to flock to the Luxury Firms for higher risk-adjusted salaries (e.g. incorporating the risk of layoffs when choosing)
- And for intangible non-financial reasons (better exit options, prestige, etc.)

No AmLaw 100 firm wants recruits to think they're lesser than Cravath, so they have to keep playing the matching game. (Certain firms can probably get away with paying less than 180k because they're located in smaller markets--but that's due to the fact that they operate in a completely different labor market.) First year associate salary has become an incredibly important sign of the perceived talent level of a given firm. It wasn't always this way (E.g. See how associate salaries differed in NYC vs. other markets in the 1990s), but that's changed over the past ~15 years (through Greedy Associates and Above the Law). Now, first year associate compensation means everything to law students, causing it to become one of the biggest factors in attracting and keeping talent, causing it to be tied to long term perceptions of firm capability.

Anyways, as long as the Commodity Firms continue to play the matching game, they will find other ways to squeeze profitability out of their law practices, including hiring smaller classes, multiple rounds of stealth and announced layoffs, poaching of lateral partners, and so on. Biglaw firms have a lot of bloat, so there's a lot to cut before they decide to stop matching.

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Re: Do you think a $20k raise is generous?

Post by Anonymous User » Sat Jun 18, 2016 9:56 pm

I made $30k before law school. While I am still a law student, it's hard to fathom how $180k is not amazing for someone with no experience. Obviously, you give up your freedom to do so. But that's a lot of money.

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Re: Do you think a $20k raise is generous?

Post by spyke123 » Sat Jun 18, 2016 11:33 pm

Just to echo what someone else said above. 180k for someone without much experience is tons of money.. no matter how you slice it. obviously this fact shouldn't stop us from demanding more (because it is always in our self interest to demand more) but 180k is "generous" given work exp/qol relative to other industries. I think the bigger issue is the law school tuition... it is just ridiculously expensive and it is the enormous amount of student loans that seem to distort our perception of how "generous" biglaw salary is. If we were all heading into biglaw with 50k or less in student loans. Even 160k would seem generous.

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Re: Do you think a $20k raise is generous?

Post by LaLiLuLeLo » Sat Jun 18, 2016 11:41 pm

spyke123 wrote:Just to echo what someone else said above. 180k for someone without much experience is tons of money.. no matter how you slice it. obviously this fact shouldn't stop us from demanding more (because it is always in our self interest to demand more) but 180k is "generous" given work exp/qol relative to other industries. I think the bigger issue is the law school tuition... it is just ridiculously expensive and it is the enormous amount of student loans that seem to distort our perception of how "generous" biglaw salary is. If we were all heading into biglaw with 50k or less in student loans. Even 160k would seem generous.
Investment bankers make low to mid $100k out of college. $180k is not generous for three years of professional school and bar admission.

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Re: Do you think a $20k raise is generous?

Post by WinSome » Sat Jun 18, 2016 11:58 pm

LaLiLuLeLo wrote:
spyke123 wrote:Just to echo what someone else said above. 180k for someone without much experience is tons of money.. no matter how you slice it. obviously this fact shouldn't stop us from demanding more (because it is always in our self interest to demand more) but 180k is "generous" given work exp/qol relative to other industries. I think the bigger issue is the law school tuition... it is just ridiculously expensive and it is the enormous amount of student loans that seem to distort our perception of how "generous" biglaw salary is. If we were all heading into biglaw with 50k or less in student loans. Even 160k would seem generous.
Investment bankers make low to mid $100k out of college. $180k is not generous for three years of professional school and bar admission.
$180k is more than 98% of the population. For an entry-level position, that is insane. Did you have the opportunity to be an investment banker coming out of college? I know I did not have pedigree for those positions. I was a liberal arts major who was looking at a low paying job. Sure I went through three years of law school and took out a lot of debt, but that does not make $180k for an entry-level job any less insane. I will be able to service that debt faster than I would have been able to service my undergrad debt alone coming out of undergrad. I will be making more than both of my parents combined. Would I like more? Sure. But I am lucky to have the job I got and will be in much better position than most law grads. I wouldn't say the firms are "generous" for raising salary because they are all motivated by their own self-interest. However, I am gracious that I will be making $20k more than I thought I would when I accepted, and I am lucky that I have an entry-level job lined up that starts at $180k with guaranteed raises based on class year if I can stick around.

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Re: Do you think a $20k raise is generous?

Post by LaLiLuLeLo » Sun Jun 19, 2016 12:15 am

WinSome wrote:
LaLiLuLeLo wrote:
spyke123 wrote:Just to echo what someone else said above. 180k for someone without much experience is tons of money.. no matter how you slice it. obviously this fact shouldn't stop us from demanding more (because it is always in our self interest to demand more) but 180k is "generous" given work exp/qol relative to other industries. I think the bigger issue is the law school tuition... it is just ridiculously expensive and it is the enormous amount of student loans that seem to distort our perception of how "generous" biglaw salary is. If we were all heading into biglaw with 50k or less in student loans. Even 160k would seem generous.
Investment bankers make low to mid $100k out of college. $180k is not generous for three years of professional school and bar admission.
$180k is more than 98% of the population. For an entry-level position, that is insane. Did you have the opportunity to be an investment banker coming out of college? I know I did not have pedigree for those positions. I was a liberal arts major who was looking at a low paying job. Sure I went through three years of law school and took out a lot of debt, but that does not make $180k for an entry-level job any less insane. I will be able to service that debt faster than I would have been able to service my undergrad debt alone coming out of undergrad. I will be making more than both of my parents combined. Would I like more? Sure. But I am lucky to have the job I got and will be in much better position than most law grads. I wouldn't say the firms are "generous" for raising salary because they are all motivated by their own self-interest. However, I am gracious that I will be making $20k more than I thought I would when I accepted, and I am lucky that I have an entry-level job lined up that starts at $180k with guaranteed raises based on class year if I can stick around.
I keep it all in perspective. I was also a libarts major making $17/hr in my job before law school. I was incredibly stoked to make $160k, let alone $180k. It's an insane amount of money and my debt load isn't as bad as some. But I'd hardly call firms giving the first raise in nearly a decade "generous". I won't call actual compensation being lower than it was pre-recession even with the $20k raise "generous". I don't think NFL owners are "generous" for giving a player $63 million guaranteed. You have to keep it in perspective.

Using the term "entry level" is disingenuous. Not all entry level positions were created equal. An entry level pediatric surgeon making $180k wouldn't be grateful for the generosity. They would be outraged at being severely underpaid by several tens of thousands of dollars.

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