Are biglaw associates wildly underpaid? Forum

[lacrossebrother]

I just want to thank the brilliant contributors making observations about the nature of salaries as if that someone is important to an underpaid vs. overpaid analysis. It's really helpful and your understanding of free market principles surely helped you to ace micro 101. Since Econ is actually entirely taught in micro 101, again, I want to thank you for your titillating analyses that no one could have recognized without your comments.

I mean, fine, I know we all understand a demand curve, but a lot of people posting ITT made an argument along the lines of "If there were no other bottles of water, you would pay $100 for one. Therefore, a bottle of water must be worth $100."

Sure. But the flip side is that just because we all pay $4/gallon/gas doesn't mean we can't look into the dynamics of cartel pricing.

[Monochromatic Oeuvre]

I just want to thank the brilliant contributors making observations about the nature of salaries as if that someone is important to an underpaid vs. overpaid analysis. It's really helpful and your understanding of free market principles surely helped you to ace micro 101. Since Econ is actually entirely taught in micro 101, again, I want to thank you for your titillating analyses that no one could have recognized without your comments.

I mean, fine, I know we all understand a demand curve, but a lot of people posting ITT made an argument along the lines of "If there were no other bottles of water, you would pay $100 for one. Therefore, a bottle of water must be worth $100."

Sure. But the flip side is that just because we all pay $4/gallon/gas doesn't mean we can't look into the dynamics of cartel pricing.

It would be an interesting experiment to take a supremely qualified student (HLS magna, CLS Kent, etc.), have them hang a shingle, give them access to big institutional clients, and see how much they could make. My suspicion is that businesses wouldn't pay anywhere near the rates they do now for first years, if indeed there was even a price they were willing to do it at. But that seems like the only way to truly isolate the value-added of a first year.

[09042014]

I just want to thank the brilliant contributors making observations about the nature of salaries as if that someone is important to an underpaid vs. overpaid analysis. It's really helpful and your understanding of free market principles surely helped you to ace micro 101. Since Econ is actually entirely taught in micro 101, again, I want to thank you for your titillating analyses that no one could have recognized without your comments.

I mean, fine, I know we all understand a demand curve, but a lot of people posting ITT made an argument along the lines of "If there were no other bottles of water, you would pay $100 for one. Therefore, a bottle of water must be worth $100."

Sure. But the flip side is that just because we all pay $4/gallon/gas doesn't mean we can't look into the dynamics of cartel pricing.

It would be an interesting experiment to take a supremely qualified student (HLS magna, CLS Kent, etc.), have them hang a shingle, give them access to big institutional clients, and see how much they could make. My suspicion is that businesses wouldn't pay anywhere near the rates they do now for first years, if indeed there was even a price they were willing to do it at. But that seems like the only way to truly isolate the value-added of a first year.

That's silly. First years don't run matters themselves. It's like saying a grocery cashier is worthless cause you wouldn't pay them without the grocery store.

[Mal Reynolds]

I just want to thank the brilliant contributors making observations about the nature of salaries as if that someone is important to an underpaid vs. overpaid analysis. It's really helpful and your understanding of free market principles surely helped you to ace micro 101. Since Econ is actually entirely taught in micro 101, again, I want to thank you for your titillating analyses that no one could have recognized without your comments.

I mean, fine, I know we all understand a demand curve, but a lot of people posting ITT made an argument along the lines of "If there were no other bottles of water, you would pay $100 for one. Therefore, a bottle of water must be worth $100."

Sure. But the flip side is that just because we all pay $4/gallon/gas doesn't mean we can't look into the dynamics of cartel pricing.

It would be an interesting experiment to take a supremely qualified student (HLS magna, CLS Kent, etc.), have them hang a shingle, give them access to big institutional clients, and see how much they could make. My suspicion is that businesses wouldn't pay anywhere near the rates they do now for first years, if indeed there was even a price they were willing to do it at. But that seems like the only way to truly isolate the value-added of a first year.

This is why social science is fucked as an academic field.

[Monochromatic Oeuvre]

It would be an interesting experiment to take a supremely qualified student (HLS magna, CLS Kent, etc.), have them hang a shingle, give them access to big institutional clients, and see how much they could make. My suspicion is that businesses wouldn't pay anywhere near the rates they do now for first years, if indeed there was even a price they were willing to do it at. But that seems like the only way to truly isolate the value-added of a first year.

That's silly. First years don't run matters themselves. It's like saying a grocery cashier is worthless cause you wouldn't pay them without the grocery store.

Isn't that the point though? First years are typically not thought of as being capable of running matters, so you can't take the work in isolation. I admit, it does make the whole exercise silly when it's anchored to a value that's never been measured and realistically can't be (as Mal was alluding to). What's the market value of a revision-less brief on a particular matter? Impossible to say, because no one ever attempted to offer one.

[JCougar]

Well, from the "exchange value of labor" point of view, a better experiment would be to take a random sample of law partners in a given practice area, form a bunch of new firms, and hire new associates at far lower salaries, but let them hire whoever they want and shop their business out at discounted rates. Whichever firm went under first due to lack of business would be just below the threshhold of the "worth" of an associate's labor.

This doesn't happen, though, because all defense firms basically bill at the same rates (close enough anyway...usually between $200 and $300/hour for first-years). In a way, it's like cartel pricing.

My guess is that biglaw associates, under this scenario, would be revealed to be vastly overpaid. Partners not so much. But currently, clients put up with overpaying for associate time just to get access to the partners they know have the right experience. But that's beginning to change, as they demand more associate work be farmed out to TTT doc review mills.

[lacrossebrother]

I think the answer is that biglaw associates are almost assuredly perfectly paid given the risk that firms take on developing you combined with the value of the training and prestige they bestow upon associates & availability of potentially similar quality labor vs. the actual economic surplus an associate brings to the firm. it's a tough calculus, and having an opinion one way or the other is absurd. if you think that firms must be overpaying given the supply of labor without recognizing the implicit risk of risking even a minimal drop in prestige/reputation alongside the risk/reward of hiring the "best" (limited supply), i think you're insane.

[jarofsoup]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

[JCougar]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

[KidStuddi]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I can't speak for every firm out there, but even as a summer >80% of my time was realized (I enjoy talking business and I'm cool with my office's managing partner). Generally the instances where my time was cut was where what I did was redundant, e.g., taking notes on a call where there were 2 other junior associates on the call who could have done the same thing. But anytime my billed hours actually produced tangible work product, even if it was pure research, the firm collected. Maybe we're the exception, but I can't imagine too many firms actually get bullied into allowing their junior associates do free work for clients.

[dixiecupdrinking]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I think you're talking out of your ass to be frank. Clients pay for junior work. And no one (and I think you meant to reference me) is saying prestige is the only thing clients care about. They obviously care about work quality. But if you think they don't expect some correlation between associates' qualifications and the quality of the work, I've got a bridge to sell you. By and large the HLS grad will produce better work than the Pace grad and people know this. Don't let your disdain for the law school prestige chase blind you to the basic realities.

[gk101]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I can't speak for every firm out there, but even as a summer >80% of my time was realized (I enjoy talking business and I'm cool with my office's managing partner). Generally the instances where my time was cut was where what I did was redundant, e.g., taking notes on a call where there were 2 other junior associates on the call who could have done the same thing. But anytime my billed hours actually produced tangible work product, even if it was pure research, the firm collected. Maybe we're the exception, but I can't imagine too many firms actually get bullied into allowing their junior associates do free work for clients.

The managing partner obviously had no incentive to make you feel valued during the summer when you are being recruited.

[JusticeJackson]

.

[JCougar]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I think you're talking out of your ass to be frank. Clients pay for junior work. And no one (and I think you meant to reference me) is saying prestige is the only thing clients care about. They obviously care about work quality. But if you think they don't expect some correlation between associates' qualifications and the quality of the work, I've got a bridge to sell you. By and large the HLS grad will produce better work than the Pace grad and people know this. Don't let your disdain for the law school prestige chase blind you to the basic realities.

I specifically referenced someone other than you, unless that's your alt. My point was that it was the clients pushing for what used to be associate work to be farmed out to TTT grads. If it were up to Biglaw, those HLS grads would still be doing most of the doc review, since it's more profitable for the law firm to keep that in house.

Of course, not all associate work in Biglaw is doc review, redundantly sitting in on conference calls, and binder-making. I have no idea what percentage of first-year Biglaw associate work this was before 2008 and what it is right now. It probably varies by firm and practice area. But from what I've heard, it used to be pretty high, and still is kind of high. But it was the clients that decided they didn't feel like paying these people to do monkey work because it was low-level enough that anyone could do it. So, obviously, prestige only goes so far. It was the clients that decided they'd rather pay a Pace grad less to do this work, and Biglaw has given in to their demands.

[Mal Reynolds]

I can't speak for every firm out there, but even as a summer >80% of my time was realized (I enjoy talking business and I'm cool with my office's managing partner). Generally the instances where my time was cut was where what I did was redundant, e.g., taking notes on a call where there were 2 other junior associates on the call who could have done the same thing. But anytime my billed hours actually produced tangible work product, even if it was pure research, the firm collected. Maybe we're the exception, but I can't imagine too many firms actually get bullied into allowing their junior associates do free work for clients.

Just lol

[OneMoreLawHopeful]

I specifically referenced someone other than you, unless that's your alt. My point was that it was the clients pushing for what used to be associate work to be farmed out to TTT grads. If it were up to Biglaw, those HLS grads would still be doing most of the doc review, since it's more profitable for the law firm to keep that in house.

Of course, not all associate work in Biglaw is doc review, redundantly sitting in on conference calls, and binder-making. I have no idea what percentage of first-year Biglaw associate work this was before 2008 and what it is right now. It probably varies by firm and practice area. But from what I've heard, it used to be pretty high, and still is kind of high. But it was the clients that decided they didn't feel like paying these people to do monkey work because it was low-level enough that anyone could do it. So, obviously, prestige only goes so far. It was the clients that decided they'd rather pay a Pace grad less to do this work, and Biglaw has given in to their demands.

You keep repeating this narrative, but it's an incomplete picture at best.

The push to farm that work out to TTT grads started long before ITE, when biglaw realized that they could mark up temp attorney time and bill it to clients in order to turn a hefty profit. It wasn't about saving clients money, it was about lining partner pockets.

You can get a picture of how the timeline actually worked because a formal ABA opinion stating that it was not an ethics violation to mark up temp time on client bills up to 300% was issued back in 2000. Since a formal opinion was called for in 2000, it's a fair bet the practice actually originated some time in the 1990s, and the challenge arose around 1999-2000.

As a result, your argument that law firms would prefer to have non-contract HLS grads doing mountains of doc review just doesn't pan out. Biglaw made it clear at least 15 years ago that they would rather hire contract attorneys for $60/hr and bill them out at $200/hr, pocketing the difference (because the 300% markup refers to the amount paid to the temp agency, which is $60/hr, and not the $30/hr the contract attorney actually gets).

Now, there were other forms of "churn," and clients have come down on biglaw to reduce bills, but your narrative makes it sound like the whole process was driven by clients, and that's just not true. The push to bring in temp armies was started by biglaw, not forced on them by clients.

[JCougar]

Now, there were other forms of "churn," and clients have come down on biglaw to reduce bills, but your narrative makes it sound like the whole process was driven by clients, and that's just not true. The push to bring in temp armies was started by biglaw, not forced on them by clients.

Whatever the history, it's now apparent that more of the mundane work is being pushed toward the temp agencies. Biglaw hiring is down for a reason. The "clients don't want to pay for first years" isn't just coming out of nowhere.

[Tiago Splitter]

Now, there were other forms of "churn," and clients have come down on biglaw to reduce bills, but your narrative makes it sound like the whole process was driven by clients, and that's just not true. The push to bring in temp armies was started by biglaw, not forced on them by clients.

Whatever the history, it's now apparent that more of the mundane work is being pushed toward the temp agencies. Biglaw hiring is down for a reason. The "clients don't want to pay for first years" isn't just coming out of nowhere.

It's hard to buy what you're selling given that Biglaw firms hired the same number of people in 2013 that they hired in 2000.

[minnbills]

Since when is doc review for TTT grads? Pretty sure it's for almost everybody at this point.

[jarofsoup]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I think you're talking out of your ass to be frank. Clients pay for junior work. And no one (and I think you meant to reference me) is saying prestige is the only thing clients care about. They obviously care about work quality. But if you think they don't expect some correlation between associates' qualifications and the quality of the work, I've got a bridge to sell you. By and large the HLS grad will produce better work than the Pace grad and people know this. Don't let your disdain for the law school prestige chase blind you to the basic realities.[/]

I think you are speaking out of your ass to be frank.

[JCougar]

Now, there were other forms of "churn," and clients have come down on biglaw to reduce bills, but your narrative makes it sound like the whole process was driven by clients, and that's just not true. The push to bring in temp armies was started by biglaw, not forced on them by clients.

Whatever the history, it's now apparent that more of the mundane work is being pushed toward the temp agencies. Biglaw hiring is down for a reason. The "clients don't want to pay for first years" isn't just coming out of nowhere.

It's hard to buy what you're selling given that Biglaw firms hired the same number of people in 2013 that they hired in 2000.

But is there more work total? Since 2000, our population has grown 10% and our GDP has grown over 20%. And due to more globalization, etc., I wouldn't be surprised if Biglaw total business has grown even faster than that.

I never knew the assertion that legal outsourcing was growing was a controversial proposition in the least bit.

Just this one Indian outsourcing firm has grown its business almost 1000% since 2006.
http://www.economist.com/node/16439006
And these aren't even TTT grads...they're people without even American law degrees.

Maybe they're only stealing work from US legal outsourcing and not Biglaw firms in general, but I doubt it. According to this, LPO business has doubled since only 2011. And this flyer is targeted toward Biglaw clients, promoting it as a cost saving measure.
http://www.deloitte.com/assets/Dcom-Uni ... 113011.pdf

[KidStuddi]

The managing partner obviously had no incentive to make you feel valued during the summer when you are being recruited.

Conversation happened later. I still work there and now have direct knowledge about the realization of my hours as a junior associate, which is what prompted me to ask about my time as a summer.

[Tiago Splitter]

Whatever the history, it's now apparent that more of the mundane work is being pushed toward the temp agencies. Biglaw hiring is down for a reason. The "clients don't want to pay for first years" isn't just coming out of nowhere.

It's hard to buy what you're selling given that Biglaw firms hired the same number of people in 2013 that they hired in 2000.

But is there more work total? Since 2000, our population has grown 10% and our GDP has grown over 20%. And due to more globalization, etc., I wouldn't be surprised if Biglaw total business has grown even faster than that.

Biglaw hiring is up about 10% since the class of 2004, and it's up about 100% since 1994. I don't doubt that biglaw entry level hiring is lower than it otherwise would be because of things like outsourcing, but I'm not anywhere near ready to subscribe to the sky is falling mentality. Biglaw entry level hiring saw a bubble-fueled runup for a few years in the middle of the last decade, but after a big correction we're about where we were before.

[Big Dog]

Maybe my math is erroneous, nevertheless. 160K divided ..

Nah, just missing a few things, like payroll taxes and benefits and the cost of your private office (Firms tend to locate in the high rent district of cities), your bar review prep course, your bar association fees, your mandatory in-service trainings to keep your license current.... not to mention an OH allocation for IT, HR, Accounting, etc. Sure, (and every other cost center) will claim that you don't use them, but their costs gotta be allocated somewhere. And, of course, you regulatory legal wannabes should readily want to pay for the OH, since much of it is mandated by state/federal law.

[dixiecupdrinking]

I was under the impression that it was very hard to for firms to bill out first years and often law firms are forced to write them off. Isn't there a big "we won't pay for training" mantra that most clients give to firms.

Yes, this is true, and it contradicts lacrossebrother's assertions that prestige is the only thing that matters to clients. Clients couldn't give a shit about "prestige" generated from law school education, because they know first year associates graduating from any school don't know squat about how to practice law.

The general consensus within the legal industry and without is that law school is a nearly valueless exercise that teaches students nothing. You don't get to be a good lawyer until you've practiced for a few years. At most, law school is a signaling ritual that shows your potential coming in...and your potential coming out. But coming out, it's still generally recognized that this potential has yet to be realized since you just wasted 3 years on pointless sophistry.

I think you're talking out of your ass to be frank. Clients pay for junior work. And no one (and I think you meant to reference me) is saying prestige is the only thing clients care about. They obviously care about work quality. But if you think they don't expect some correlation between associates' qualifications and the quality of the work, I've got a bridge to sell you. By and large the HLS grad will produce better work than the Pace grad and people know this. Don't let your disdain for the law school prestige chase blind you to the basic realities.[/]

I think you are speaking out of your ass to be frank.

Your criticism is fair but unsubstantiated.