Biglaw...coming to an end? Forum

[onetimeonly95]

Take a look:

http://www.nytimes.com/2010/01/17/fashi ... ef=fashion

[Kobe_Teeth]

I sicerely doubt it's "the end," probably more of a severe reality check.

[thesealocust]

edit: n/m

[UofO]

Good read, op. For an alternative perspective, check this out:

http://papers.ssrn.com/sol3/papers.cfm? ... id=1407051

Abstract:

"During the last several decades, the legal profession's definition of a "large" corporate law firm has gradually shifted. The rise of mega-firms, with broad geographic platforms and highly sophisticated, specialized, and profitable practice groups, has been expedited by the steady erosion of the norm against lawyer movement between firms. This change in market structure and professional ethos is attributable to a confluence of factors, including the bureaucratization of corporate legal departments; the publication of law firm financials; the delineation of individual lawyers by prominence in various regional, national, or global markets; and the challenges of maintaining shared cultural values and long-term time horizons in the face of perpetual growth imperatives driven by the promotion to partnership tournament.

To date, commentators have described this process without necessarily articulating a logical endpoint. The purpose of this essay is to assemble the empirical facts of the "age of lawyer mobility" and, in turn, to offer some preliminary observations on: (a) the internal economic logic that propels the growth strategies of most large U.S. law firms; (b) how these strategies collectively produce a value proposition increasingly less attractive to clients and young lawyers; (c) structural problems within most large firms that inhibit their ability to effectively adapt to changing market conditions; and therefore (d) why many large law firms are vulnerable to small and mid-sized competitors who, by virtue of their size, have the flexibility to emphasize cost, collegiality, innovation, collaboration, and shared risks, both within the firm and with clients. Although a substantial number of large firms will continue to prosper, primarily by attracting lateral partners with the most lucrative and loyal clientele, most large firms (i.e., Am Law 200 or NLJ 250) will likely have to retool their business models in order to survive."

[wired]

[quote]The pain of 26-year-olds earning six figures may not seem great in a country where unemployment hovers around 10 percent. But, Legal Tease argued, that six-figure salary looks a lot smaller when you divide it by the number of hours worked. “If you do the math, you’re making less than a baby sitter — not a nanny even, but an actual baby sitter in high school,” she insisted.[/quote[

What alternate reality is she living in?

Let's assume that you are required to work 80 hours per week every week of the year as a new associate. You have a starting salary of $160,000.

160000/(52*80) = 38.47

While that is not what a lawyer would like to be paid per hour, it is most certainly more than a high school babysitter is making. Furthermore, you won't be working 80 every single week. Her outrageous accusations make me turn my nose up at her!

[solidsnake]

^^^
OOH, you probably won't work all 52 weeks of the year.
OTOH, 160k is gross income. Good luck collecting anything near that post-tax.

Babysitters work under the table. But, yeah, she was probably using hyperbole to get her point across.

[araiza99]

Subtract $40k in taxes, $24k student loan payments, etc...

[Renzo]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

[joshhoward]

that's best case scenario though. not top 10 law = not 160k

[mallard]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

It's not terrible, it's just also significantly less, per hour, than I got paid as (for instance) an LSAT tutor.

[heyguys]

oh noez, you mean I may have to live off roughly 100 thousand dollars a year after factoring out taxes and student loan repayments??? can people actually do that???

biglaw will almost certainly be there by the time we get out; market rate might not increase, but one point of optimism is that firms are hiring 1Ls this year. Can't imagine they would be doing that if they couldn't afford it.

[araiza99]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

Bonus checks are heavily taxed.

BTW, when do you expect taxes to go up?
--ImageRemoved--

[09042014]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

Bonus checks are heavily taxed.

BTW, when do you expect taxes to go up?

When the Bush tax cuts end in 2011. Bonus checks aren't more heavily taxed than any other sort of money(ignoring the marginal tax rates), but they have a really high percent withheld.

[ruleser]

I lol'd at this quote:

"Smart, talented people will still find advancement within firms, he said. But “speaking candidly,” he added, “in the past, associates were a little oblivious” in presuming that if they “simply showed up every day and didn’t offend anyone, they were there indefinitely. They have had a wake-up call.”

You mean you can no longer suck/do nothing and make $160K+ raises/bonuses for life? WTF?

[mallard]

I lol'd at this quote:

"Smart, talented people will still find advancement within firms, he said. But “speaking candidly,” he added, “in the past, associates were a little oblivious” in presuming that if they “simply showed up every day and didn’t offend anyone, they were there indefinitely. They have had a wake-up call.”

You mean you can no longer suck/do nothing and make $160K+ raises/bonuses for life? WTF?

"Showed up" doesn't mean "do nothing" if you're showing up seven days a weekend for ten or twelve hours a day.

[araiza99]

.

BTW, when do you expect taxes to go up?

When the Bush tax cuts end in 2011. Bonus checks aren't more heavily taxed than any other sort of money(ignoring the marginal tax rates), but they have a really high percent withheld.

I have read that there are additional taxes imposed on bonus checks. States want a greater cut. My own personal experience with getting big bonus checks = serious disappointment when even more taxes are withheld.

So you expect taxes won't rise to the levels seen after wars or the new deal? Somehow there is all this added spending but the taxes will remain at a nice 39.6%? How do you explain the tax rate at over 90% during the 40s and 50s?

[Kohinoor]

My suspicions began when I was linked to an article in the fashion section and were realized when the article was anecdotes, conjecture, and a discussion of a television show.

[rayiner]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

It's not terrible, it's just also significantly less, per hour, than I got paid as (for instance) an LSAT tutor.

Per-hour wages aren't really comparable between part-time jobs and full-time jobs. People make $20/hour working at Best Buy, but that's not the equivalent of a $40k job. The uncertainty of irregular work hours, no benefits, etc, is built into that seemingly high salary.

[09042014]

.

BTW, when do you expect taxes to go up?

When the Bush tax cuts end in 2011. Bonus checks aren't more heavily taxed than any other sort of money(ignoring the marginal tax rates), but they have a really high percent withheld.

I have read that there are additional taxes imposed on bonus checks. States want a greater cut. My own personal experience with getting big bonus checks = serious disappointment when even more taxes are withheld.

So you expect taxes won't rise to the levels seen after wars or the new deal? Somehow there is all this added spending but the taxes will remain at a nice 39.6%? How do you explain the tax rate at over 90% during the 40s and 50s?

The top marginal tax rate was 90%. And that tax bracket was very high compared to today. After the Regan tax reforms the overall rate was lowered, but so was the income level to hit it.

When the tax rate was 90%, it was 90% for every dollar over 400,000 in 1960 dollars. So basically 90% for everything over 3 million in current dollars (even the partners at the firm you'll work for probably won't make that much). It wasn't so much a tax, as it was a maximum income. No company would pay that knowing 90% would go to the government. Some making an associates wage would pay much less.

And more spending and less taxes pretty much sums up American history from 1980-2009.

[mallard]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

It's not terrible, it's just also significantly less, per hour, than I got paid as (for instance) an LSAT tutor.

Per-hour wages aren't really comparable between part-time jobs and full-time jobs. People make $20/hour working at Best Buy, but that's not the equivalent of a $40k job. The uncertainty of irregular work hours, no benefits, etc, is built into that seemingly high salary.

Which is exactly why massive biglaw layoffs makes it seem a lot less desirable even to the types of people it would normally attract.

[araiza99]

The top marginal tax rate was 90%. And that tax bracket was very high compared to today. After the Regan tax reforms the overall rate was lowered, but so was the income level to hit it.

When the tax rate was 90%, it was 90% for every dollar over 400,000 in 1960 dollars. So basically 90% for everything over 3 million in current dollars (even the partners at the firm you'll work for probably won't make that much). It wasn't so much a tax, as it was a maximum income. No company would pay that knowing 90% would go to the government. Some making an associates wage would pay much less.

And more spending and less taxes pretty much sums up American history from 1980-2009.

What was the tax rate back then for people making the equivalent of $160k/year?

[Renzo]

Subtract $40k in taxes, $24k student loan payments, etc...

Add bonus of $7k-10k in bad years, $10k to 30k in good, etc....

And you're left living off $100k after taxes as a first year, $160 as a fifth year (assuming you didn't pay off your loans already).


Sounds terrible.

It's not terrible, it's just also significantly less, per hour, than I got paid as (for instance) an LSAT tutor.

Per-hour wages aren't really comparable between part-time jobs and full-time jobs. People make $20/hour working at Best Buy, but that's not the equivalent of a $40k job. The uncertainty of irregular work hours, no benefits, etc, is built into that seemingly high salary.

Right. I have had jobs that I billed at $100/hr. I have never made $210k/yr.

[crazycanuck]

I have always maintained this, and I will repeat it:

There is nothing wrong with having to be the best to go to the big firm jobs, to get paid the big bucks. What IS wrong is the ridiculous tuition schools charge to get a law degree. With that tuition you have to get a big law job just to survive, THAT is the real problem.

In Canada, we have I think 12 schools, 1 per major city with a few in Toronto. At UBC last year (the law school in Vancouver and one of 2 law schools in B.C) you have to be about top 30% to get a shot at the big national firms, and top 50% to have a shot at the bigger regional firms, first year salary is around 50-75, everyone else gets 30-50k jobs. The difference here is that UBC tuition is around 11k/year, so debt isn't nearly as big of an issue. I have a friend who is graduating from there this year and he doesn't know anyone who doesn't have a position, and usually less than 10% of the class don't get a position right after school. With the lower debt, students are more free to pursue whatever avenue of law they want.

[TTT-LS]

.

[Aeon]

It's unlikely that BigLaw will disappear any time soon (barring any radical changes in the economy, governmental intervention, etc.). There are considerable economies of scale to having a large firm.

--ImageRemoved--

This chart is bunk. For one, it selectively places labels identifying presidential administrations (and in any case, it's Congress that sets the levels of taxes, not the White House). Moreover, it's impossible to compare the highest bracket of income taxation 50 years ago to today. As already mentioned, the relative income at which one falls into the highest income bracket has varied (eg: $400K a few decades ago had much greater buying power than $400K today). Finally, it only looks at the federal income tax, not taking into account things like social security and Medicare withholdings, state and city income taxes, property taxes, sales taxes, etc. The actual average tax burden on the highest income bracket today is over 50%.