Long but interesting article on the economics of law firms, why first-year associates in the top firms now make $160K per year, and what might be broken about this. (For comparison, once you count bonuses, this is more than the salary of Supreme Court Justices.) (See also.)
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“Nice try, but it bears only the remotest connection to the way labor markets actually function. If they functioned the way the cost-plus crowd hypothesizes, I could afford my own Gulfstream V, Provence villa, and 5-bedroom penthouse with Central Park views: After all, I just increased my “costs,” so the workings of the market would appropriately subsidize me on the wage side, right?”
Things such as ever-increasing law school debt are a prerequisite for entering the law profession. They’re not a “gulfstream jet” perk that you always fantasized about and just happened to incur. They’re an up-front expense that must be incurred to enter a given profession and (more importantly) must be paid back. It makes sense that as *law-school* debt rises, the expected entry-level *lawyer* salary rises similarly to offset the increased debt incurred. Or else people will decide that the $100k investment (not “cost”) in themselves isn’t worth it and become a garbageman instead, causing a relative scarcity of new lawyers. Which should drive up entry-level salaries even further. Free markets and all that.
Yes and no; people take on that much debt from the elite schools in part because they know they can pay it off quickly if they are careful. The non-elite schools are less expensive. If the top firms were paying $70-$80K/year, the schools would have a lower cost- virtually no one in their right mind would take on another $150K in expenses after the $160K in college expenses in order to earn that kind of money.
He’s also talking about a lot besides the education. The city-center rents and lifestyle have a lot to do with it too. Aside from buying a solid, appropriate work wardrobe, your expenses as a first-year associate don’t have to be high. You could live out of the city and commute; you could drink at bars in the suburbs where drinks cost $5 instead of $15 or $25. Many associates don’t choose these options, in large part because they know they get paid a shit-ton of money, and because the really aggressive ones know they can leave for other options- as he points out later in the article.
He does mention other expenses, but his argument suffers for including school debt. Sure, an entry-level associate doesn’t *need* to live downtown in a penthouse or hob-nob in top-line bars (though doing so may help their career ambitions and upward mobility. I’ve lived next to a ritzy building with lots of entry level lawyers, and without fail they saw their address as an investment. It’s all about who you know and appearances, after all.).
But a lawyer without fail requires a law-school education. My impression is that top-notch firms that pay big bucks prefer to hire folks from elite law schools. And elite law schools have an expectation that their students will go to work at top-notch firms that pay out big, and therefore they can get away with charging their students more. It’s a catch-22. The elite schools won’t start charging less until fewer students want to attend them. And that will only happen when top-notch firms start passing over elite-school grads en-masse. The salary spike starts at the top, not with the students.
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