"For New Lawyers, the Going Rate Has Gone Up":
The Saturday New York Times has a story on how starting salaries are up for 1st year associates at many big New York law firms. The "going rate" at top New York firms is apparently $145,000 a year these days. I see that even Anonymous Law Firm is in on the act. By comparison, starting salaries at top NY firms a decade ago were $86,000 in 1996 dollars, if I recall correctly, which as best I can tell is roughly $110,000 in today's dollars.
Mucho respect for Professor Kerr for mentioning it in his post.
Interesting article about NYC. Incidentally, I think DC is experiencing the same salary trend. My office (an IP boutique firm in DC) just raised starting associate salaries to 135 this year, and apparently plans to bump them up to 145 next year.
Meanwhile, I'm sitting here happy as a clam starting at $60K in my small firm, having enormous potential for upward mobility, having a social life, living comfortably on my salary, being able to differentiate between my work and my personal lives, and actually having fun doing what I'm doing.
Keep telling yourself that...whatever makes you feel better about making less than half of the going rate.
Surely many top tier law students would find 70k/year and a 35-hour work week appealling. Even if a firm could attract only lower-ranked students with that salary, I am fairly confident that 2 lower ranked (less intelligent, more lazy, less lucky, whatever) associates could meet the productivity and quality of 1 top tier associate while working significantly less hours.
Perhaps there are more costs to duplication of associates than I am accounting for?
Yeah. France tried that with their blue collar workers. It was a disaster. Lot of cost associated with transitioning work between people, training costs, benefits, social taxes etc. Looks good on paper, works like s*** in practice.
Well, you need to account for the fixed costs of having a lawyer on staff as well -- office space, equipment, secretarial help (although this could maybe be the same amount, since the same amount of productivity is expected). Your firm would have to have nearly twice as much real estate (unless you pack them tighter, which also goes to quality of life), without any rise in real revenues.
Also, I think you'd see a significant dip in quality by doing this, at least at the very top of the profession. Law school trains top students to work very hard, and I think many would likely take the existing regime over your proposal, because they are used to working hard and don't view it as a huge problem.
Also, I wonder if there are quality gains from having a single person focus on an issue very intensely, versus fragmenting that issue over more people? Probably wouldn't apply to many first-year chores such as document review, but might become more of an issue as tasks become more complex. You'd have more work being dong by committees instead of individuals, which adds inefficiencies and may also lower quality (at least in my experience).
So, in effect, you are dumbing your workforce down in order to achieve this goal.
You're missing the point. We go to these firms for just a few years, bank all that money, and then leave for the easy small-firm life with retirement already taken care of.
Law firms get upset because the 3rd-4th year is when we become profitable, but what do they expect us to do with these work hours?
They don't? Tell that to the output numbers of big firms who have used them to set up mergers; to the output numbers of the overall economy, the rules (private property, contract, liability, etc) the lawyers have defended and enforced; tell that to the bottom line of productivity and functional market processes, price signaling, calculation made possible by firms using lawyers to discern copyright, patent protection, trade secrets, whether an innovation is worth the risk and expense or will be mimicked too soon by a competitor.
Lawyers may not produce any durable goods in the narrow sense, but they certain produce a good - a public good, a private good, information, knowledge flow at the very least. They maintain the structure of our society - for better or for worse, and act on behalf both of society and of private business and households. They also certainly add to the output of the economy in several ways at least.
I work hard, make a comfortable living that will get even more comfortable as my billables, origination, and bonuses increase, and I have the time and sanity to continue to enjoy my relative youth.
I'm not rationalizing anything. I'm perfectly happy with my career - past, present, and future. I've known big-firm attorneys with six-figure incomes who, on an hourly basis, make less than a Wal-Mart greeter.
They don't? Tell that to the output numbers of big firms who have used them to set up mergers...
Lawyers really don't add to production. One set of lawyers makes compliacted rules so another set of lawyers has to figure out ways around those rules, and then two more sets of lawyers have to spend yeas in court fighting over which set of lawyers is right and another set of lawyers (judges) has to decide who was right.
All these intelligent people should have gone into science or engineering and added to the sum of human knowledge, not spend their lives making rules that strangle the productive ones. Repeal 90% of the laws!
Lastly, its nice to hear that Adam is happy with his job, his upward mobility (what does that mean exactly?) and prefers his current job to work at a big firm. But I am not sure Adam quite understands what he is missing. First, unless Adam and his firm are exceptional paragons of efficiency, I have a really hard time believing he can produce quality work concerning non-trivial legal issues without putting in substantial hours. No attorney I know---from local PDs to State and Federal court judges---thinks that you can have confidence in the quality of your work without putting in way more than 40 hours per week. Practicing law at a high level is just really hard. So I wonder, based on that assessment, whether your firm really is doing interesting, high quality work. Second, I think it should be recognized that top firms attract much of the best legal talent in the country (I'm think mostly of partners and senior associates). As a young attorney it is very beneficial to see what that kind of talent looks like and how it operates---even if you realize quickly that the lifestyle is not for you. Lastly, Adam should be aware that there is a better way to game the system. Associates at the offices of national firms in smaller markets---such as Dallas, Boston, Seattle, Atlanta---make the same salary as associates in the big markets. Such associates benefits from a substantially lower cost of living and work fewer hours. This is especially true when you compare NYC to anywhere else (this is the source of much bitterness on the part of NYC associates).
So long as we have private property rights (essential to productivity) we will need lawyers to help enforce those rights. Similarly, as long as firms have a need to purchase other firms, protect information, learn about the laws that help to protect information (such as patent and copyright laws), discover fraud and theft, and many other areas that will exist so long as private property exists - lawyers will be necessary to the functioning of the market.
Just because a product goes largely unseen - as many knowledge/information products do - does not mean that it doesn't exist.
Lawyers produce products - both good and bad ones - and in general add to the productive capacity and output of society. It is government bureaucracy and regulation that takes away from it.
The Walmart Greeter comment is a little exaggerated, no? If a lawyer worked 12 hours per day, 365 days per year, that would be 4380 in that year. A truly improbable amount of work even for the craziest big firm workaholic. If his salary is $100k, thats $22.80/hour, $125K, $28.50/hr, and $145k, $33.10/hr. More realistic, I think is an attorney who bills 2200 hrs/year, which amounts to 70-80% of his hours worked, or between 2750-3140 hours a year. That attorney is pulling in between $32 and $36 an hour on a $100k salary. I guess its scary that attorney are not making more than that but really, how many Walmart greeters do you know that make that kind of hourly wage?
Well, how many summary judgment motions have you won this year (either at the hearing or by having the other side just give up and file a non-suit)?
And lets assume that million dollar property losses or wrongful death cases count as significant.
I've won sixteen so far this year.
Yet, I walk my daughter to school in the mornings, I see her at night and I take weekends and holidays off.
So it is possible, there is life wherever we find it, for the reasons we find it.
The cost of living is lower, sure.
Plus, money in the federal government goes up substantially the more experience and time in service you have. The attrition rate of federal employment versus big firms, the benefits package, vacation, work pressure, retirement, and various forms of security, make relying on starting salaries as a comparison a very misleading proposition. I don't know what a lawyer with 15 years of service for the federal government makes but I'm sure it's pretty damn good, especially given benefits, security and working conditions.
If your options are, $150K to start somewhere versus $50K to start somewhere else, yes that's a big difference. The percentage of law graduates who have that option is miniscule.
Stephen, I hate to burst your bubble but, no, a million dollar case is generally not significant to a top New York firm (unless it involves some important precedent). Indeed, such cases are generally too small to take on and often referred elsewhere.
The class action and hostile takeover cases I handled at S&C and Skadden frequently involved well over (often several multiples over) a billion of dollars and the kind of complex and novel issues of law that one will never see in any wrongful death case. Hell, the billables alone in such cases often came to more than a million dollars in a year.
Of course I never had sixteen summary judgments in a year. I couldn't possible take on sixteen of the type of cases I handled in a year and devoted a fraction of the time that they required and that my clients expected and demand -- and I'd have been guilty of malpractice had I tried.
Today, as a general counsel, I have occasion to hire outside counsel for both cases of the size you handle and cases where a top firm is called for. My needs, expectations and hiring criteria are quite different depending on which type of case we are talking about.
I assume you are good at what you do. But don't presume that the service you provide to clients facing a hum-drum million dollar wrongful death claim would satisfy the needs of a Fortune 100 client facing a bet-the-company class action securities claim or a hostile takeover attempt. On the otherhand, were a lawyer to devote the same time and resources to million dollar wrongful death case as are appropriate for a $2 billion dollar class action securities claim, he'd be justly fired for over billing.
Different horses for different courses.
Here are my two questions:
(1) Exactly what is the profit margin on an associate? In my neck of the woods, the going rate for new associates is about $110k a year, and those associates can be billed for around $175 an hour. It seems to me that associate fringe benefits don't cost the firm that much; our health care premiums are very high, the 401k is not matched, etc. So let's just say that it costs the firm $130k in salary + benes per junior associate.
Assuming the associate bills 2,000 hours with a 95% realization rate (which isn't an unreasonable assumption), that's $332,500 in revenue. After subtracting the associate's salary + benefits, you have $202,500 left. You mean to tell me that there is $202,500 in unrecovered overhead and costs associated with me? I think not! It seems to me that the profit margin on associates is rather high.
(2) It seems to me that 2% per year real wage growth (what Orin's estimate reveals) is not exorbinate. If NY associates were making (today's dollars) $110k in 1996 and $145k now, that's 2.4% real wage growth per annum. If you look only at nominal wage growth, it's still only 4%. Excuse the BIGLAW, but 4% nominal wage growth isn't out of line, especially given the high tech boom of the late 1990s! (Also take into consideration the fact that billable hour expectations may have risen at these firms between 1996 and 2006 - so it may not even be an apples to apples comparison).
sheesh!
Lawbot, It's evident that you cannot think in these terms, but for some people, there are considerations in life other than constantly measuring one's income against that of others. Some people are even capable of determining their own ethical and professional worth without even thinking about what other people make. Ironically, I can think of few things in life more impoverished than the life your post suggests.
In other words, there are 168 hours in a week. Suppose you need to spend 10 hours/day on nonleisure but nonwork tasks (sleeping, commuting, chores, paying bills, doctor visits, whatever). That leaves 98 hours (and feel free to adjust this number to whatever you would like--this is just an illustration).
So, in this illustration, up to about 49 hours of work per week you are still justifiably counting up work. But past that point, you are really starting to count down leisure. Or to put the point more broadly, the time you have is a fixed quantity, which is a point sometimes lost when you simply compare how many hours you might be working.
I'd agree.
You aren't bursting my bubble at all. I've friends doing the sort of work you are describing.
However, Westie had said anything that was "non-trivial" just could not be done by anyone who had any sort of time for quality of life.
What I'm doing is non-trivial, though I've no delusions that it matches up to large IP cases (having consulted and worked a little on the defense of IP malpractice cases I've an idea of what that sort of thing takes) or merger/M&A work or similar things in terms of the raw amount of work required.
Or even a significant fraction of the raw amount of work required. In fact, much of what I do is intent on making it look like no work was required at all.
Though any time the sanctions paid by the other side break seven figures, there has been some work done in a case ;)
I'd say I'd agree with almost everything you said, but the scope of "non-trivial" is broader than just doing 40,000 billable hour minimum cases.
I can, but each of has their own life, with their own regrets.
I spend a fair amount of time with my regrets each Labor Day week-end, and find I don't really know how to measure a life any more.
Federal district judges have 2 bright, though inexperienced, law clerks. What do most state court judges have? Shared access to a research attorney who is usually dividing his time among 2 or 3 judges with a combined caseload exceeding 1000 is common - and these attorneys are often poorly paid (worse than public prosecutors/defenders with the same years of experience).
Nick
Though I did get a judge to actually read and rule in a case like that -- this year in fact. Generally, though, once it gets more than an inch thick, you can guarantee they will rule against the motion.
Medis -- you make a good point. Anyone who wants to be happy ought to read some of those studies and Stumbling on Happiness (the link is to the blog, not the book, though the book is what I'd suggest reading over the blog, only the blog is on-line).
I would have put that minimum income at about twice what the studies suggest, but the science is really interesting.
Perhaps my word choice was poor. What I was trying to convey by using the phrase "non-trivial legal issues" was legal issues that are (1) novel (at least to the practitioner), and/or (2) complex or indeterminate, and/or (3)difficult to advocate persuasively. I don't see how you can address such issues in a high quality fashion without a lot of time and hard thinking. And I don't doubt that there are many instances where the legal issue is easy but the import of that issue is "non-trivial" for the litigants. Anyway, I continue to think that if Adam rarely has to stay late to conduct legal research or perfect a difficult argument or master a complex factual record, it seems to me that Adam should consider whether his firm is not dedicated to producing high quality work or just doesn't face particularly troublesome (and interesting) issues in their practice.
Maybe we don't disagree as much as I thought.
My experience is quite different. Certainly that is not the case with any of the federal court judges I have appeared before. Nor is it the case in the Commercial Division of the New York City courts, where most large commercial cases are diverted. Those judges, pretty much without exception, read and are familiar with the parties' submissions. And even in regular state courts, I generally find (with some notable exceptions) that a judge will devote significantly more time than is his usual practice when particularly large complex cases are before them.
Besides, what you describe is just piss-poor lawyering. Good lawyers know better than to bury the court in unneccessary paper. Doing an enormous amount of prepatory work does not prevent one from presenting one's arguments concisely and effectively (especially if in state court). I've filed many successful dispositive motions in big cases, representing a huge amount of work, without seeking leave to exceeed the court's maximum page limit (eg., 25 or 35) for briefs. And now that I'm in house, I've rarely encountered a big firm litigation partner who doesn't understand the importance of brevity in court submissions.
I need to add you to my approved counsel list.
Am I missing something?
That there is a timeline for the case?
After 9 years I was at 14-5, which today pays $103K. A decent sum, even in DC. But the real payoff was that those were the only years in the last 25 when I worked 40 hour weeks! Show up at 9, knock off at 5, weekends free and rarely take work home.
Kind thought, but I'm doing CL for a staff counsel office, so I'm not on those lists anymore. An ability to not worry about rainmaking has to be high on my list of reasons I like my current job
which today pays $103K. -- and I'll bet you actually used your vacation time, not to mention, last time I looked the federal attorneys were still on an accrued pension system and were able to work flex time when they wanted. I know a number who work four ten hour days and take a three day week-end every week while commuting before and after rush hour on the days they do work.
I second that.
"There's not really a connection between salary levels and hourly
rates. We set salaries at whatever is necessary to attract and retain
the best associates. We set hourly rates by client demand and market
conditions based on firms operating at our level in the market."
No, there is a connection. The connection is number-of-hours-worked,
and number of associates who make partner.
Effectively, there are three independent variables in law-firm economics:
Associate salaries, associate hourly rates, and per-partner profits.
Partners will more or less hold the third variable constant, and the
other two are, generally, endogonous. There are only two dependent
variables, as too many associates learn too late.
Lesson to Learn: Be aware of the deal you're making when you sign up.
Sorry to burst any bubbles.
As for how many hours each week you have to work, that depends on how experienced and efficient you are, how good you are at managing your time, and what you have to do. Sure, you put in long hours immediately before and during any trial, and maybe the day before an important brief is due. But, there can be gaps when the work doesn't require the level of commitment Westie is describing (I say this as someone who has billed over 340 hours in a month). At a big firm, though, you always have innumerable demands on your time, from your partners, clients, and because they expect you to bill alot to justify the salary they pay you. Also, you are often asked to do assignments of almost no utility, when an otherwise highly intelligent person comes up with a foolish idea and insists that it must be done immediately (and you can't gently try to talk them out of it).
Is it too late for me? I don't have any legal training or experience, but I stayed at a Best Western a couple months ago.
That isn't true. That just isn't true. And it's also not true that you have no social life. I get more [censored] now that I have a huge salary that is publicized.
Nick: You forgot, in federal district court, your 3-inch, important, preliminary injunction opposition might end up in the hands of an extern who just finished his first year of law school.
... and worked every holiday, including drafting my wife to help me work on some holidays ...
There is more to life. This has been a good thread to read this week, especially this weekend, since I reflect a good deal on life on September first of each year.
Thanks to all for you posts and thoughts.
Yup. With my seniority, I think I accrued 20 days vacation per year, translating to a month. Or maybe it was less, now I forget, but plenty enough. You HAD to use it since I think 20 days was the max carryover -- "use or lose" time. Attorneys didn't have flex time when I was there.
It was low-stress, too. Esp. after I figured out a number of timesavers, and made sure never to let the boss know. "We've never done it that way" is a commandment in government. I estimated that if I handled my eight hours of work with the efficiency of private practice, I could get it all done in 3-4 hours. I never got it to that efficiency, but got maybe halfway there, meaning about 6 hours of real work and 2 hours of reading legal history, etc.
Example of inefficiency: someone sues a client, Justice must represent them. OK, so I write up a memo to Justice about it. Nooo.... it must be a comprehensive litigation report, in seven copies, to be signed by the Solicitor, i.e., approved by me, my boss, his boss, and then the top dog. At each stage it sits in an in-box for 3 days to a week or two. Any trivial typo will have it rejected, and sent back for another redraft and seven copies. (I once had one rejected because there was one space between a period and first letter of another sentence, and the gov't style manual called for two).
Second, these associates, having no practical experience, are of little real value to the firm. Often, they end up just cataloging depositions, and doing doing boring stuff. I know several people who left these big firms after a few years, had to leave because they were only being trained to write memos for their firm, and this stupid stuff, and not getting any real training. Perhaps that's a function of each firm, but it's telling nonetheless.
Third, the underlying assumption is that these people are the 'best' and so are worth it. That, of course, is absurd. And if these firms are stupid enough to really think that a top grades at 'top' law school is worth it, then by all means, go for it. I, however, find that these top earners are often arrogant sobs who think they are brilliant legal eagles, who in fact know nothing about how the real world works, and are often poor researchers and writers.
And if they're from Harvard, forget it!
I estimated that if I handled my eight hours of work with the efficiency of private practice, I could get it all done in 3-4 hours.
I recently moved from the private sector into a (non-law) job on the Hill, and I disagree strongly. A typical meeting on the Hill will accomplish as much in 1-2 hours as a typical law firm meeting would in 5-6 hours, and that's being conservative.
Now, law firms have every incentive to run things as inefficiently as possible, since they bill by the hour and make money by running up the clock. Non-law firm private sector employers, particularly those whose employees would refuse to work 80-100 hours per week, may be different.
And yet, year after year, these firms engage in these practices and make boatloads of money. Grades and law school quality are an imperfect filter, as anyone at those firms will tell you. But they appear to be good enough to reliably select people qualified to keep these very successful business models going.
I have noticed that billing rates have gone up at law firms at least as fast as associate salaries. Partners are making more money than ever. The people who are hurt by this are clients.
In the current legal environment where the general counsel's job is often to cover his ass, high dollar firms are often hired when they aren't needed. That way even if the guy loses the case, he can say, that he hired the best attorneys money can buy.
Well, the people who are hurt by this are stupid clients. If a client agrees to pay a buttload for legal services, so be it. That's the free market at work.
I had a friend Bonnie who worked at a large law firm in NY and earned top salary. When the firm imploded, she had a nervous breakdown, which took her several years to really get over it. She is now a solo practitioner and much happier.
When I graduated from law school in 1987, the top salaries in NY were about 70-80,000 per year. My starting salary for the federal gov't in DC was 27,000.
I know many firms that have casual fridays -- the question is whether THESE firms have casual fridays. Frankly, if I were paying someone out of school six figures, I would expect them to look like six figures every single day. Not just me, but the stupid clients that pay such a huge bill certainly expect it. I know of several large firms in Washington where you cannot walk outside your office without wearing your jacket.
As for having a chip on my shoulder, you bet I do. I've met many a Harvard law school grad who thought he or she was top baloney (I would normally use a more colorful word) but didn't know squat. I loved burying those guys. And I graduated in the bottom half of an good, but great, law school. Hey, law is all about competition and sparring, ain't it?
(a) they were no longer paying for the associates and
(b) that when he brought them, they wanted a discount on the rate.
I'm willing to believe that first year associates can produce some good, but often they are an overall drag, with a lot of "value" billing ...
Consider the firm that represents The Wall Street Journal. That same firm billed over a million dollars on a case on a theory that had been disposed of by a California Supreme Court ruling. Every batch of associates who rotated in reviewed the research and billed the file ... but not a single one of them did an updated citation check.
The lawsuit by the client (who also discovered that the "litigator" assigned to the file, while a partner, had never tried a case to a jury) was a second section, front page article. It was telling. It also left me wondering just what did the hours that were billed on that part of the file represent. Never did see a follow-up story.
Firms at that level in our local market require associates to put their suit coats on if they leave their office (i.e. to go down the hall to the restrooms, for example). Many of them also have guidelines for appropriate vehicles and such.
But some don't. Each firm has its own branding approach.
I will say that things are a lot better than the 1920s or so when incoming associates had to be married, with a working wife, because the firm did not pay enough for a many to support himself, required six and a half days a week in the office, and gave the associates a list of approved churches they could attend (and that they had to attend at least one of) in the half day they had off.
I've seen some very nice work from some of them too.
As far as I can tell, it isn't all inflated billing and such ... there is a lot of real, hard, and productive work done as well.
I think you can find and cite examples for whatever you want to look for.
Great thread though.
when did this story you're referring to run?
One thing I think the thread completely misses, though, is that the majority of the work at large NYC firms is NOT litigation - it is transactional. If you work on 11-figure M&A transactions (which I have), you can throw as many first and second years on the diligence as needed. Nobody at the client is going to complain. Similarly if you are doing a securities transaction where the client is raising money. Raising money is completely different than litigation, since the client is ending up with money, not simply avoiding losing money. Different psychology involved.
New York's Commercial Division is unusual, even among metropolitan court systems. Most of them have a complex litigation division, but that generally has cases get assigned due to a large number of parties rather than complexity of legal issues (which in many areas means that it's full of construction defect cases).
Nick
One thing that nobody has mentioned here is that not everyone WANTS to work on new and tricky questions of law. Many lawyers, including some who did very well in law school, are attracted by other aspects of the profession. Some actually prefer the fact-based side of trial work, for example, and many would prefer to have client contact on small cases instead of working on a small part of enormous cases. What's wrong with that?
I do think that the market is distorted, though. The big salaries at big firms pull in too many people who don't really like the work, even if they are intellectually capable of doing it. I'm not sure if halving the hours would solve the problem, although it would probably help.
You have no idea wht you are talking about. I am a mid-level associate who has worked at two very large law firms in NYC.
"You have to wear very expensive suits,"
No. Almost all firms are business casual 5 days a week all year. it has been this way since the late 90's. I almost never wear a suit, let alone an expensive one. I am in Structured Finance.
"drive new expensive cars (can't let a client see you drive to work in something cheap!)"
What??? I don't own a car. No one drives to work in NYC. We take the subway there and car service home.
eat at fine restaurants all the time (even when the firm, er, client, is not picking up the tab).
What??? Why would I need to eat at expensive restaurants on my own time if I did not want to. When you go with people from your office, the firm pays.