Following up on Saturday's post, Cravath Fires Latest Shot In Salary War: $400,000 For 7th Year Associates: Legal Evolution, #BadData, Part II: As the War for Talent Rages On, Let the Sorting Begin:
Cravath & Davis Polk associates are raking it in, and everyone’s got an opinion. Here’s some data to explain how & why the new associate pay scale is a rational move in a functioning market. …
In 1987, the high-end starting salary for a Big Law first associate was $68,000. Today, it has seemingly ballooned into $215,000 for a multiple of 3.2 in 35 years. But 35 years turns out to be a long time, during which prices for most things appear to skyrocket. In 1987, a gallon of milk was about $1.07 and a gallon of gas was about 90 cents. Today, a gallon of milk is about $3.88 (outpacing NQ salary growth at 3.6x) and a gallon of gas is hovering around $4 (while the most recent bump is reactive to the current crisis in Ukraine and uncertainty around dependence on Russian energy, gas price hikes take the cake at 4.4x).
What does that mean in plain English? It means starting salaries, even on the top-of-market scale, have barely gone up at all. In fact, when indexed to 2022 dollars, starting salaries have yet to recover to the 2007 peak. It is this hard-to-see & easy-to-forget impact of inflation that left first-year Cravath associates in the inexplicable position of feeling very, very poor while being paid the handsome salary of $160,000 by 2015.
It is easy to decry the relative uselessness and the absolute overcompensation of first-year associates. (That said, don’t sleep on this group. In Graham’s parlance, the first-year associates at the 25 most profitable law firmis in the world are highly likely to develop rapidly and they are likely to develop into highly productive lawyers regardless of well-worn tropes about lawyer inefficiency or technology avoidance.) It is true that Big Law’s elite have historically depended on outdated proxies for talent and potential like academic pedigree, and that such hiring practices are highly correlated to the lack of true diversity, equity & inclusion in the legal profession. In other words, to the extent elite law firms have made missteps in talent, it is probably that (a) they have missed positives in failing to select diverse talent and (b) they have missed opportunities to greatly speed the pace of development of the talent they do select.
