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April 12, 2006

Are Associate Salaries Justified? The People Have Spoken

Our last poll, asking "Are Associate Salaries Justified," drew just over 300 votes, and here are the results:

Since it's almost illegible at this resolution, here's a recap of the breakdown:

  • 36%, the plurality by far, representing the repressed-economist vote, responded "Yes--the only rational response to competitive forces."
  • 24%, the meritocrats, chose "Yes--required to attract top-tier students."
  • 16%, the curmudgeonly crowd, opined "No way; it strikes me as collective insanity."
  • 12%, the ex-Marine's, voted "Yes--they're required to extract hard work."
  • 10%, the resigned fatalists, went for "Who knows?  We can't control it anyway," and finally
  • 3%, speaking either for the ex-Marine's who were also drill instructors, or the profit-impaired firms, voted, "No way; and Stracher's 50% cut is overdue."

My reading on this?

Since 72% voted "yes" in one form or another, and barely a quarter of that number (19%) voted "no," the firm consensus appears to be that matters are not gravely out of whack on this score.  (10% took the agnostic route.)

I happen to agree that there's ample justification for paying associates handsomely:  Either on the grounds of Gregory Mankiw's "efficient wage theory," or else on my personal theory, which is that (a) paying people richly, and (b) expecting them to work like dogs in exchange, is the perfect introduction to what the life of a partner is like.  Consider it akin to an 8 to 10-year hazing process; I predict that those who emerge alive and kicking at the other end of this funnel will indeed be partnership material.

Published by Bruce at April 12, 2006 1:12 PM | TrackBack
Published to Compensation | Cultural Considerations | Finance | Partnership Structures | Practice Group Management | Strategy

Comments
To even ask this question is ridiculous. What about the increases in PPP or partner compensation?--which have increased 100%+ at most firms since 1999 whereas associate salaries have been stagnant. Every year the firms and partners are making more and more as billing rates are increased every year--and now finally after 7 years associate salaries are raised by a meager percentage and people ask whether it's justified? Are you kidding me? My firm recently raised 1st year salaries by 10K but they simultaneously raised the billing rate by $10, which based on a 2000hr year translates to 20K (more than double the pay raise). Firms have been charging more and more over the past 7 years and very little of that surplus has gone to the associates, so YES associate salaries are justified, and I believe senior associate salaries are drastically low.

Published by: associatex at April 13, 2006 3:24 PM

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