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<p>Actually, their explanations are elementary: the NBA and MLB have robust unions. As a case in point, while the latest NBA agreement that concluded the lockout was portrayed as a relative victory for ownership, the fact is, the union still negotiated a deal that the rest of us could only dream of having. Imagine how much higher salaries would be for engineers, or even lawyers, if ownership agreed to split half of all revenue (not profit, but revenue) with employees and, and no firm could spend less than 85% on total salaries than the average of all competing firms. As an example, Microsoft generates $71 billion in revenue annually. Splitting 50% of that revenue with its 90,000 employees would mean that the average employee salary at Microsoft would be nearly $400,000. And remember, that calculation includes all Microsoft employees, including secretaries, janitors, security guards, etc. {Furthermore, the comparison doesn’t even factor in the fact that the NBA 50% revenue-split is disbursed only amongst the players - regular employees of NBA teams such as trainers, marketing staff, ticket salesmen, etc. are not included - so that average player salary is driven even higher. A 50% revenue split from Microsoft to be disbursed only amongst the engineers would surely mean that the engineers would all be paid 7-figure salaries.} </p>
<p>As a historical example, it should be noted that it wasn’t that long ago when baseball and basketball salaries (adjusted for inflation) were unexceptional even for the superstars, let alone for the rookies. Yogi Berra had a peak salary in 1961 of [url=<a href=“http://sportsillustrated.cnn.com/vault/article/magazine/MAG1075363/index.htm]$55000[/url”>http://sportsillustrated.cnn.com/vault/article/magazine/MAG1075363/index.htm]$55000[/url</a>] - which would be the equivalent of less than [url=<a href=“http://www.westegg.com/inflation/]$400,000[/url”>The Inflation Calculator]$400,000[/url</a>] in today’s dollars. We’re hardly talking about a middling player - Yogi Berra is arguably the greatest catcher in baseball history, being the only catcher to win 3 MVP awards. Similarly, Mickey Mantle made peak salary of only $100k, which is the equivalent of only $650k in today’s dollars. This is Mickey Mantle we’re talking about here! Even the great Babe Ruth and Ty Cobb made the equivalent of only about $1 million in today’s dollars; a backup role-player on an MLB roster makes far more than Ruth or Cobb ever did, courtesies of a muscular union.</p>
<p>But lawyers don’t have unions. So I must ask the question again: why exactly are biglaw associate new hires so well paid? Consider the following:</p>
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<p>All firms in all industries want top talent, or at least claim to. Engineering firms claim to want top talent, yet you don’t see salaries of new mechanical engineers spiraling upwards. Pharmaceutical and biotech firms claim to want top talent, yet you certainly don’t see salaries of new biology and chemistry grads (even those with PhD’s) spiraling upwards. Heck, even hospitals feel little compunction to ‘compete’ for new medical school graduates for residency positions, who are paid a minuscule $35-45k a year. </p>
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<p>Again, the far better explanation is that baseball and basketball salaries are dictated mostly by union negotiations. The NBPA negotiated maximum salary strictures for new players such as Rose. The MLBPA negotiated enforced guaranteed contracts for unproductive aging players such as Soriano.</p>
<p>We should also keep in mind that MLB and NBA teams behave as a legal cartel. MLB enjoys an anti-trust exemption as a matter of Supreme Court ruling, because baseball is [url=<a href=“ESPN.com - Baseball's antitrust exemption: Q & A”>ESPN.com - Baseball's antitrust exemption: Q & A]apparently[/url</a>] not interstate commerce. The NBA’s status as a cartel is legal by virtue of the existence of the NBPA, as companies are immune from antitrust litigation regarding labor practices if employees are represented by a union (which is why the NBPA threatened to decertify which would then allow the players to sue the NBA owners for antitrust violations). </p>
<p>But, like I said, lawyers don’t have unions, and biglaw firms are not a cartel (at least, not formally). Which makes it all the more impressive that such high salaries are nevertheless garnered by brand new law school graduates, without the expense and bureaucracy of a union. Granted, those high salaries are available only to those who make it to biglaw, but that’s no different from the high basketball salaries being available only to those who make it to the NBA. {Those who can make it only to the D-League are paid orders of magnitude less.} </p>
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<p>Actually, it seems to me that the rational strategy for a law firm is to allow some other biglaw firm to incur the high salaries of training new graduates for the first few years, and then raid them once they’re fully trained and productive. Why not? Other posters here have stated that if midlevel and senior associates’ salaries were lowered (which I never recommended), then they would presumably leave for other firms which indicates that competition for trained labor is vigorous. So why not have other law firms (stupidly) incur the costs of training, while you later reap the benefits? </p>
<p>Again, to be clear, the key difference between biglaw and sports is that sports teams not only force players to sign multi-year contracts, but also (in the case of the NBA) can sign current players to add-on contracts through home-team preferential policies such as the ‘Larry Bird exception’. Biglaw is under no such restrictions. Associates are not under signed contracts, but rather are permanent free agents who are free to jump to other employers at any time. So why don’t they?</p>