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<p>Actually, it’s a tremendous amount, when viewed from the purely economically rational, market-driven approach that my detractors continue to invoke. Your entire analysis is predicated upon the notion that salaries are determined solely by how many (billable) hours you work. But this is no different from the ‘labor theory of value’ that has been discredited by mainstream economists for centuries (although admittedly still holding sway amongst heterodox Marxist economists). Rather mainstream economics would maintain that wages are ultimately determined by the demand for the services that you provide, not the time spent to create those services. A supergenius Tony-Stark-esque engineer who can invent a flying car in the space of an hour can reap millions in profits, but if I spend my entire life trying to build a new technology but never succeeding, then I receive nothing. It doesn’t matter how much time I spent; all that matters is that I created no value. </p>
<p>Which returns us back to the point that I’ve made before which heretofore still has not been seriously challenged: new biglaw associates are unprofitable in the sense that they earn salaries far in excess to the value that they provide. And not just for an initial month or two which could perhaps be attributed to a standard training & integration ramp-up period, but probably for several years. I believe somebody on this thread mentioned that biglaw associates become profitable around year 3 at the earliest. Therefore it doesn’t matter how hard those new associates work, all that matters is how much value they provide. </p>
<p>I therefore must ask the question again: why are new biglaw associates paid so well? Specifically, why do biglaw firms continue to pay them in excess to the value that they provide? Do biglaw firms enjoy losing money? </p>
<p>Naturally that entire analysis rests upon the assumption that the biglaw employment practices are entirely economically rational. That assumption is questionable at best, for the fact is, most organizational practices are not entirely economically rational, but are accompanied by strong - sometimes overwhelming - social and political pressures. {Like I said, why are American managers paid so much more than are European and Japanese managers when there is little reason to believe that American managers are actually more competent than their counterparts? In particular, why did the management of GM and Chrysler continue to be paid better than that of Japanese car firms, all the while leading GM and Chrysler into bankruptcy? } </p>
<p>But what makes biglaw associate salaries so intriguing is that usually irrationally high salaries accrues to victors of the internal political jockeying within a particular firm. Let’s be perfectly frank - employees at any organization spend significant quantities (sometimes the majority)of time not serving customer demand but rather engaged in the intrigues of office politics, which then determines promotions and salaries. Savvy office politicians (sadly but unsurprisingly) extract salaries far in excess of their worth. </p>
<p>But brand-new associates have no internal political standing, as far as I can tell. Nevertheless, they’re still paid far in excess of their worth. How and why?</p>
<p>To reiterate, whatever ‘billable hours’ may appear on the clients’ invoice doesn’t matter for the purposes of who gets paid what. Just because an associate may bill a lot doesn’t necessarily require that he be paid a lot. After all, after the clients pay their fees, they don’t care what happens to the money, which now belong to the law firm to dispose of as it pleases. If the firm wants to take those fees to pay million-dollar bonuses to its janitors while shafting the associates, that’s not the clients’ concern.</p>