Milbank surprised everyone this week by boosting associate salaries over their 2016 levels. While we wait to see if others will follow suit, Joe and Elie break down what’s happened and what this might mean for the industry at large.
Above the Law – Thinking Like a Lawyer
Emergency Podcast Milbank Raises Salaries
Intro: Welcome to Thinking Like a Lawyer with your hosts Elie Mystal and Joe Patrice, talking about legal news and pop culture, all while thinking like a lawyer, here on Legal Talk Network.
Joe Patrice: Hello. Welcome to another edition of Thinking Like a Lawyer.
Elie Mystal: Money.
Joe Patrice: Yeah, I am Joe Patrice.
Elie Mystal: People are making money.
Joe Patrice: That’s Elie Mystal.
Elie Mystal: I am so fucking broke.
Joe Patrice: Yes, we are having a conversation today in this very special podcast, I wish we had — a sound effect I do not have is like a, The More You Know kind of.
So this is a very special Thinking Like a Lawyer because we are going to talk about breaking news.
Elie Mystal: Milbank?
Joe Patrice: Yes. So for those of you who don’t know, there were raises in the big law market, we are going to talk about what happened, why you should care and what’s going to happen next.
But first, we thought we should hear Elie complain about some stuff because that’s what we do on this show.
Elie Mystal: It’s pretty easy to complain today because as much as I am happy for our readers and our kind of soon-to-be readers who are all about to get raises, I think, and we will talk more about that later. Man, it puts into stark relief how much money I left on the table when I left big law.
Joe Patrice: Yeah.
Elie Mystal: Good Lord. So, just to do a little personal accounting, when I started in 2003 the starting salaries were $145,000 a year, that was up from about — I think it was like 120 in 2001.
Joe Patrice: 125.
Elie Mystal: 125 in 2001. By 2003 it was 145. I quit in 2006 and 2007 Simpson Thacher raised them to 160, and then the bottom fell out. And so it was 160 forever, until two years ago, Cravath raised them to 180, and now today, yesterday, well, depending on when you read this, last week — watch this, listen to this last week, Milbank raised them to 190. And we don’t know if that’s where it’s going to stop in this particular round.
Joe Patrice: Yeah.
Elie Mystal: I did an accounting, not including these raises, but I did an accounting after Cravath’s raises, just adding up all of the money that I would have made had I stayed in big law, not even assuming that I was made a partner, just assuming that I had stayed, not been fired, which was the thing — which was not a sure thing.
Joe Patrice: Well, I mean if you did not make partner that probably was a result that was going to happen, yeah.
Elie Mystal: Yeah, but I kind of like settled into of counsel service partner world, and it was well over $2.5 million. I mean reduced from what I actually made over those times, just well over $2.5 million, just left on the table because I didn’t like representing corporate clients and I instead wanted to write mean things about white people. Like that’s a lot. Like I have put in some dues, some — I have some skin in the game. You know what I am saying?
Joe Patrice: Yeah.
Elie Mystal: My wife knows what I am saying.
Joe Patrice: Yeah. No, because she is the one who actually funds your life.
Elie Mystal: Yeah, somebody has got to.
Joe Patrice: Yeah. No, I hear you, so yeah.
Elie Mystal: Man.
Joe Patrice: That’s a complaint.
Elie Mystal: Let’s take a break.
Joe Patrice: No. What I was thinking was, oh, you just meant from like our jobs entirely, yeah.
Elie Mystal: That was a double entendre, but sure.
Joe Patrice: Well, since we are talking about raises today, you know what that’s got me thinking?
Elie Mystal: How to get a better job.
Joe Patrice: It does. That’s exactly what has me thinking. So, getting in at a new firm where you are going to get access to some of that better pay, or if you just want to move to a different firm because it better fits your career goals, either way, but if you want to do that, you shouldn’t do it alone. And that’s where Major, Lindsey & Africa comes in.
MLA has over 35 years of experience in the field of legal recruiting and the know-how to match lawyers with the firm or legal department that best suits them. The market is constantly changing, which is the whole point of today’s episode, everybody.
Elie Mystal: So much change.
Joe Patrice: Yeah, and Major, Lindsey is suited to help lawyers navigate that evolving landscape. So check them out now at HYPERLINK “http://www.mlaglobal.com” mlaglobal.com.
Elie Mystal: Honestly, I promise you, if your firm is not going to match these raises, you are going to want to give Major, Lindsey a call and go find your money.
Joe Patrice: Exactly.
Elie Mystal: With that said, Joe, why don’t you take us through, because you did the initial post, so what — just explain to our listeners who maybe haven’t read Above the Law for reasons passing understanding, explain what happened.
Joe Patrice: Yes. An email comes in from an anonymous tipster who says, Milbank just raised salaries and attached an email that seemingly looked like it was the firm chair informing everyone that they had raised their salaries between $10,000 to $15,000 per class, in an amount that roughly translated to a cost-of-living adjustment since the last raises in 2016, slightly more, maybe like a 1.5% raise or something like that.
Elie Mystal: I think somebody ran the numbers.
Joe Patrice: It was 1.6 I think.
Elie Mystal: Yeah, 180 from 2016 and 2018 dollars is 1.86. whatever and they raised it to 190. When we saw the first one I thought it was a hoax, because Milbank, really? The first mover is going to be Milbank?
Joe Patrice: Yeah. I mean obviously we have lived in a world where Cravath is usually the first mover when it comes to salary issues. Simpson is willing to buck that, you pointed out they made the change the time before. They also have led occasionally on bonuses, though that’s also usually led by Cravath.
Milbank, of which —
Elie Mystal: Skadden has led on bonuses in the past.
Joe Patrice: Milbank, which was a monster huge firm back in the day, but has settled into being just an elite firm that isn’t part of that super top tier over the last several years made this move, and it’s a move that honestly, I do believe this isn’t really — I don’t like to think of this as a raise, and we will get into this a little bit more later, I really do think of this as more of a cost-of-living adjustment.
It’s more that they looked at the world and said it’s ridiculous that we would say this is what people were worth in 2016 and in 2018 go that number is still what it is, even if it’s not worth the same, so I get that.
Elie Mystal: One of the things that I think people need to remember is that the law firms are not raising salaries in a vacuum, and I am not talking about the low-grade law firm collusion that quite frankly a site like Above the Law helps along by publicizing all the salary numbers, it allows the firms to kind of collude without needing to actually collude.
But my point is more that law firms do not raise salaries in a vacuum of just other law firms. They are looking at where the talent is going throughout the legal industry. So a big law firm is going to raise salaries when they are losing talent, when they fear like they are losing talent to in-house sources, to smaller boutiques internationally. These are the kinds of factors that they are thinking about. They are never in a position to give money away for free, right. It’s never out of the generosity of their own hearts.
They were looking at market forces and they were saying we need to make this adjustment, whether you want to call it a raise or an adjustment, to compete and compete for the best talent.
Joe Patrice: Yeah. I mean I think that’s true. I think if I were to guess what went on here, I think that Milbank, as I said, years ago this was one of the super elite and now it’s just a very good firm — it’s still an elite firm, but it’s just not quite at the tier of the Cravaths and Simpsons in our minds.
Meanwhile, when you look at rankings of various law firms, and I don’t know as though necessarily the Above the Law rankings of law firms, but other rankings tend to undersell the value I think of Milbank comparative to other firms in their tier. I think there are other firms that rank higher than them that I look at and go they are not better than Milbank.
And given that, I think that what happened here was a realization that maybe they should do something to make it clear that they are real players and in this instance the easiest and frankly probably correct thing to do was to make a cost-of-living adjustment and they did and a slight raise on top of that and there we go.
Elie Mystal: What a nice happy view. You will not be surprised that I have a more cynical take on what we are seeing right now.
As of this recording, Milbank moved first, we have had Proskauer and Winston so far, Winston & Strawn so far match that 190. We can expect —
Joe Patrice: And Hueston Hennigan.
Elie Mystal: And Hueston Hennigan matched 190. The usual big movers that we have been talking about Cravath, Sullivan & Cromwell, Davis Polk, those people have not matched yet.
Joe Patrice: Correct.
Elie Mystal: The question then becomes — doesn’t become are they going to match or not or just stay at 180, they are not. If Milbank is paying 190, Cravath is not going to be pay 180, that’s just not how the world works. The question is whether they are — firms like that are going to match 190 or come over the top and go to 200,000 for a starting salary.
Now, my take on what’s going on is because of the competition from other parts of the legal industry, they all have got to know that salaries need to go up. The question is how high they need to go up and I wonder if what we are seeing, especially with the quick matchers, the Proskauer and the Winston & Strawn’s, if the attempt here is to try to set the market at 190 as opposed to 200,000, which had Milbank just waited for Cravath — if Milbank was just going to wait around for Cravath, maybe by the time Cravath comes in, Cravath would have just set the market at 200,000 and forced everybody to follow them.
Joe Patrice: Yeah. And I don’t think a raise was going to happen in the near future actually. I am one of those people who thought that they were going to sit this out for another couple of years.
Elie Mystal: So you think this caught CSM kind of completely by surprise?
Joe Patrice: Yeah. I think that everybody thought — remember we had a 10 year gap of nothing happening, right, so this was an instance where everybody thought this was the new status quo for ten years or until the recession that’s inevitably going to hit in a year so wipes everybody out. I think everybody wanted to just roll through that and move on.
And that’s why I really do — I do believe that the Milbank argument when they keep saying publicly this was just a cost-of-living adjustment, I take them at their word on that. I think they are trying to say, well look, we are not really eager to move the market here, we just thought let’s do a little bit right by this, because for reasons that you have said, there’s a lot of lateral movement at this point.
Like the way the market — you have kind of alluded to the way the market is, but the issue with the way the market is goes back to the 2016 raises, which we were at the forefront at the time of saying we are great and then they got out of hand. You wrote a great post about how they were getting out of hand.
At a certain point what used to be New York and DC maybe would have a premium salary and then everybody else would get a little bit less; that 2016 raise everybody — bumble outside a Dallas firm was getting the same as a Cravath associate and the way that it blew up like that resulted in a world where, back a little bit to our sponsors, groups like Major, Lindsey & Africa were right there to say hey, if you are originally from Texas, you now work crazy hours as a fifth year associate in an elite global firm, you want a family, would you like to make the exact same amount of money and a higher risk of becoming a partner to move back to Dallas and work 75-80% as much, and that’s a thing.
Elie Mystal: And the point where Dallas and Minneapolis and Indianapolis are paying the exact same amount of money as you are making in New York or DC, but without the actual cost of living without, if you are working in Texas, without state taxes, the argument for why anybody should be taking this money in New York, especially given New York hours. I mean it’s not just the cost of living here, it’s also the hours that they I would say bore into your soul and suck out of you, it’s hard to make the argument for why anybody as intelligent to take this kind of money in New York when it’s being offered other places.
The Milbank raises, like the 2016 raises, again apply equally to all offices. My question for you then is anybody going to change the —
Joe Patrice: Except the German office, yeah, go on.
Elie Mystal: My question then is anybody going to change that? Is Cravath going to either come over the top hard enough to put pressure on to make firms not want to follow them or only follow them in certain markets, like are we ever going to see what used to happen, which was meaningful salary disparity within the top 200 firms?
Joe Patrice: Okay, two levels to that. One, it does speak to a thing that I want to get into, but I will get into in a minute, which is that the more important question is who doesn’t follow; we will talk about that in a second. But as far as Cravath going over the top and trying to make this an actual raise rather than just a cost-of-living adjustment, I do certainly think that’s possible. I think given the amount of time that has transpired since this first announcement and how long it’s taking them to move, seems as though that’s increasingly likely.
If that were to be what happens, yes, I think there would be an effort to draw some distinctions. I think that’s what they wanted to do when they made the move in 2016 and it backfired tremendously as everybody followed. I think that that might have come to an end. I think that the last two years have played out in such a way for what we would like to call the Am Law 51 and below, the law firms that are big law, but not big law. Anyway, those folks have just not been holding up their end. Demand is on the decline. Their revenues are barely holding on.
I think that the gap between the haves and the have-nots in the Am Law world is growing and I think that a lot of the pressure that’s being put on those lower firms is that they have jacked up their expenses because they joined the raise and I don’t think they can justify having done that, and I think that if somebody were to go over the top, this time you would really see separation.
But that leads back to what my transitioning, which is to the first point, I think the real question is not who raises, who goes over the top something like that, I think those are sexy headlines that we are going to promote heavily on our website because they are cool. People want to see them. But the real question, I made this point in a post yesterday I think — no, actually this morning sorry, what I really want to focus on is who doesn’t move, because that’s going to tell us a lot about where firms think they are. Because anybody, if they go over the top, who knows, if it’s just a match, then it’s just people trying to COLA adjust.
But that’s the thing, if it’s just an adjustment to cost of living, anybody who paid 2016’s Cravath scale has no argument not to raise it, because it’s just a cost of living, and if they choose not to do that, that is the actual signal that they know they can no longer keep up with the big kids.
Elie Mystal: That’s a good point. And look, the other point here is that a recession is coming folks. I mean I am not good enough at markets to make money off of knowing that, but I think we all know that. This thing is not going to — the stock market is not going to go up indefinitely and we are getting ourselves into trade wars.
It’s unlikely for the good times to keep rolling, and I think that as you say, a lot of us who watch the industry thought that the firms were going to keep salaries where they were through this next recession and shake it out after that. So there’s a lot to suggest that, that — especially again, and I kind of agree with you about the COLA adjustment, but if Cravath really does come over the top and really does make it a real raise, they can afford it, not everybody can, and there’s not a whole lot of good reason for everybody to follow. That doesn’t mean they won’t.
Joe Patrice: Yeah, the recession point, which I understand how a lot of people might be skeptical, because everything is going up, but I mean this is your, for those of you who took calculus, this is your calculus moment, it is going up at an increasingly slower and slower rate. Every new pitch up is just a little less than the one before.
Same thing with employment, employment numbers go up every month, but slower and slower than they went up the month before. Those trends are when you start reaching the very, very top of a roller coaster and it starts thinning out. And when you add to that the way in which a lot of the tools that a economy uses to respond to, insane things have largely disappeared like any kind of a —
Elie Mystal: Stimulus _______ can’t do that anymore.
Joe Patrice: Yeah, there’s very little money hanging around that’s not just massive deficit spending anymore. Inflation is pretty much to the bone already, like there is a reason that $10,000 is the only thing that is cost of living over the course of two years at those numbers, right, like it’s going to be a little scary.
Elie Mystal: I love how we have turned our salary raise podcast into an end is nigh podcast.
Joe Patrice: Well, I mean — yeah, the end is —
Elie Mystal: So nigh.
Joe Patrice: We said this and some of us were saying this in 2016, right, that those raises usually portend a turn in the economy to the negative. Why? There are a lot of good reasons, but here’s a bad one because it’s more fun. The bad one is and it’s not entirely untrue lawyers are, A, risk averse; and B, usually really terrible at business.
And so the risk averse part is when the good times are rolling, they tend not to join in. They tend to say well, we could still pay you 160, even though the world has pretty much demanded you pay more.
Meanwhile, they are also bad at business. When they finally come around to realizing, hey, things look good enough that we can make a move, that’s usually when it has come to a conclusion. And so that’s where we find ourselves.
Now, the 160, for instance, another person pointed out about just being a COLA adjustment and the 1.6% raise that this is over the 2016 raise, somebody pointed out that if you compare it to the numbers in 2007, the 160 in 2007 would be worth like 198 and some change now. So they are like 200 is actually the accurate COLA adjustment for the 2007 numbers, which is interesting thinking, but yeah.
Elie Mystal: I can’t wait for Cravath to make that argument and make my summer.
Joe Patrice: Yeah, it’s going to be interesting. We are still in a kind of bunker mentality here at the office. We have slipped away for a minute or two in between craziness to record this podcast for you, but yeah, I mean we are just sitting hitting refresh constantly for people to tell us that their firm has raised to match either Milbank or go over the top.
By the way, this is a good time to pitch that if you didn’t know how to reach us, you should, because it is at HYPERLINK “mailto:[email protected]” [email protected]. Send us an email, do it from your non-work email if you want to never be found, whatever it is, just let us know because you are our eyes and ears out there on the ground.
Elie Mystal: Yeah. Don’t assume that somebody else is doing it for you.
Joe Patrice: Yes, absolutely. And the outpouring this time around has been great. We have been getting tons of tips from the firms that have moved, so much so that we can’t individually thank everybody for them because they are coming in so fast and furious, but thank you everybody for doing that.
Elie Mystal: We are getting tons of tips from the firms who haven’t moved, who are wondering when their firm is coming along.
Joe Patrice: Fair enough. There is some speculation that other people aren’t going to match this time. I think that’s dumb. I think that it’s a question of whether somebody goes over the top. If you thought the actual number was what it was in 2016, you have to match, and if you think you were wrong in 2016 that tells us more about you.
Elie Mystal: Yeah. And look, there is just no — especially at the top tier, like I said at the beginning, there is no universe in which Milbank is paying more to first-year associates than Cravath or someone, there is no universe in which that happens, so like they are coming, the question again, as Joe and I have been saying, is just a question if they are matching or if they are coming over the top. So stay tuned.
Joe Patrice: Yeah. No, I think that’s true.
So thanks everybody for listening to this fairly quick rundown of where we are with our raises.
I just want to also thank again Major, Lindsey & Africa for sponsoring the podcast. They are a leading legal recruiting firm and so you may want to talk to them if your firm isn’t getting the raise.
So anyway, that’s it for our show. Thanks for listening. Listen to the podcast. Subscribe to the podcast. Review the podcast. Those are the three steps in your life. And then the fourth one is threaten to beat up people who don’t listen to the podcast. No, don’t do that, no, just yell at them constantly about it and berate them, whatever you need to do.
Elie Mystal: Remember, if you are ever thinking of leaving big law to go into media, remember, you are going to be poor forever and every few years they will really remind you of it.
Joe Patrice: Yeah. Also, read Above the Law, follow us on Twitter. I am @JosephPatrice; he is at @ElieNYC. Watch MSNBC. There is a one in two chance that Elie is on at some point.
Elie Mystal: Or Tyler.
Joe Patrice: She was on CNN. Our former guest Tyler was on a CNN show earlier today, so also that.
And I think that threw me off, but I think that’s it.
Elie Mystal: That’s it.
Joe Patrice: Yeah, cool. Talk to everybody later.
Elie Mystal: Bye.
Joe Patrice: Bye.
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