In fact, the news also made it to Congress when Justice Anthony Kennedy, testifying before the Senate Judiciary Committee remarked that law clerks leaving the court made more money than judges do in their first year in a law firm. But in the March 1st issue of the American Lawyer, Arik Press summed the scene on the first year associate: “There is … a price to taking the king’s shilling. … going to work at a “lifestyle firm” means not having a lifestyle.” And, Erik at Erik Mazzone’s Blog came out with “The Dark Side of increasing Associate Salaries,” at http://erikmazzone.wordpress.com/2007/03/04/the-dark-side-of-increasing-associate-salaries/ that shows part of the real story of 1st years dying from the 16 hours workload. Now, all that set me to thinking, and I thought, “How can it be a ‘salary raise’ if the workload is increased at the same time?” I mean, a salary raise means more money for the same work doesn’t it? If it’s more money for more work, then it’s not a salary raise but a raise in workload while the rates of payment remain almost the same.
So, what do such high salaries mean? While the fallouts are many, including advertisement of the firm, attracting new talent, putting the pressure on smaller firms, encouraging lateral recruitment etc., to me it seems legal service may be seen by the firms as Giffen goods. Now, that’s very old economic theory, attributed to Sir Robert Giffen, that says when consumers are not in a position to judge the quality of goods in a market, then only the price needs to be raised to get an increase in demand. It’s seen as an exception to the normal rule of demand being inversely proportionate to price. There’s no doubt that in the legal market, client’s are rarely in a position to judge the quality of service and its worth. So, the raise may just be a justification to try the Giffen goods approach. That’s what I think. Higher salaries mean higher fees charged, and the demand for the Giffen goods happily increases. Thanks to Simpson, Thatcher & Bartlett.
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