Thursday, January 14, 2010

How Much Are (Some) Salaries Increasing Every Year?

While putting together other posts that are taking a lot longer than I anticipated, I thought I'd look at how much salaries increase.  In particular, I thought I'd look at the salary for a lawyer at a "Big Law" law firm.  I want to thank a friend of mine for suggesting the post and providing the data.  Turns out "Big Law" has annual lockstep salary increases that are publicly available, which makes it amenable to analysis.  It is also useful because "attorney" is frequently cited as an example of the kind of job one needs to have in the frum community to be able to afford yeshiva tuition.

Here is the raw data for 2009.  According to my friend these numbers have been in a place for a few years, the only difference is that bonuses were "low" this year.  However, he believes that, if anything, "normal" bonuses would slightly hurt the average increase as "normal" bonuses help younger associates more than older associates.

1st Year: $160,000 + $0 bonus
2nd Year: $170,000 + $7,500 bonus
3rd Year: $185,000 + $10,000 bonus
4th Year: $210,000 + $15,000 bonus
5th Year: $230,000 + $20,000 bonus
6th Year: $250,000 + $25,000 bonus
7th Year: $265,000 + $30,000 bonus
8th Year or higher: $280,000 + $30,000 bonus


If you calculate the average percentage increase, you get about a 10% increase.  Given previous posts, if you are an attorney at a "Big Law" firm, congratulations!  Your salary is increasing at a rate that is commensurate with yeshiva tuition yearly increases*.

* Caveat #1: This only applies to "Big Law" attorneys.  If you weren't lucky enough to get onto law review and land one of these jobs, your salary is likely to be substantially less and your annual increases will also likely be less.

* Caveat #2: In order to get those bonuses and in order to keep your job, you must bill around 2,100 to 2,200 hours.  That usually means being in the office around 10 or so hours a day on average.  Factor in commuting and you're likely away from the house around 13-14+ hours a day.  Factor in having to leave early on Fridays and Shabbat and you're probably in the office on many Sundays as well.

* Caveat #3: Also, keep in mind that just because your salary is increasing 10% a year, on average, doesn't mean your take home salary increases by that much.  Your marginal tax rate is likely 33% federal and about 6% state.  You're likely hit with the Alternative Minimum Tax as well.

* Caveat #4: Even if after all those taxes, your salary increase covers the annual rise in yeshiva tuition, this only helps you if you are currently able to keep up with yeshiva tuition AND you can absorb the increases that occur in tuition when your children advance from grade to grade.  In particular, in most yeshivas the tuition bump from 8th grade to 9th grade is substantial.

9 comments:

Anonymous said...

Only 10 hours a day at a big firm? What big firm do you work at (I'm not expecting you to answer, just pointing out that most ppl I know at big firms only work 10 hr days when they are working half-days)

Tuition Talk said...

I'm not a lawyer. The "my friend told me" talk was not a euphemism.

From what I was told this is an average. Obviously some are in the office much longer. If so, this just makes the situation worse as these attorneys are away from their families even more.

Anonymous said...

Don't forget that these lawyers have to pay for their law school education which most finance through loans. That could have cost about $120,000 and starts accruing interest on graduation.

Tuition Talk said...

Good point. Can't believe I forgot that given my earlier post on how I'm paying for yeshiva tuition even though I don't have kids due to student loans that I had to take out because my parents were completely tapped out.

Anonymous said...

Don't forget that many of these attorneys will be asked to leave somewhere between years 5 and 8. Some very talented ones who aren't rainmakers might get a "career associate" or "counsel" position. Others might get good jobs in-house, but many others might be taking a pay cut when they leave.

Avi said...

I agree with anon 2:02 - you might as well publish the salary schedule for baseball players. A few make it to the big leagues/make partner. The rest don't. Nice to know that the ones who make partner can afford tuition increases along the way, but that's not even necessarily relevant to aspiring lawyers, never mind those of us in consumer goods, marketing, bio research, or accounting.

Anonymous said...

Your comparison of attorney salary increases to tuition increases is not apples to apples.

These are annual raises you get as you advance in seriority over your first 8 years, which correspond to increases in your billing rates and (hopefully) your skills. Then you cap out and get only very small cost of living increases or even decreases depending on current economics. What you're looking at is more like a series of small promotions, not annual raises.

Apples to apples is more along the lines of 2008 first year attorny to 2008 pre-k tuition, 2009 second year attorney to 2009 k tuition, etc. From pre-k to 9th grade attorneys get clobbered just like everyone else, not to mention that you have increasing nunbers of children in yeshiva.

A more fair comparison is annual increases in top to bottom tuition scale with annual increase in top to bottom attorney scale.

You posted that tution typically goes up something like 10% per year for a given grade. Salaries for attorneys of equivalent experience have been stagnant or declining the past several years. Sometimes they rise nicely, sometimes they stay the same for quite a few years, and recently many went down.

samjorno said...

This post essentially cuts to the heart of the matter. Yeshiva tution increases are simply outpacing parents' disposable income increases. And, that model is unsustainable and it is going to crack. Ok, people have been saying that for years, but we are nearing the end of the line. I have had many a conversation with several Yeshiva administrators and they are simply unable to explain how the tuition increases can continue to outpace increases in family income. We need some orgainization, perhaps the OU, to take the lead in addressing this matter. We will either wisely address it now, or, we will address it in haste when the matter blows up. when that happens, children will be "tossed" out because parents can not pay and the school will be unable to provide the education absent additional revenue from somewhere.
Again, the end of the road is near, so, what are we going to do??

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