Yes, yes it is. At least that’s what I gather based on the relative volume of commentary I received on the subject since the inception of this column about small law firms. I’ve been avoiding the topic, mostly because salary discussions usually degenerate into little richard-measuring contests but, in addition to the comment wars that spilled out of my posts on hours worked and billable hours, I’m still getting emails like this one:

I’m not sure all this “small law, low pay” stuff is accurate. Certainly, it’s true if we are assuming the small/mid law is in the same market as Big Law, but I’m not sure how often that is the case. Small/mid-sized legal market tends to have a much lower cost of living, which means the magnitude of the paycheck tells you little about its value. How about a post that captures and attempts to balance this concept?

Okay, fine. Now that I’m back from the Canadian wilderness, let’s talk about it…

Before we get into cost-of-living adjustments and the relative values of big firm and small firm salaries, let’s acknowledge the importance of the raw numbers. If someone tells me they make $250,000 (which I agree does not make them rich), my mind doesn’t immediately turn to where that person lives as an attempt to normalize the salary against mine. Instead, my mind goes to the rather large gap between that jerk’s person’s number and my own, and I briefly question my own self-worth until remembering that I’ve chosen the life of a pauper and turning to a nearby mirror for a Stuart Smalley affirmation.

The point is that our salaries are badges of honor (or shame, in my case). It’s a quick and dirty measure of our value in the working world, and it’s personal. We care how much other people make, not because we care about their financial well-being, but because we want to put their number down on the table and measure it against our own. We want to know how we stack up versus our contemporaries (and possibly rub their faces in it when they don’t measure up). But, as the quote above alludes, we must consider other factors to come up with an honest comparison of the actual value of a salary in different locales. Specifically, let’s look at salaries broken down to a per hour number, and then factor in the divergent cost of living.

The numbers below are the actual first-year salaries (Sept. ’06 – Aug. ’07) at the Biglaw employer of my friend Brian, which I’ve previously compared to the small firm I worked at. I’m talking purely about dollars here, including bonuses, but excluding all other perks (free sodas, stockpiles of Tamiflu, free lingerie, etc.) — we can talk about those things later. Also, while the salaries are exact, the hours are merely to the best of our recollections, but are close enough to give an honest comparison. I’ve rounded to keep the math simple:

  • Base Salary: Biglaw Brian — $145k; Little Richard — $65k
  • Bonuses: Biglaw Brian — $45k; Little Richard — $2k
  • Hours Worked: Biglaw Brian — 3,200; Little Richard — 2,100
  • Hours Billed (includes Pro Bono hours): Biglaw Brian – 2,400; Little Richard — 1,300

Based on total dollars received and hours worked, Brian’s salary works out to an hourly wage of just under $60. Meanwhile, my wage comes in at just over half of that, at about $32 per hour. Keeping in mind that I’ve never been one overly concerned with making big bucks, that’s still a pecuniary kick in the pants. I’ve known Brian a long time, and he may just be the best combination of book smarts and street smarts I’ve ever met. Still, I find it hard to believe that coming out of law school, his work was worth twice as much as mine, so let’s continue the breakdown.

We still need to factor in the cost of living in our respective regions — Manhattan versus Small Town outside Atlanta. That first year Brian rented one room in a three-bedroom apartment on the upper west side for $1,200/month. I realize many of you familiar with the Manhattan market will scoff at the idea of getting room for less than two grand, but I verified this with Brian. Also, I visited there on more than one occasion during his tenure there and, while it wasn’t a Park Avenue palace, it also wasn’t a s**thole.

On the opposite side of the Mason-Dixon Line, I rented a one-bedroom with an office for $640/month. Frankly, I’d expected to pay about half that, but had not considered the scarcity of options which, as you economists know, tends to push up the cost. Apartment hunting there was not a hunt at all and took all of 45 minutes to make the easy choice between the only two rental complexes in the area.

Beyond rent, our other expenses roughly balanced each other out. His Metro Card cost less than my car payment (plus insurance), though his sporadic need/use of cabs brought the overall cost of transportation closer together. He spent more to eat and drink, but certainly not twice as much. Our minimum loan payments were similar and the difference in utilities was negligible.

Getting back to the raw numbers for a moment, Brian’s take home for his first year was nearly triple what mine was. Triple. That difference in magnitude should not get lost in discussions of the cost-of-living argument — especially to young lawyers struggling to pay off student loans. Brian had much bigger chunks of money coming in with which to pay down his educational debt in our first few years out of school. Also, whereas I saved a pittance each month, Brian was stowing away close to $4,000 every month in cash, beyond whatever he put into his 401K.

What I take away from the numbers is this: While Brian’s housing costs were roughly twice mine, his overall cost of living was not high enough to put us on equal footing in terms of the relative value of our salaries.

We can continue to argue about cost-of-living comparisons, and I hope we will, but my opinion is that we should be looking for jobs based on what our priorities are, not what we want our salaries to be… unless, of course, your salary is your priority.

Send me your thoughts on the relative value of small firm salaries to Little Richard at gmail dot com — and, where possible, include concrete salary and bonus numbers (which, if used, will be used anonymously). You can also keep an eye on what’s coming via my Twitter feed here.

Earlier: Prior ATL coverage of small law firms


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