Law firms being law firms, no one has been willing to break ranks and drive a stake into more rational ground.
We are dealing here with an expensive and irrational exercise in law firms’ “signalling” to the market that they are at the top of the pecking order — because they’re willing to overpay for entry-level talent. Note: When I say this behavior is “irrational,” I’m speaking of having a market stuck in this unstable posture; let me hasten to add that the behavior of any given firm contributing to this bizarro structure may seem, to it, rationally compelled precisely by the prevailing irrationality. This is a problem known as that of “collective action,” and it can be a thorny one indeed.
A final word on how irrational this is: We don’t seem to see it in any comparable market for entry-level talent. Indeed, not even two weeks ago Harvard Business Review published “The Real Reason New MBAs Want to Work for Goldman Sachs,” describing a market utterly congruent to that for first-year associates in all ways but salary lunacy:
What attracts top talent? Is it great benefits, flexible hours, steep pay packages, or state-of-the-art training? New research suggests it’s something simpler – but more difficult to obtain.
The status of a firm is quite possibly the leading driver in attracting the best of the best [...]
[I]n particular, [the Wharton professors] wanted to find out whether the ability to offer more money is really a competitive advantage. Investment banking in particular offered a good testing ground for these questions because there’s a clear hierarchy of firms, and because a firm’s place in that pecking order is readily quantifiable via surveys on websites like Vault.com [...]
When they polled current MBA students applying to work at investment banks, “the extent to which firm reputation would help with future employability” was ranked as their most important decision-making factor.
Because of this, high salaries aren’t a competitive advantage, at least at first. “You get the best people, and you don’t have to pay as much as you should early on because they want the stamp of ‘Goldman Sachs.’” [emphasis supplied]
Of course, we’re so much smarter than investment bankers, and savvier at running our firms to boot, so feel free to ignore this.
But back to where we came in….