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Are New Grad Law Salaries Actually Bi-modal?

It’s a common refrain that law salaries for new grads are bi-modal, with a large percentage of law graduates going into Big Law. The NALP even publishes data that shows a double humped distribution of salaries every year. But a quick query of freely available American Communities Survey data (collected by the US Government) shows that there is a small hump in the same spot that the NALP survey reports. But NALP shows nearly 21% of graduates with income around $185k / year and it looks like roughly 26%+ are earning at least $160k which looks to be a huge overstatement. This is what I found:

Only 16% Reported Income Near that Range

  • Mean : $91,798 / year
  • Median : $75,000 / year
  • 25th Percentile : $51,771 / year
  • 75th Percentile : $119,976 / year

I have read comments questioning some of the data collection methods that NALP uses, and I think that this single slice of data definitely shows that there is an odd deviation from the results I derived from the ACS. If anything my data should skew higher, because I could not separate people with only 1 year of experience out. So there would be associates with in Big Law with multiple years of raises and experience in this data set. An interesting overlap is that the NALP’s adjusted mean is slightly below the mean salary that I have calculated, which is interesting as to how close it is.

Methodology

  • ACS 5 Year 2013-2017 Micro-data
  • Industry : Legal services so this would be limited to law firms specifically.
  • Ages 25-28 to try to capture new grads specifically with at least one year of work, there was no way to restrict years of experience.
  • Occupation : Lawyers, and judges, magistrates, and other judicial workers (This was the lowest level, I could separate it at, but I doubt there are a lot of Judges/Magistrates/Other in this age range)
  • Education: Professional degree beyond a bachelor’s degree (Could not be more specific)
  • Weeks worked prior year: >40+ weeks / year (to try to exclude people who were reporting income from partial year internships/clerkships)
  • Hours Worked in a usual Week : >35+ hours / week (to try to get only full time)
  • Currently Employed

New name, and new calculators coming soon!

I’ve decided to retire the old Shnugi name after 15 years of using this to host my data analysis tools. Although I will continue to use it as my username. I don’t know if I’ve gotten all the links updated, but it seems like everything is working after the migration. Please let me know if you find any broken images, links or pages.

I haven’t really been doing a lot of personal blogging, and I thought it would be more fitting to have a more descriptive name, since most people aren’t here to read about me but to find out things about themselves.

New calculator

The newest calculator is a housing percentile to compare your housing costs nationally. Make sure to include your utility costs and fixed fees like HOA.

Calculate how much can you save with pre-tax commuter benefits for 2020

Marginal Tax Bracket
Select the appropriate marginal tax rate matches your income. For example if on your taxes you report $100k in adjusted gross income (AGI) as a single filer, pick the 24% option, because you make at least $84k but less than $160k.


Monthly Commuter Contribution ($270 max/month)



How does this work?

The Pre-Tax commuter benefit works exempts up to $270 per month from Federal income, Social Security, and Medicare taxes. This money can only be spent on eligible travel to work expenses such as public transit passes (commuter trains/buses/vanpool), parking at your employer, or ride-share (Uber Pool/Lyft Line). In general, your employer will partner with another company who will provide the passes and payment cards. This has been increased from $265 per month from 2019.

So imagine that if you earn $70,000 a year in Texas, and pay $200 per month in eligible parking fees at your workplace:

Before Pre-Tax Benefit

  • Monthly Income: $5,833
  • Taxable Income: $5,833
  • Total Federal Taxes: $1,238
  • Parking Pass Using Your Credit Card : $200
  • Amount left over : $4,395

After Pre-Tax Benefit

  • Monthly Income: $ 5,833
  • Parking Pass Using Pre-Tax Commuter Benefit: $200
  • Taxable Income: $5,633
  • Total Federal Taxes: $ 1,194
  • Amount left over : $4,439

Savings of $44 / month or $528 / year!

Sure this isn’t a ton of money. But if you’re already auto-paying for public transit passes, ride share (Uber, Lyft), or parking every month to get to work, this is a quick an easy way to save some money with minimal effort. The only downside is that you employer must have an account set up with a benefits provider to allow you to take the deduction.

This calculator is for illustration only, and the tax brackets and contribution limits will likely shift in coming years. Some states will also deduct Pre-Tax Commuter benefits from their state and local taxes so your savings could be even bigger! If your income is right at the border of the break point of one of the marginal tax brackets, your actual savings will vary a little bit. Just something to keep in mind. For more information, the IRS has a very long PDF with all the details
https://www.irs.gov/pub/irs-pdf/p15b.pdf .

One weird thing about the benefit is that your employer may or may not list the benefit in Box 14 of your W2. So I’m not sure how the government tracks how compliant you are with you spending or contributions or if there’s a difference if you have multiple jobs. It seems like there’s a lot of trust in the companies that administer the benefit to do it correctly.

Household Savings Improves to only 36% Spending more than Income

After analyzing data from the 2017 Consumer Expenditures Survey (CEX) by the Bureau of Labor Statistics (BLS), nearly 35.9% of US households spent more than they earned. This is the most recently available data from the BLS. Overall, 46 million out of 129 million US households are estimated to have had expenditures that exceeded their after tax income (table below).

Large Improvements since 2015

Comparing these results to the previously reported ones for 2015’s CEX survey where I reported 38.5% spending more than income, the percentage American households saving has improved significantly. Almost 2.5 million fewer households are spending more than they earn, which is a huge improvement. In addition households tended to save more than in 2015, as the $0-$10k group dropped by 1.4 million households, with large increases in households saving larger amounts of income. One of the largest shifts appears in the decline of household who spent more than $150k than they earned. Shockingly, this category decreased 54%! I suspect that the losses of this size were primarily due to investments and housing losses, and values for both of those assets have increased significantly in the past few years.

Continue reading Household Savings Improves to only 36% Spending more than Income

Supply Chain Professional Salary Progression 2018

Years ago, I used to wonder what my future in supply chain management would be like. With so many different career paths ranging from purchasing, warehousing, transportation, manufacturing, there were a lot of variables to consider. Now with years of experience behind me, I decided to collate together several supply chain salary surveys together. I can compare how well I’ve done in comparison and see what might be coming in the future.

Salaries rise quickly but plateau

As you can see, salaries start at around $67k on average early in a career. They slowly rise to $120k towards the end of a career. This implies that the natural rate of growth per year of experience is about 1.69% annual raises (assuming no inflation) over a 40 year career. That isn’t terrible but isn’t great either. In the first 10 years, the gains per year of experience are significant as the growth rate is nearly double at 3.17%.

The mid career plateau is very evident in that flat section around 10 years of experience to 25 years. At this point in your career people are moving into senior roles. In corporate, that would be senior individual contributor role like managers with no direct reports or senior analysts. In field positions this would be similar to being a manager who is directly still leading front line workers.

The growth rate implied for these years is barely above zero at 0.28%. From my own experience, this period time causes a lot of soul searching. The first few promotions were comparably easier to earn, so hitting that individual contributor cap might feel like a ceiling. And, this frustration boils over into turn over as people get past up for promotions or opportunities. Also some people get complacent and get expensive relative to their output/skill-set. This becomes a risky position during layoffs when a cheap new grad may start to look like an affordable replacement for a senior associate with stale set of skills.

I think I’m getting to the Plateau

I used to worry myself with questions like how quickly should I be promoted. Or I would compare myself too much to my peers and how they were being rated. It’s hard when you’re starting out to figure out what’s normal or not. Looking at my own personal growth, my income started a little bit below the average but quickly shot up as I got performance reviews and promoted. After that whirlwind of upward trajectory, I am getting the feeling that I’m approaching the plateau. As I’m compensated well above average at this point, but I don’t really have an interest in management yet. When I look at my career progression and prospects there isn’t a lot unless I do pursue management or switch into something much more technical like data science.

Sources and Methodology

I created the graph using the listed supply chain salary surveys. The average line is all 4 survey averages averaged by years of experience, the Highest Survey Average Salary represents the survey with the highest value for that experience, and the Lowest Survey Average Salary represents the lowest value for that experience.


Because the years of experience ranges were not exact matches, I populated this table with each year of experience and listed the salary for the experience range for each year. I then averaged across using those values:

Interestingly, the 21-29 age range on MHL salary is $58.7k, which is lower than their listed cohort of 1-2 years at $64k. This seems to suggest that people entering the supply chain profession are slightly older than the 21-29 age group. They also probably have professional experience in other areas. If you are a recent or incoming college graduate, do not despair if your salary is more in the $50ks. It’s totally normal. Your salary will grow quickly if you work hard and show some aptitude.

Since only one of the surveys provided median and average numbers, the numbers presented are using averages. You should keep in mind some highly compensated employees will be represented in the more experienced buckets. Also a lot of these surveys don’t have very deep survey pools and tend to only ask their membership for responses. This could be a problem because the people who are in these trade groups tend to be more involved at work or are high potential individuals who probably earn more.