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Want to earn $1,000 an hour? Well, there's a perfectly legal way to pocket this princely sum: Despite all the really good reasons not to go to law school, go anyway. Then wend your way into a top-flight firm, work ungodly hours for years to make partner, and then you may be able to join the ranks of upper-crust lawyers who now command an hourly billing rate of $1,000 or more, according to the Wall Street Journal.
Yep. $1,000. An hour.
Just another jarring data point in the widening income inequality divide between the have-a lots and the have-a-lot less. What those lawyers bill in one hour is more than the median weekly earnings in this country of $782. Granted, less than 3 percent of lawyers are estimated to command that $1,000 an hour, but according to the WSJ piece, the average partner rate is $575 an hour. Not exactly chump change, either.
Now I respect this is just free market capitalism at work. If there are clients out there willing to pay those fees, that's their prerogative, just as it is the prerogative of the lawyers to ask for that much. That said, I would think shareholders of public companies would sure like to know if the firm could get proper representation at a mere $575 an hour, rather than the $1,200 that some corporate legal eagles are pulling down.
And to be fair, lawyers are far from the top of the earnings heap. Consider that hedge fund manager John Paulson reportedly raked in a $5 billion payday in 2010. If he billed based on 2,200 hours a year (what law partners typically book), his rate would have been $2.3 million an hour. That makes Alex Rodriquez's paycheck from the New York Yankees look downright pauperish: ARod earns about $170,000 a game, or about $56,500 an hour based on the average 3-hour length of a Yankee game. Moreover, the hedgies (and venture capitalists) enjoy an entirely indefensible tax deal -- which Congress continues to rubberstamp -- that allows them to treat much of their pay as long-term capital gains (top rate: 15 percent), rather than income (top rate 35 percent). So while a lawyer might net $635 after tax on a $1,000 billable hour, a hedge fund manager could keep $850 of the same $1,000.
No mater how you cut it, though, $1,000 an hour is impressive. Bill the annual average of 2,200 hours and that's a nice $2.2 million in gross pay. It got me thinking what we could get done if we were all pulling in $1,000 an hour. Yes, I realize the partners don't pocket all the money, and yes there are those pesky taxes to pay. But for the simple reason $1,000 is a nice, round (and resoundingly stunning) number, let's take a spin through what you all could do (and how long it would take) if the boss decided to skip the 3 percent salary boost this year and bumped you up to $1,000 an hour:
- Fund your 2011 IRA: 5 hours. That's how long it would take to get to the $5,000 maximum. If you're over 50, you'd have to work an extra hour to make it to the $6,000 limit.
- Pay the tab for a year at a private college: About six days. As MoneyWatch's Lynn O'Shaughnessy recently highlighted, Swarthmore's $51,500 tuition tab isn't a classic definition of a good value, but if you're pulling in $1,000 an hour, you'd need little more than a week to cover the full cost.
- Reach the maximum annual earnings that are taxed for Social Security: Less than three weeks. The Social Security payroll tax is only levied on the first $106,800 of earnings. So that's about two-and-a-half weeks of $1,000 billable hours. As former Labor Secretary Robert Reich recently pointed out, we could completely fix Social Security without even raising the retirement age if Congress would agree to raise this earnings cut-off to $180,000. And that's still less than 10 percent of a pricey lawyer's annual haul.
- Buy the median-priced U.S. house with cash: About four weeks. The median existing home price is just under $160,000 these days, requiring four solid weeks (at 40 hours a week) to be able to cover the entire cost. Prefer to take out a mortgage? OK, at 20 percent down -- the new norm many mortgage lenders now demand -- you could start on Monday and have the $32,000 by end-of-day Thursday.
- Save $1 million: About six months. Sure, $1 million isn't what it used to be, especially if your living standard is based on making more than $2 million a year. But given that just 23 percent of workers 55 and over have even $250,000 tucked away for retirement, according to the Employee Benefits Research Institute, $1 million would definitely go a long way to easing retirement anxiety. Maybe it's not too late to take those LSATs...
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