Biglaw, Layoffs, Money, Skaddenfreude

Nationwide Pay Raise Watch: NYC to 190 Associate Layoffs?

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A few weeks ago, we were getting bombarded with rumors of supposedly imminent New York pay raises. Davis Polk to $180K! Simpson Thacher to $190K! The gossip was running rampant.
But in the last two weeks or so, with all of the turmoil in the stock market and tightening in the credit market, pay raise rumors have died. And now we’re hearing very different things. Like this:

[Y]ou are missing one of the bigger stories of the past week or two: to a large degree, the corporate departments of many of the major NY law firms have basically come to a halt. Plenty of people have nothing to do – at all.

At my firm, in the top 5 of the Am Law 100 rankings, things have gotten really slow. So far, few think it will be a long term problem, but people are beginning to wonder.

Why is this so big? If the corporate departments of these firms go downhill, everybody can kiss their pay raise to $190,000 goodbye. Will we go from 190 rumors to lay-off rumors?

That, dear friends, is the $160,000 question. More after the jump.


Our tipster continues:

I would like to hear about the status of corporate departments in some other firms. In the short term, some people are staying busy with bridge loans for deals that are already in the pipeline that need to go forward. That said, if the credit markets are really tight, then a large portion of corporate work that has been pushing things forward will disappear.

Private equity deals and all of that have largely been fueling the legal economy. What will happen if this type of work diminishes or disappears? If this work disappears, there will be less competition from investment banks and private equity funds for talent — meaning law firms will have no incentive to raise salaries, like 2000-2006.

This comment to a recent clerkship bonus post is consistent with our tipster’s speculation:

Am I the only one wondering if this is the last we’re going to see of “raises” in the near future? I know everybody has to match the high end of the market, hence raising to match clerkship bonuses, etc. But I’m no longer as sure about raising salaries to 190+ in New York given the market conditions.

Granted it’s August, but the market is shaky and my floor (finance) is dead. I’m getting nervous…

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Fall is practically upon us, so people are already thinking about year-end bonuses. From our original correspondent:

Another angle on this: Could bonuses be affected? Since the market has been good for half the year already, I don’t think bonuses would go down, but they could in the future if the market stays bad…

Readers, what do you think? We welcome your thoughts in the comments.

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