There’s an interesting post up on Constitutional Daily by The Philadelphia Lawyer. It’s a repack from a 2007 article arguing that salaries for first-year associates should go up to $190,000 a year.
And he’s right.
I know, I know — most Americans are still feeling the effects of a terrible economy. Occupy Wall Street is about to take pitchforks to those who are well-off in this country. Yada, yada, we’ll get back to the very sad story of America momentarily.
But you know who has done well over the last five years or so? Law firms. Especially Biglaw firms. Especially partners at Biglaw firms. Just look at the Am Law reports on profits per partner and revenue per lawyer. Firms are making money, more than they were in 2007.
Yet the associate salary scale hasn’t seen a raise for almost five years. And bonuses are down compared to 2007. Is it time for firms to start sharing the wealth?
I know, on its face it sounds ridiculous to raise the associate salary scale at a time when some clients are openly refusing to pay for the work of first-year associates. First-years are pretty useless and clients are starting to notice.
While first-year time might provide a challenge when it comes to collecting on billables, most clients are still willing to pay for third-year work and fifth-year work and so on. But the associate salary scale hasn’t gone up since Simpson Thacher got the ball rolling in January 2007. Maybe you can’t argue that first-year pay should go all the way up to $190K, but can’t third-year pay go from $170K to $200K? Haven’t those people proven their value to the firm? Haven’t they earned a cost of living adjustment?
Especially in New York. Last week we learned that when you adjust for cost of living, top New York associates have less buying power than associates in Birmingham, Alabama. A raise for the New York office that was not shared firm-wide would be totally appropriate given those numbers.
While the economy has suffered, it’s not like billing rates have been stagnant. The National Law Journal Billing Survey shows that billing rates even creeped up for first-year associates in 2010.
Sure, alternative fee arrangements are all the rage, but most Biglaw profits (especially at the very best firms) are still made by lawyers who charge by the hour. And at the very top, that hourly business is booming. Top partners have pushed their hourly rates past $1,000.
And those rainmaking partners have fewer associates to share the wealth with. Firms are paying the same associate salary scale as they did in 2007; does anybody even want to take a guess and how many fewer associates those firms are carrying?
Of course, it is precisely because of those layoffs that the associate salary scale remains stagnant and there’s no chance in hell “NY to 190″ becomes any more potent than screaming “that’s the bank that took my parents’ house.” The numbers show that there is enough of a demand for high-end, well-compensated legal work to justify a raise in the salary scale. But when you look at the supply side, it’s a nightmare.
There are too many willing and able attorneys who would work Biglaw hours for less than a Biglaw salary to convince firms to start handing out raises. There are so many unemployed or underemployed lawyers, and law schools churn more out every year. Firms have an abundance of interchangeable options for junior people.
For more-senior lawyers, they have no place else to go. Sure, Sullivan & Cromwell could raise salaries for mid-levels, and the Skaddens and Cravaths would have to follow in order to keep the very best talent. But why would SullCrom do that? They’d be bidding against themselves; it’s not like banks or big corporations are paying huge amounts of money to poach experienced people away from Biglaw these days. Again, there are just too many lawyers for that. And the economy is still too depressed for that to happen.
So, the holding pattern continues. The “income gap” between Biglaw associates and partners might well be widening, but that’s what happens in an oversaturated market.
I know it’s hard to hear, but we are literally looking at a situation where people are making $160,000 and losing ground relative to the those at the top.
$160K (You’re Selling Yourselves Short) [Constitutional Daily]