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Nationwide Pay Raise Watch: Philadelphia To $160K (This Time For Real)

Which top law firm is leading the march to $160,000 in Philly?

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In recent years, all the action over Biglaw associate compensation has centered on bonuses. This latest bonus season, which saw firms one-upping each other and enhancing bonuses after the fact, was especially exciting.

Base salaries, in contrast, haven’t budged since the $160K pay scale, first announced by Simpson Thacher in January 2007, spread around the country. That was more than eight years ago.

But could we finally see some movement on that front? One of the markets that never got the $160K pay scale could be on its way to acquiring it. Here’s a report from Gina Passarella for the Legal Intelligencer (noted in Morning Docket):

Dechert has decided to increase the going rate for first-year associates in Philadelphia and Princeton, New Jersey, to $160,000 to match what it was already paying in all of its other U.S. offices. Those increases will carry through to all associate classes in varied amounts. DLA Piper said last year that it was increasing starting salaries in Philadelphia to $160,000, but at the time it didn’t have any first-years in the office.

We covered what we called DLA Piper’s “theoretical” pay raise last summer. The Dechert pay hike is very real, taking effect on May 1 and benefiting some 90 associates across the two offices. All class levels will be moving to the Simpson scale — so eighth-year associates, for example, will see their base pay jump a whopping $70,000, from $210,000 to $280,000.

What prompted the pay raise? Pretty much what you’d expect, a combination of market forces and associates speaking up:

For Dechert, it was the competition in Philadelphia and Princeton for associate talent plus the increasing interconnectedness of the firm’s offices and client teams that caused firm leadership to close the gap between the two cities and the rest of the firm.

Dechert CEO Daniel O’Donnell said Monday that the firm’s Philadelphia and Princeton associates asked about the disparity in pay between themselves and their counterparts across the country at his annual state of the firm address with chairman Andrew Levander earlier this year. The two said they would do some research and came to the conclusion recently that bumping up pay across the associate classes in the two cities was the right thing to do.

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He went on to note that Philadelphia and Princeton associates are often working on the same cases, for the same clients, as associates in other offices — and getting billed out at the same rates too. Add in the factor of geography becoming less important, due in part to technology, and putting the Philly lawyers on the same scale as pretty much everyone else made sense. (O’Donnell did note, on the subject of rates, that Dechert would not be raising rates on clients to cover the pay hikes.)

So what does this mean for the Philly market? A heck of a lot more cheesesteak, it seems to me. I concur with this ATL tipster: “Dechert Philly is adopting NY associate salary scale for associates as of May 1…. First large shop in Philly to do so, big move for Philly market, and MLB [Morgan Lewis & Bockius] may have to follow suit.”

The Legal Intelligencer has a helpful summary of the current state of play in Philly:

Dechert and DLA Piper will now pay $15,000 more for first-year associates in Philadelphia than any other large firm. Morgan, Lewis & Bockius and Duane Morris pay $145,000 to start. Pepper Hamilton, Blank Rome and Drinker Biddle & Reath pay $140,000. Reed Smith pays $130,000 in Philadelphia and $125,000 in Pittsburgh. The firm announced last year that it was increasing starting salaries in New York to $160,000.

UPDATE (4/8/2015, 12:30 p.m.): Reed Smith recently raised its Philadelphia starting salary to $145,000.

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Some of these firms might not budge (because, well, they can’t afford to budge), but I suspect that MLB and Duane Morris might have to follow Dechert’s lead. This isn’t like DLA Piper’s phantom pay raise from last year. Dechert is the Cravath of Philadelphia, and other firms look to Dechert to set the pace.

So I’ll close with two questions I previously raised: “Why slave away in Manhattan for $160,000 when you could be living like a prince in nearby Philadelphia? Could a raise in Philly spread to other markets?”

If we see a nationwide pay raise in the next year or so, we may look back on Dechert’s move to $160K in its founding city and say to ourselves, “It started in Philadelphia.”

UPDATE (11:10 a.m.):

1. According to a Dechert source, “The associates in Philadelphia are very pleased. There had been a growing resentment among Philadelphia associates that associates at other Dechert offices are all paid at NY market, while Philly and Princeton were on the $145,000 scale — even though it is no secret that Dechert attracts the best talent (at least on paper) in Philadelphia.”

2. We’ve heard (unconfirmed) reports that the Dechert pay raise was driven in part by Morgan Lewis trying to poach corporate associates in Philly with offers of New York salary — while keeping their non-laterals on the $145K scale. Associates at MLB, you might want to do some digging into this — then let us know what you hear, by email or by text (646-820-8477).

Dechert Raises Associate Pay in Phila., Princeton [Legal Intelligencer via Morning Docket]

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