NY to 190

It’s always sunny – or raining money? – in Philadelphia.

Philadelphia: it’s all about the Benjamin. The city abounds in tributes to its famous founding father, Benjamin Franklin. It even boasts a museum devoted to his life and times.

And maybe Philly will be all about the benjamins, plural — as in hundred-dollar bills. There’s speculation afoot that the new going rate for first-year associates in this city could rise to $160,000.

What’s the basis of the speculation? And could a Philadelphia pay raise have implications for other markets?

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The days of wild spending on associate salaries seem like a distant memory washed away in the Great Recession. It was an exciting time to be a lawyer when every year (or even mid-year) a firm-wide email would explain that the pay scale was going up as part of the ongoing arms race among Biglaw firms to attract talent. That trickled down to Midlaw and the Boutiques and suddenly there were coke-fueled orgies all around.

While the country’s financial outlook doesn’t inspire much excitement, lawyers might be getting back in the high life again, with a pay bump expected next year. NY to 190?

So how much more are you about to make?

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[T]here is nothing about the current market that suggests starting associate salaries will be moving up any time soon.

James Leipold, executive director of the National Association for Law Placement (NALP), crushing the hopes and dreams of future Biglaw associates across the nation. Salaries for entry-level attorneys have been “essentially flat” since 2007 (although median pay rose to $160,000 once again after slipping to $145,000 last year).


‘I love being an associate!’

We’ve waited a long time to type these words. A major law firm just raised starting salaries for first-year associates.

Before you start chanting “NY to 190,” however, there are some things you should know. The raise relates to associates in what some might call a “secondary” legal market; we’re not talking about New York, or Washington, or Los Angeles. Associates at this firm, even post-raise, won’t be making the magic number of $160,000 a year.

That said, the legal market in question is rather large, and the law firm in question is a national and even international player. So the move could have ramifications beyond just the affected associates….

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Law schools, don’t expect your applications to rebound anytime soon. The Law School Admissions Council (LSAC) recently released data showing that fewer people took the February 2013 LSAT than any administration of the February test ever.

Forever ever? Forever ever. In fact, the number represents one of the smallest amounts of test takers since 1988.

1988, folks. The Berlin Wall was still up. People were listening to Rick Astley and not ironically.

The reduced number of test takers is certainly a result of students beginning to question the value proposition of law school. But some of it is undoubtedly the result of intelligent students questioning the value proposition of being a lawyer.

Would you want to go into a field that hasn’t seen a starting salary raise since 2007?

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It’s been a while since we’ve had a good New York to 190 post. As we’ve discussed before, associate salaries at New York law firms are long overdue for a raise. Starting salaries have stagnated in New York.

What’s worse, total associate compensation has gone down this year from last year, thanks to Cravath’s low bonus and the absence of spring bonuses. The buying power of a New York associate is pathetic.

But one new firm in New York seems poised to change that. The firm isn’t nearly as big as our salary market leaders, but the firm is leaving the stagnated Cravath salary scale in the dust…

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Is $160,000 a 'garbage' salary?

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?

double red triangle arrows Continue reading “New York to $190K? Actually, It’s About Time.”

On January 22, 2007, Above the Law reported that Simpson Thacher & Bartlett raised starting associate salaries in New York to $160,000.

That was almost four years ago — 1,326 days ago, to be exact (2008 was a leap year). But here we are, in the fourth quarter of 2010, and a new NALP report is telling us top Biglaw salaries in New York have re-established themselves at $160K. Partner profits haven’t generally remained stagnant for four years, at least at certain firms. Law school tuition certainly hasn’t remained stagnant for four years. But the upper end of associate compensation has been stuck in the mud. Back in 2007, I could go to a movie for $10.50. Now it goes all the way up to $11! I’m outraged!

I’m not actually outraged (well, I am about movie prices, but that’s because at $11 you’d think something besides Inception wouldn’t blow). And you won’t find too many associates outraged that their compensation hasn’t kept pace with growing partner profits at some firms. That’s because most associates are recovering from the terror of layoffs and salary deflation. NALP explains it this way:

NALP’s 2010 Associate Salary Survey shows that, although the $160,000 salary for first-year associates still prevails at large firms in a number of markets, including Chicago, Los Angeles, New York, and Washington, DC, in other markets, such as Boston and San Francisco, the median has dropped back to $145,000, reflecting salaries ranging from $110,000 to $160,000.

Sorry about your tiny pink paycheck, Boston and San Fran.

For the rest of us, let’s take a look at the full salary scale according to NALP’s research…

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100 dollar bill Above the Law Above the Law law firm salary legal blog legal tabloid Above the Law.JPGThe American Lawyer’s 2007 Associates Survey is now available, via Law.com. Good stuff!

A summary of the survey’s key findings, by editor-in-chief Aric Press, appears here. The WSJ Law Blog collects additional highlights here.

It seems that ATL readers and law firm consultants aren’t the only ones predicting pay raises in the reasonably near future. From Aric Press’s write-up, here’s the money quote (hehe):

This year’s famous hike to $160,000 in starting pay for first-year associates did not buy hiring firms anything in terms of separating themselves from their competition. The firms that can afford to pay more will pay more; but there is a price point that not all Am Law 200 firms will be willing to match. We’re confident that that number begins with a 2.

What Press describes is similar to this excellent analysis, by Bill Henderson of the Empirical Legal Studies blog:

[T]he Big Law market is the midst of a “separating equilibrium”. In short, a few dozen elite firms are pulling away from their BigLaw peers in the competition for premium, price-insensitive work….

So what does the future look like? BigLaw will no longer be synonymous with “large full service firms”, which was the mantra throughout the ’90s. Successful financial services and labor & employment lawyers will tend to migrate to different firms [i.e., super-lucrative and less-lucrative firms, respectively].

In terms of leading New York firms — the shops with big-time transactional practices, and profits per partner of $2 million or more — we’d speculate that a move, to a starting salary at or close to $200,000, will happen in the next twelve to eighteen months. If it doesn’t happen in time for this fall recruiting cycle, it will happen in time for the next one.

The foregoing analysis assumes, of course, that U.S. law firms chug along nicely over the next year or two. If we have a general economic meltdown, then all bets are off.

Annual Survey Shows the New Reality of Associate Life [The American Lawyer]
Associate Survey: Want to Leave? Big Law’s OK With That [WSJ Law Blog]
Howrey Associate Pay Scale: What Merit Really Means [Empirical Legal Studies]