Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Jonathan Birenbaum is a Director in our New York office and focuses his practices on lateral partner, group and associate placements and client services in the New York area and Canada. Prior to joining Lateral Link, Jon was a legal recruiter with a New York City boutique legal recruiting company where he placed associates and partners in a variety of practice areas with Am Law, regional and boutique law firms in New York, California, New Mexico and in Toronto. Prior to his career in legal recruiting, Jon was a litigator with the City of New York, the New York State Attorney General’s Office and in private practice as a healthcare litigator with two New York City firms. Jon holds a J.D. from St. John’s University School of Law in New York and a B.A. in Political Science from the University of Wisconsin-Madison.
What’s not to love about New York? The concrete island is home to liberty personified in 136 tons of copper and steel, a public park larger than the principality of Monaco, a coastline longer than Miami, Boston, Los Angeles, and San Francisco’s combined, and 68 combined miles of towering steel skyscrapers. Well, for one, the cost of living.
When compared to the cost of living in other American cities, the $160,000 starting salary at most major New York firms is looking more and more meager. Biglaw salaries in New York have not risen in nearly seven eight years, since Simpson Thacher announced it was bumping base salaries for first-year associates to $160,000. Given inflation over the same period, first-year associates are getting paid $21,000 less a year compared to what their senior brethren collected…
And, unfortunately, $160,000 starting salaries are not even the norm anymore. Only 40% of the firms in L.A., D.C. and NY with 700+ attorneys reported paying a starting salary of $160,000, compared to 90% in 2009. For 2015, the number of large firms paying less than $160,000 is predicted to decrease even more, to only 25%. The median salary is expected to drop from $147,000 to $130,000 from this year to the next.
Meanwhile, tuition costs for law school continues to rise. Even when accounting for inflation, tuition rose by nearly 12% for ABA-approved law schools from 2007 to 2013. Compounded by this double-digit inflation, the challenge to new grads to both pay their loans and flourish in the New York market can be onerous.
The good news is that, even though ancillary markets in the U.S. sometimes pay a fraction of the salary in New York, their cost of living is almost always less than the difference in pay. With further rising costs in New York, these ancillary markets may look more and more attractive to law students and lateral associates.
For example, Philadelphia — which is less than 100 miles from NYC — pays competitive salaries in a city rich in history, and offers decent cheesesteaks to boot. When adjusted for state taxes, city taxes, sales tax, housing, grocery, utilities, transportation, and healthcare, a first-year associate in Philly need only earn around $85,000 to make the equivalent of a $160,000 first-year salary in New York, but oftentimes earn $145,000 their first year.
Even on the West Coast, the question of which office to join can be a no-brainer when comparing the costs of living between cities like San Francisco and San Diego — given you are not an IP attorney. The housing in San Diego is, on average, 31% cheaper than in San Francisco. Given the difference in the cost of living between the two cities, an attorney could take 250 round-trip flights every year before spending the same amount as living in San Francisco.
Similarly, a $160,000 New York salary is equivalent to earning $63,000 in Dallas, $65,000 in Houston, or $59,600 in San Antonio. From the cost of living savings, a first-year could buy near-courtside season tickets to all three playoff caliber NBA teams in Texas for less than the cost of being verbally accosted by Spike Lee or visually mauled by the Knicks’ attempt at the triangle offense. But then again, the way the Knicks are performing, perhaps you want to invest in that seat at the Barclays Center.
Some secondary market firms are actually beating or matching the top New York Am Law firms in compensation. Texas firms including Bickel & Brewer and McKool Smith are offering first-year salaries of $175,000 and $185,000, respectively. And DLA Piper recently announced that it will start paying first years $160,000 a year in Philly.
Should the regional players in secondary markets continue to offer competitive rates compared to big cities, the pressure could cause Biglaw firms in major markets to drive up their first-year associate salaries once they become more comfortable with the post-recession economic climate. With rising tuition and cost of living and stagnant nominal compensation growth (and decreasing real compensation), $160,000 may no longer be a competitive benchmark for the big five cities of New York, Los Angeles, San Francisco, Chicago, and D.C. Working hard as a lawyer in any of these cities is a grind, and there is hardly any time to spend your money anyway, but if the big firms want to attract and retain the top legal talent in the Big Apple, they will need to pay.
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