Is NY To $180K Hurting The New York Market?
The latest associate pay raise could actually make New York less appealing as a place to practice law compared to other markets.
Michael Allen
Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients and placements for in-house attorneys.
By now you’ve undoubtedly heard the news that Cravath raised associate base salaries to a new $180K scale on Monday. Shortly thereafter, we learned that Milbank Tweed became the first major match, followed by Paul Weiss, Cahill, Weil Gotshal, and Hueston Hennigan, in just a matter of hours. On our end, the questions came pouring in as to whether or not we could expect to see a major lateral shift as associates learn that better compensation opportunities exist elsewhere.
While Biglaw associates continue to celebrate the increase of salaries for the first time in nearly ten years, it must be pointed out that these base salaries are actually below the standard Simpson Thatcher set in early 2007 when adjusted for inflation. In fact, “real” base salaries are down — $160,000 in 2007 is actually equivalent to more than $185,000 today.
Because the spread of bonuses was much smaller in 2006/7, only associates with 7+ years of experience have realized real growth in their total compensation packages. The standard set in 2007 saw bonuses ranging from $30,000 for first-year associates (prorated) to $60,000 for senior associates, while the current bonus model typically ranges from $15,000 to $100,000+. These differences can likely be attributed to clients’ increased resistance to paying for work produced by first- and second-year associates. Though every other year lags in comparison to 2006/7 when adjusted for inflation, the gap shrinks with experience (click on the graphic to enlarge):
Inflation isn’t the only sticking point for recent graduates. While the number of students paying full tuition has decreased, average indebtedness has not. Law school debt in 2015 averaged $140,000 per student – 86 percent greater than it was in 2004. In 2006, Congress extended the Federal Direct Plus Loan Program to fully cover graduate and professional students. This allowed them to borrow the entirety of their tuition and cost of living allowances, resulting in the unintended consequences of law schools taking advantage and increasing tuition. It is now 25 percent more expensive to go to law school today than in 2006.
There is good news to be found. By kickstarting the expansion of salaries to non-New York markets, Weil (joined by others) has likely incited a radical shift in the compensation of Biglaw associates. While New York associates are typically compensated at the top of the market due to living in one of the most prohibitively expensive metro areas in the world, associates across the country are reaping the benefits.
| City | Median Starting Salary | Salary Required To Yield NYC Buying Power |
| Dallas, TX | 160,000 | 67,615 |
| Houston, TX | 160,000 | 69,095 |
| Charlotte, NC | 130,000 | 67,830 |
| Chicago, IL | 140,000 | 81,760 |
| Atlanta, GA | 115,000 | 70,290 |
| Los Angeles, CA | 160,000 | 98,715 |
| Boston. MA | 160,000 | 101,530 |
| Washington, DC | 160,000 | 103,290 |
| Costa Mesa, CA | 160,000 | 104,555 |
| New Orleans, LA | 95,000 | 66,350 |
| Denver, CO | 110,000 | 77,115 |
| Austin, TX | 96,000 | 67,545 |
| San Antonio, TX | 80,000 | 61,425 |
| Redwood City, CA | 160,000 | 124,115 |
| San Francisco, CA | 160,000 | 124,115 |
| Philadelphia, PA | 107,500 | 84,080 |
| Newport Beach, CA | 130,000 | 104,555 |
| Seattle, WA | 110,000 | 98,715 |
Even before the proliferation of New York firms to other major and minor markets, most of these markets approach parity through their comparatively low costs of living. For example, from NALP’s survey of associate salaries, the median starting salary for an associate in Dallas, Texas, was $160,000. While New York associates usually garner larger bonuses at the end of the year compared to other major markets, the cost of living differences mitigate these premiums. If firms continue to match Weil and Milbank’s ubiquitous increase, we could see movement from New York to less costly cities in the very near future. As of right now, it seems New York to $180K could soften the market as starting salaries are pushed up in other major markets, making New York’s compensation comparatively weaker when adjusted for inflation.
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