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Associate Pay May Need to Return to 1998 Levels, Consultant Says

Posted Nov 5, 2009 10:10 AM CDT
By Debra Cassens Weiss

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In 1998, law firms in Atlanta paid new associates about $72,000 a year.

That may be more to the liking of Altman Weil legal consultant James Cotterman, who told participants in an Oct. 27 webinar for law firm clients that associate pay cuts didn’t go low enough, according to the Fulton County Daily Report.

Associate pay at large law firms dropped from $160,000 to $145,000, but that was only "about half of what was needed," Cotterman said, according to the Daily Report account.

"They probably should have set pay back a decade, to 1998. That's what I was expecting," he said. "This story may not be over yet."

On Cotterman on Compensation in June, Cotterman wrote that annual pay for new associates would be reset by about a decade if it dropped to $125,000 or even $100,000.

In the past couple decades, pay rose because of competition for associates and increases in billing rates that rose 1.3 times the rate of inflation, Cotterman said in the webinar. Now clients are resisting rate hikes, and the demand for legal services is dropping, according to Cotterman and another Altman Weil consultant, Pamela Woldow.

Also driving down pay, they said, are contract lawyers, offshore legal providers and virtual law practices.

Pay cuts are "a painful reality and one that surely will fire up emotions," Cotterman wrote in the blog post. "But the tide has changed; clients are moving quickly and assertively to reduce legal spend. This goes beyond alternative fee arrangements. Costs of outside legal bills are going to come down, and from the early signs—down dramatically. Services will be competitively bid, outsourced, offshored, converged, internalized, re-engineered and even forgone."

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