Lawyer Pay

Sticky Wages Depress Associate Hiring; BigLaw on Track to Become 'Older and Dumber'

  • Print.

Salary figures released last week are bad news for large law firms that pay high starting salaries as well as for new lawyers seeking high paying jobs, according to two new reports analyzing the statistics.

Law grads from the class of 2011 are earning median pay of $60,000, a 5 percent drop from 2010 and a 17 percent drop since 2009, according to NALP–The Association for Legal Career Professionals. Put the salary figures on a graph, however, and you will also see changes in the bimodal distribution in which pay is clumped at $160,000 in BigLaw and the $40,000 to $65,000 range for new lawyer hires elsewhere.

A greater percentage of lawyers are grouped in the lower range and a lesser percentage in the higher range, when compared to figures just a few years ago, report the New York Times Economix blog and the Legal Whiteboard in a post by Indiana University law professor William Henderson. The figures indicate that BigLaw continues to pay starting salaries of $160,000 even as clients balk at paying to train new lawyers and outsourcing takes away associate work, Henderson says. Instead of paying less money to associates, BigLaw is hiring fewer of them.

To the Times, the statistics offer a “perfect example of a ‘sticky wage’ depressing employment.” No law firm wants to be the first to lower salaries, the newspaper says, partly because they don’t want to miss out on the best talent and “partly because they are afraid of losing face. Not paying the standard top-tier salary is a tacit admission that you’re no longer top-tier.”

Henderson says keeping salaries high and entry-level hiring low “is not a farsighted or innovative business strategy.” Law firms are focusing on the acquisition of lateral partners with portable books of business in an effort to increase the bottom line at a time of stagnant revenues. “This strategy may work fine for this fiscal year,” Henderson writes, “but over the middle to long term, BigLaw is going to get older and dumber.”

The best long-term solution, Henderson says, is to drop starting pay at large law firms to the point where associates are cost-effective to train. “And that price point is not $160,000,” he says.

Give us feedback, share a story tip or update, or report an error.