First-year lawyer salaries hit $180K in Philly
Salaries for first-year lawyers at big firms in Philadelphia are topping out at $180,000 a year to keep pace with New York competitors.
Salaries for first-year lawyers at big firms in Philadelphia are topping out at $180,000 a year to keep pace with New York competitors.
The venerable Wall Street firm of Cravath, Swaine & Moore got the ball rolling in June with the announcement that it would be raising first-year associate salaries by $20,000, to $180,000, and that associates with up to eight years at the firm would also get increases.
In Philadelphia, Dechert L.L.P. matched Cravath's salary increase for first-years and also boosted pay for associates with more experience.
Reed Smith, a global firm based in Pittsburgh with a large Philadelphia office, hiked associate salaries in Philadelphia, Wilmington, and Princeton to $160,000 from $145,000, effective Jan. 1.
In New York, Washington, Chicago, Houston, and California, first-year associate salaries will increase from $160,000 to $180,000.
"For us it came down to investing in the strongest talent, both from a recruitment and a retainment standpoint," said Casey Ryan, a labor and employment partner at Reed Smith, who also serves as the firm's head of legal personnel.
At Duane Morris, a Center City-based firm with 700-plus lawyers, salaries for first-years will be rising from $150,000 to $160,000 as of Sept. 1.
With the latest announcement of pay raises at many firms, the trend of eye-catching compensation for young lawyers at big firms has come full circle.
The last time firms competed so heatedly for top law-school talent was just before the start of the 2008-09 recession, and salaries for first-year lawyers in New York, Washington, Los Angeles, and a few other cities hit $160,000. At the big firms in Philadelphia, the pay scale was lower, $145,000 to start.
The collapse of financial markets hit some firms so hard that they canceled classes of incoming lawyers, and in some instances cut salaries and instituted widespread layoffs.
Since then, the market has slowly recovered. While incoming freshman classes are still smaller than at the zenith of the last law-firm boom in 2007, hiring has become more competitive and law firms are making more offers.
According to the National Association for Law Placement, the job market for first-year lawyers improved dramatically last year. Major firms made offers to 95.3 percent of their summer interns - that number had dipped below 70 percent in the depth of the legal recession in 2009.
All of this is occurring at a time of flat revenue for law firms. Profits were anemic to nonexistent after the 2009 recession, recovering somewhat by 2014. Since then, though, business has softened once again, although conditions remain far better than during the recession or in the immediate aftermath.
John Soroko, chairman and CEO of Duane Morris, said nontraditional legal-service providers, such as electronic discovery firms that do document review, a task once routinely done by firms for their clients, have cut into revenues.
And those conditions have made some midsize to large firms skeptical of the new round of pay raises.
Mark Silow, firm-wide managing partner at Fox Rothschild, said the 700-lawyer firm doesn't see the business case for raising salaries. Firms like Dechert and Cravath, which focus on complex transactional work that commands high hourly rates, are so profitable that they can raise associate salaries by $20,000 or more and not cut into partners' compensation.
For Fox, passing along such costs to clients would be hard, he said.
Still, the decision by Dechert, Cravath, and other firms to raise pay for associates will pressure Fox Rothschild to do the same.
"I do foresee that at some point there will be pressure on us to increase [associate salaries]," he said. "It is unfortunate. It eventually puts pressure on clients and firms who are, one way or another, going to look at how to pass this back on to clients, and that is stressful."
Even so, other law firms say they need to pay more to ensure that they stay competitive by hiring the best lawyers.
"If you have the highest and best level of talent, that enables us to provide the best level of service to our clients," said Ryan of Reed Smith.
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