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After years of remaining flat, could first-year associate salaries be moving upward? The Legal Intelligencer reported last week that a DLA Piper office in Philadelphia was paying first-year associates $160,000 -- that's standard for firms in big markets like New York and Los Angeles, but it's an increase from the $145,000 that's been the norm in Philly.
It's not just limited to DLA Piper or Pennsylvania. Reed Smith, which has been paying under-market rates in Manhattan, is going to up its first year associates' salaries to $160,000 effective January 1, 2015, reported New York Law Journal. The ABA Journal, citing the National Association for Law Placement (NALP), saw the median salary for new law graduates in 2014 rise to $95,000 from $90,000 a year ago.
What does this all mean for new and aspiring lawyers?
The Flood Is Dying Down
For one thing, it means that the legal industry is potentially recovering from the 2008 recession. It also means that it's recovering from the 2013 law student inundation.
2009 and 2010 saw a huge increase in LSAT takers, likely due to new college graduates deferring their job decisions in a terrible economy. Three years later, the wave of students overtook the legal market, depressing salaries and decreasing demand for new graduates. No doubt spurred by this revelation, LSAT administrations declined for 14 straight test administrations after the June 2010 test. You can see the results of that all around you as law schools, facing sharply decreased enrollment, are frantically trying to cut costs. The upside to that decreased enrollment is that the Class of 2014 is a fraction of 2013 and 2012's size.
The Ripple Effect
As a 2007 article from Oregon Bar Journal correctly points out, an uptick in salaries in one market is going to affect every market: "Large firms [in Oregon], whether they have East Coast offices or not, compete for much the same pool of top law school graduates as do New York and other metropolises."
An Oregonian who goes to Harvard could either move back to Oregon or go to New York; in order to make Oregon a reasonable and viable alternative, it's got to stay competitive with everywhere else. The same goes for other midsized markets.
Larger Salaries, but Fewer People Getting Those Salaries
Just because new associates are getting hired at higher salaries doesn't mean Big Law firms are hiring more associates. It's entirely conceivable that a 10 percent pay increase is compensation for becoming more "efficient," which is management-speak for "work more hours." This is supported by data from The New York Times' Economix blog, which looked at historical salary data for first-year associates and found that the percentage of lawyers getting that benchmark starting salary fell from 25 percent in 2009 to 14 percent in 2011.
Economix also observed that the adjusted mean salary for entry-level attorneys has gone down because a greater quantity of new lawyers get jobs toward the left end of the income distribution, around $50,000. These aren't just traditional government and small firm jobs, but also "new second-tier, nonpartner-track jobs" at BigLaw firms.
It would seem that, while first-year salaries might be going up, the chances of being one of those people with higher salaries is going to be less than before.