Lawyer Pay
Associate Pay May Need to Return to 1998 Levels, Consultant Says
Posted Nov 5, 2009 9:10 AM CST
By Debra Cassens Weiss
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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Comments
B. McLeod
Nov 5, 2009 9:24 AM CST
Yup. Determine, market. Determine.
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Liz
Nov 5, 2009 9:36 AM CST
If law school salaries and tuition could return to 1998 levels, there’d be no problem. But I don’t see that happening.
The older generations willful determination to run everyone else off a cliff in the interests of pretending there’s some free market lesson to be learned is just kind of shocking. The Wealth of Nations doesn’t really support anything like the idea that, “Bad actors should never be corrected because eventually it all works out after the dust settles,” and if the last few years have taught us anything, it’s the efficient market theory will have to be, to put it mildly, revised.
Law school is priced like a monopoly, not like a perfect product in a perfect world with perfect information.
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right
Nov 5, 2009 9:38 AM CST
Self serving consultants. What needs to happen is that law firms need to start providing more valuable services to their clients - not just reduce in-house costs. No associate in their right mind would bill 2000+ hours for 70K per year. Granted, many associates aren’t in their right minds, but still.
What I bet this “consultant” didn’t take in to consideration was the fact that by paying an associate 140K instead of 70K, you basically get 1 person to do the work of 2 people. The salary may have doubled, but the other costs stayed the same (health insurance, office space, training, etc.). The only other option would be reducing the salary and keeping the workload high. People just won’t do that job, though. And frankly, you wouldn’t want the people who did it. I could make 70K/year in any number of 40 hour per week (or less, in all reality) jobs. Why torture myself for it?
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Anon
Nov 5, 2009 10:13 AM CST
Doctors with similarly insane amounts of debt routinely work 100 hour weeks for a pittance for 4-6 years after graduating from medical school. I don’t know that lawyers would refuse to do the same thing, if that were the business model in our field.
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AndytheLawyer
Nov 5, 2009 10:28 AM CST
I’ll bet anyone at 50-1 odds that the consultant didn’t offer to return Altman Weil’s billing rates to 1998 levels.
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brislend
Nov 5, 2009 10:39 AM CST
So a top notch student is expected to go into 200 grand of debt and wind up at a soul crushing job with no life working 80 hours a week to pull down 60 grand a year after taxes? Sign me up.
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tim
Nov 5, 2009 10:59 AM CST
How can you live in NYC on 100,000?
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Math Fail.
Nov 5, 2009 11:08 AM CST
I’m not sure I agree or disagree with the idea that associates are overpaid relative to other professionals with the same or greater levels of education—e.g. phds in the hard sciences/engineering, doctors. I think theres a case for both sides on that issue. Note that the health reform bill thinks doctors should take a 20% pay cut and be exposed to higher taxes to a total about about 35% cut in take home.
I do know than 160 to 145 is a 15k difference and 145 to 125/100 is more than 15k so thats not really “half.”
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associate
Nov 5, 2009 12:29 PM CST
Sure, no problem…. as long as we’re also talking about a corresponding reduction in my revenue expectations (i.e., lowered rate and/or lowered hours expectation).
The going rate in Atlanta in 1998 was apparently 72k. I’d rather manage a couple of McDonald’s. It pays better anyway.
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anonymous
Nov 5, 2009 12:33 PM CST
Well, maybe if corporations were required to stop outsourcing their legal work to India, then American attorneys and associates could once again find employment here in the US and make half-way decent wages. In America, lawyers are required to spend time and money obtaining a law degree, maintaining a bona fide office, etc. What are the requirements in India?
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anon
Nov 5, 2009 2:38 PM CST
The only reason for the increase in associate salaries to $125,000 iin 2000 was the dot com bubble. I have no idea why salaries went as high as $160,000.
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BigLaw
Nov 5, 2009 2:58 PM CST
Working for peanuts doing boring legal work is not for me. The firms need to bump up the money to keep people interested in law as a career. When I graduate, hopefully the salaries are back up to where they should be.
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Nick
Nov 5, 2009 6:41 PM CST
Anon is correct about the huge jump in 2000 being due to the dot com bubble. I was a relatively new associate during that time. My salary was $85,000 a year and my billable requirement was 1800 a year. The firm was about 18 lawyers large/small and it was rather pleasant work environment—not a lot of pressure. Frankly, it was a good gig. Once firms started the salary wars, things turned ugly b/c there was a lot of turnover and lateral movement. I don’t know—I would hate to be an associate nowadays. I’m quite happy being a solo practitioner; ironically making more $ than I would working at a law firm.
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Mac The Knife
Nov 5, 2009 6:44 PM CST
#11 It’s the old “mine is bigger than yours” mentality. Because so much money was being made by the clients they didn’t really question the constant increase in legal fees that exceeded inflation. There was plenty to spread around.
Because the law firms were making so much more money, eventually one of them decides to make a make a substantial jump in lockstep associate compensation, in theory to corner the market on the top ranked law school graduates. Of course in reality, this never works out and every firm that does so knows it wont, so essentially it becomes a big p***s waving contest where all the other firms are forced to step up to the plate and show that there’s is as big as the firm that first announces the big jump in associate salaries. Locker room mentality extends into all aspects of BigLaw.
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windy idiot
Nov 6, 2009 6:09 AM CST
I like how all of this “cost cutting,” “market realignment” and “salary restructuring” is so focused on associate salaries. I’d like to see clients look at the ridiculous partner chargeable hour on the bills and ask for a corresponding reality check at the partner compensation level. After all, partners are the ones who theoretically assume the risk of an erratic income in bad economic times. The problem with the business model of today’s law firm started when partners decided they needed $1m/year so they could keep up with the lifestyles of their clients. The downturn has revealed that lawyers are not such good businessmen after all, and the attempt to fix the problem by slashing associate (or junioir partner) salaries does not fix the problem.
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Bruce
Nov 6, 2009 6:40 AM CST
Does that mean associate pay at the majority of law firms is going up seeing as it is below that now?
The image of the industry is still stuck on a situation that doesn’t exist.
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Yvette
Nov 6, 2009 6:53 AM CST
Aren’t you all forgetting something. A first year associate cannot do anything. My secretary and paralegal know more about the practice of law than a first year lawyer. I write off practically all of their time because I would never require my clients to pay $200 per hour for their work. Yet, you’re telling me that they are worth $145,000 per year. BTW - if you’re managing two McDonalds, you’ll be working more than 2000, dealing with $7.00 per hour employees and coming home smelling like grease. Try the swap for a year and then give your perspective on the practice of law.
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Bush One
Nov 6, 2009 7:11 AM CST
Yvette @#17: Maybe you shouldn’t be billing your first year associates out at $200/hr. Then you wouldn’t be writing off their time. Implying that the newest associates cannot produce quality work (or perhaps I’m misreading your post) makes me wonder why you hired them in the first place. Maybe you got some bad hires? Younger associates may spend more time completing assignments than it would a seasoned partner, but assuming quality product, charging a lower fee per hour for associate work would satisfy most clients, as long as you explain to them a seasoned attorney will supervise/final edit all work going out (and actually do that), the associate can still generate income while learning on the curve.
And I was trying to avoid what may come across as an attack (and please know it is not), but ” A first year associate cannot do anything. My secretary and paralegal know more about the practice of law than a first year lawyer. ” Did you start your career knowing everything? What if your pay then was half of what it was? Would you have been able to make it?
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Not entirely gruntled
Nov 6, 2009 7:14 AM CST
I would be happy to work for $80K if my firm also paid me a one-time $100K bonus toward my law school debt. A lot of young lawyers are working for Big Law only because they have to to pay their debt, and/or, conversely, went to expensive elite law schools (rather than cheaper ones, or lesser ones to which they could have gotten academic scholarships) only because they knew Big Law would pay them enough to pay down the debt in some reasonable time. All of this served Big Law and Big Law Schools very nicely; now you want out and you’re going to stick us with the bill? What a profession.
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RC
Nov 6, 2009 7:30 AM CST
The reality of this situation is that there are numerous branches to this problem, one of which is that law school tuition keeps rising despite the fact that the product isn’t changing. If the holders of my school loans were willing to accept half of the payment I’m making right now (which is more than my mortgage payment), then I would be willing to make less money. As it stands, I can’t, and I live VERY modestly. Law schools should stop blinding potential students with huge dollar signs as justification for raising tuition, because 95% of their graduates will never see anything near those dollar signs. Like most problems, this is systemic. Who knows, this flailing economy could lead to more truly dedicated attorneys in the world rather than treasure hunters. That would be refreshing.
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Point of Clarification
Nov 6, 2009 7:36 AM CST
Since 1996, associate salaries haven’t kept pace with partner profit shares. Additionally, associate salaries have not kept pace with the cost of living increase and inflation either. At a starting salary of a paltry $75K, the big law firms would lose their top talent. Personally, I was making more than that before law school, without an advanced degree. I never would have gone to law school to become a lawyer for a starting salary of $75K. Large law firms are essentially paying to have their associates on call 24 hours a day. I most certainly would not check my messages hourly or work through the night on a regular basis for that salary.
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Anon
Nov 6, 2009 7:46 AM CST
Hey #4,
The upside for doctor salaries is much greater than that of attorneys. Doctors take a hit during residency to have greater salary potential a few years down the road.
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Bob
Nov 6, 2009 8:17 AM CST
the problem is that we are mostly eating dinosaur meat. Many Associates and Partners are not worth what they are paid. A bunch of shareholders have lost their job in this downturn. You are only worth as much as you make for your practice. No matter how good you are, if you don’t have the cases you are not worth squat. Graduate’s debt is not my problem since few of them have any loyalty to their first firm. I let someone else train the newbies and hire only individuals with proven track records. That works just fine for my practice.
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MBA JD
Nov 6, 2009 8:19 AM CST
Unless your guaranteed a law job through with the Lucky Sperm and Egg Firm or your a 3rd generation law family, why in the hell would you go $100,000.00 in debt to perform a service for an increasingly fickle human population. Oh that’s right, you went to law school because you long to help people without regard to financial remuneration. If its all about the money just become a prostitute you’ll end up one anyway in the long run. Oh, and according to Keynes, were all dead in the long run.
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D
Nov 6, 2009 8:32 AM CST
I wouldn’t mind having my pay cut so long as my hours expected AND my student debt were proportionately cut as well.
It’s very easy for people who went to law school when tuition was affordable to pronounce that salaries should come down. If they had the debt of modern law school graduates, their tunes would change.
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B. McLeod
Nov 6, 2009 8:44 AM CST
Indeed, #24, if Keynes never got anything else right, he at least did master that one point.
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Jaded
Nov 6, 2009 8:59 AM CST
News flash! Consultant tells management what they want to hear, collects big fee!
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RRS
Nov 6, 2009 9:25 AM CST
I graduated in 1993 with $75,000 of debt and made $20,000 my first year out. Within 4 years I earned my keep and was making $75,000 and my compensation kept rising from there. I ended up paying off all of my loans without too much pain within 10 years. Noone should go into law just for the money, but, if you work hard and earn your keep, you’ll pay off your loans. Necessity is the mother of inventions we all ultimately do what we have to do.
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dynamite
Nov 6, 2009 9:28 AM CST
At # 7, I’m a lawyer and I do live in NYC, and I make $50,000 a year. Frankly, a lot of people would work 80 hours a week to make $75,000 a year because there are people making much less than that working even more hours at different jobs. Truth is, a lot of lawyers just graduating in NYC will work for $40,000 or less. If the Big Firms were smart, they would realize this, and the partners would be making twice the amount of money they are now. For every lawyer that quit complaining of pay, there would be 10 lawyers in line to take his or her job. One year working at a big firm is a huge resume booster; forget the salary.
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Doug Motzenbecker
Nov 6, 2009 9:31 AM CST
Although I am long out of law school, I could understand associates immediately answering, “Well, no one is going to return law school tuition to 1998 levels.”
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DP
Nov 6, 2009 9:32 AM CST
#3 - There are MANY lawyers who bill 2000+ hours per year for a $70,000 salary. That you don’t even know of their existence speaks volumes about the scope of your experience and credibility.
#24 - I believe they encourage the use of the apostrophe, when appropriate, in most JD/MBA programs.
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JME
Nov 6, 2009 10:05 AM CST
#12 seems to have a bit of a problem. Unless you solo or do something else right out of school, your first years are going to be boring legal work. I have many boring hours trying to formulate documents. It is critical to get them right, but definitely not interesting. The interesting part comes in the client interviews, court arguments, etc., which, as a solo, I am doing my first year out of law school. It is also good to give a client good news, which you young associates probably never get to do.
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Liz
Nov 6, 2009 10:31 AM CST
Gee whiz. Do you mean I can have clients too, if I just pay the ABA a few thousand more dollars, to learn what my $100k law school didn’t teach me? Is this as good a deal as BarBri or what.
Wait a sec…. How many new businesses fail in the first year? How much can new solos expect to make? How many new solos are out there, competing for how many clients?
Well, I guess I can trust the ABA to give me non-fictional numbers on all these factors. So there’s no worries about my $1000+ a month Sallie Mae payments!
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AndytheLawyer
Nov 6, 2009 11:21 AM CST
Liz—In your next incarnation, learn bartending, or automobile repair, or tailoring, or nursing. Less tuition, and the skill sets are portable worldwide.
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Ford
Nov 6, 2009 11:43 AM CST
AndytheLawyer - No doubt there is nobody here who doesn’t think that it would be nice to have a set of skills to fall back on, but every time you (not literally you only, but you’re the first person in this thread to do it) claim that every law student should try their hand at auto repair, nursing, or other trades that actually require talents which are relatively uncommon in attorneys, it sound incredibly disrespectful. most lawyers I know can’t stand math, science, or the idea of smelling human excrement for 12 hour shifts, and if they could, they’d still be awful at those positions.
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Kevin
Nov 6, 2009 11:43 AM CST
#19,
You really thought the legal profession was filled with people who care about your personal situation? Hardly.
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eichler1
Nov 6, 2009 12:06 PM CST
Yeah, I’d go with that, so long as law firm partner pay, corporate executive compensation and law school tuitions also were reset to 1998 levels. Otherwise, the associates are shouldering the burden for a problem they didn’t create. Hey, come to think of it, why not just lower salaries in the financial industry to 1998 levels. That’d save tons of money.
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Sparky
Nov 6, 2009 12:19 PM CST
Consultant Needs to Kiss Our Asses, Associates Say.
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B. McLeod
Nov 6, 2009 12:20 PM CST
Conversely, Ford, it is really difficult to imagine that there could be many people who are just inherently incapable of doing anything in life but the practice of law. I do not think there is anything disrespectful in suggesting that colleagues who have hit a wall with law practice should retrain for something else. That said, they should not (ala Liz) expect 3rd parties to provide additional training or retraining gratis, simply because the law school effort didn’t work out well.
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spinnaker
Nov 6, 2009 12:29 PM CST
Well, we shouldn’t complain - it looks as if the Altman Weill consultant has found a solution to the “oversupply” of lawyers and high law school tuition. If his idea is accepted, no one will go to law school, therefore, no new lawyers and law school tuition would be reduced to make up for a decrease in students and lowered expectations of starting salaries!
Touche
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Liz
Nov 6, 2009 12:42 PM CST
“Liz—In your next incarnation, learn bartending, or automobile repair, or tailoring, or nursing. Less tuition, and the skill sets are portable worldwide.”
Another helpful suggestion from some one who assumes the widely held belief that the system is unsustainable, could only be held by some kind of malingerer. I’m not, in fact, I’ve been much luckier than I probably deserved to be. I was certainly much luckier than many of the people I know who deserved much, much better than they got.
I know this is a hard concept for many lawyers, Andy, but some of us actually hate to see people screwed over, even if we personally don’t have a dog in the fight.
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Ford
Nov 6, 2009 12:46 PM CST
@39: McLeod, I’m aware that there are other talents that people have which, in an ideal world, make them qualified for somethign other than the practice of law. My issue is that people on this site repeatedly assert that lawyers (or anyone else with sufficient “smarts” as determined by the number of degrees they have) should automatically go into another field because they are inherently smart enough to do it. Particularly, I’m thinking about Scalia’s argument that lawyers should retrain to be engineers or doctors to address the overcrowding of the legal market. There are absolutely jobs that lawyers can learn how to do, but I take offense to the idea that allegedly intelligent people are fungible between disciplines.
I say this, by the way, because I know that aside from business majors and engineers, maybe 10 people in my law school class could accomplish more than the basic four functions if they had a TI 83.
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DCML
Nov 6, 2009 1:16 PM CST
$125k in 1998, adjusted for inflation, is $164k now. So why is paying over $125k for associates such a crazy idea??? I’m pretty sure law school didn’t cost $150k in 1998 either. Where would biglaw be without associates?? Do clients really think that BIGLAW partners do all their own work and only they should get paid well? That they do their own legal research, review documents, manage document reviews, manage due diligence projects, write motions and memorandum and deposition outlines, etc.?? Ha!
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TKO
Nov 6, 2009 1:56 PM CST
Maybe this consultant should reduce his fee to 1998 levels. He’s advising law firms to cut their spending, right?
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Steve
Nov 6, 2009 2:21 PM CST
I imagine one could assemble a firm of experienced T2-T4 and a handful of still jobless T1 graduates.
It would be the best of both worlds. Attorneys with experience and attorneys with impressive diplomas all in one firm, all working for under $100K.
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AndytheLawyer
Nov 6, 2009 2:27 PM CST
Liz—nothing in my post suggests I thought you’re a malingerer. Just unfortunate. If that’s wrong, great. But it was a reasonable inference from the passion of your posts on this issue.
I don’t think any new law grad caught up in the mess of this economy and its effect on employment rates and wages is blameworthy. But blaming older lawyers (as you do in your post #2) for not volunteering for the ice floes so that a newer crop of shiny faces can handle home foreclosures and apartment evictions (or whatever the other growth niches are in the profession these days) is absurd.
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DG
Nov 6, 2009 2:28 PM CST
Those law students who are not top 5%/law review should be thrilled with such a large overall salary drop, because it lessens the risk to big firms of hiring them. We bill our first years out at 150/hr, which means 300K gross on a 2000hr year, but since at most 50-70% of that is likely to get to a client (because a 10 hour research day gets cut to 2hrs billed), you really only take in 150-210k. After paying 12k in health insurance, a share of secretarial salary (20k), and office space (10K), and other overhead(10k), bar fees, etc., first years are NOT typically profitable at a 125K starting salary. And for those who want to bitch about the share taken by partners, it took me 15 years to build my practice and trust with clients. In this legal market, just try getting the top dollar work without a big name/rainmaker partner with the long client relationship - hah! You would have no “grunt” work to do without them…
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Joe
Nov 6, 2009 3:09 PM CST
I see that Liz is still spending her time posting on blogs instead of doing something productive with her law decree.
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Liz
Nov 6, 2009 3:46 PM CST
If you people only knew how lucky I’ve been.
That’s actually why this situation freaks me out so much. Unlike the unsympathetic fakers on this board, I know what it takes, and I know how much of it was just flat out luck. I worked my tail off, but SO DID ALMOST EVERYONE ELSE. There is no way any one of us can oretend that our situation was entirely merit.
What frightens me, is that since I know how shaky it all is, I hate seeing more people freaked out needlessly. It may not affect me right now, but it will eventually. Lawyers who are frantic about money, lawyers who feel trapped, god forbid lawyers who are suicidal - these aren’t personal problems. They affect all of us.
So many people in this profession seem incredibly ok with watching people screwed over. In my experience, and again, I’ve been freaking lucky, these are exactly the people who are eventually hit hardest, and don’t recover.
So lecture and snipe all you want. I know you don’t know what you’re talking about, you’re on a path that doesn’t end well, and if your eventual implosion weren’t going to trash the profession, I wouldn’t care. But I love this profession, and I hate to see this mess.
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Liz
Nov 6, 2009 3:58 PM CST
PS - How did my point about free market capitalism NOT tolerating monopoly behavior turn into, in your words, a request for older lawyers to volunteer for ice floes? I hate people who say, “It will all work out…” It’s smug and inaccurate. That doesn’t mean I want older people to be poorer than they already are - for cryign out lout, I can’t imagine how frightening it must be for people nearing retirement.
My point is that older attorneys are being willfully blind. Younger attorneys didn’t cause the mess, and we can’t fix it for you, no matter how much you lecture us about bucking up and pulling through, like you did in 1970, back when debt levels and real wages were manageable.
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