Is Associate Pay on the Rise Again?

Gina Passarella

The Legal Intelligencer

With some evidence that associate salaries are on the rise, one might start to think that it's a case of back to the future. But this time around firms appear to be treading lightly.

After a few years of taking advantage of a down market and decreasing associate salaries, some firms are starting to edge up what they pay first-year associates. Whether this means a wholesale increase across all associate levels is unclear.

This year, Blank Rome, Reed Smith, Stradley Ronon Stevens & Young and Schnader Harrison Segal & Lewis all increased starting salaries.

Blank Rome paid first-years in Pennsylvania $130,000 in 2010 and will pay them $140,000 in 2011. The firm has the same number of associates starting in the state this year as it did last year -- six.

Reed Smith paid first-year associates $110,000 in Pittsburgh in 2010 and $117,500 in Philadelphia. This year, the firm will pay Pittsburgh first-years $125,000 and Philadelphia first-years $130,000. The associates will not start until January 2012. The firm will have 25 first-year associates across all of its offices, with 11 based in Pennsylvania. That is up from the eight first-years Reed Smith had in the state in 2010.

Schnader Harrison also pays different salaries for its Pittsburgh and Philadelphia locations, and both offices will increase starting pay in 2011. The firm paid $110,000 in Philadelphia and $95,000 in Pittsburgh last year. It will pay first-year associates $120,000 in Philadelphia and $105,000 in Pittsburgh in 2011. The firm's three first-year associates for 2011 are all based in Pennsylvania.

Stradley Ronon more than doubled its first-year class in Pennsylvania this year from three in 2010 to seven in 2011. That group is also going to see a salary bump from $115,000 to $125,000.

The increases at the four firms still have them below the Pennsylvania market leaders of Morgan Lewis & Bockius, Dechert and Duane Morris, which all pay first-year associates $145,000. Cozen O'Connor pays its first-year associates $135,000.

Of the four firms that are increasing associate salaries this year, only Blank Rome is bumping up its Pennsylvania pay higher than it has ever paid associates in the state. At $140,000, the firm is paying more than its peak of $135,000 in Philadelphia between 2006 and 2008.

Stradley Ronon's 2012 pay of $125,000 matches its 2006 first-year salary, but is lower than the $135,000 the firm paid in 2007 and 2008.

Reed Smith's range of $125,000 to $130,000 across the state for 2012 comes in lower than the $135,000 to $145,000 the firm paid at its peak in Pennsylvania in 2008.

Schnader Harrison's $120,000 in Philadelphia for 2011 is lower than the $135,000 the firm paid in 2007 and 2008.

In what is perhaps a sign of how some things have changed, firms aren't chomping at the bit to announce salary hikes like they were before the Great Recession. All four of the firms declined to comment on the salary increases.

It seems that starting salaries aren't the only things firms are increasing. According to a survey of midlevel associates by The Legal Intelligencer affiliate The American Lawyer, the average base salary nationally for midlevel associates at the responding firms this year was the highest in five years and represented a 4 percent increase, from $178,164 last year to $185,319 this year.

A survey released in May by consulting firm Altman Weil showed 18 percent of respondents thought reduced associate salaries would be a permanent trend, down from 32 percent who thought so the year before.

One of the survey's authors, Altman Weil principal Eric A. Seeger, said he thought the survey demonstrated that firms were done cutting salaries. He said the question was posed as whether the respondents thought reduced associate salaries would be a trend moving forward. Answering "no" to that question doesn't mean people thought salaries would increase, he said.

In looking at all classes of associates rather than just first-years, Seeger said there was some logic to increasing salaries. The associates who survived the recession are presumably the best and the ones the firms want to keep, he said. And if the overall number of associates has been reduced within a firm, overall compensation may still be lower despite base increases, Seeger said.

But the market isn't at a point to warrant large-scale increases just yet.

Seeger pointed to The Legal Intelligencer affiliate The National Law Journal's NLJ 250 data to show that the number of associates between 2004 and 2008 trended up while their average hours billed trended down. He said there was not enough work for that many associates.

In this "sluggish" economy with continued price pressures, demand for associates is not growing dramatically, Seeger said.

"Until demand grows, economic principles dictate no salary increases," he said.