A partner at Greenberg Traurig was meeting with attorneys from five law firms when he learned that Simpson Thacher & Bartlett had raised associate salaries across the board.

"Every BlackBerry in the room started flashing," he recalls.

It was 4:30 p.m. on Jan. 22. At least five firms matched the next day, and by the end of the week, the sticker price for a new associate in the New York market was up for the second time in a little more than a year -- to $160,000.

The raise surprised competitors and legal consultants alike and caused many to question whether another pay increase makes sense. They point out that pay isn't associates' main gripe (uncertain partnership prospects and grueling hours top this list). Robert Link Jr., managing partner of Cadwalader, Wickersham & Taft, goes even further. If improving associate morale was Simpson's goal, says Link, the raise may do more harm than good.

A higher salary "puts more pressure on productivity and hours," says Link, exacerbating precisely the quality-of-life issues that make junior lawyers unhappy.

"I don't know what Simpson was thinking," he adds.

Even as Link made those remarks, he was getting ready to write bigger checks. Cadwalader matched Simpson's pay raise within a day. Competitors had little choice but to follow suit. Link says there was "no deliberation" at Cadwalader: "We won't allow Simpson or any firm to distance themselves."

Across town, at Dewey Ballantine, Chair Morton Pierce convened his executive committee "immediately" upon learning the news, and the firm matched soon after.

Simpson Chair Philip "Pete" Ruegger probably didn't expect the raise to clinch him the Most Popular award at the managing partners club. And he knows that a pay raise is not a panacea for associates' woes. But Simpson lawyers don't hand out money -- the firm will pay at least $8 million more to its 520 associates in 2007 -- without a good reason.

One reason is public relations. "The perception that we're paying attention to compensation for associates will hopefully earn us goodwill," says Ruegger. If it's attention he wants, mission accomplished. The raise drew a blizzard of media attention. Law students, lawyers at Simpson and potential laterals could not have missed the news.

Another reason for the raise, according to Ruegger, was getting a leg up in the competition for talent in law schools. That competition is fierce. Firms are growing, and law schools are increasingly unable to meet their needs.

The number of associates at National Law Journal 250 firms increased 76 percent from 1996 to 2006, while the number of law school graduates climbed just 7 percent during that period.

Meanwhile, grads have more career options than ever, particularly on Wall Street.

"We've seen a lot more interest in the past year from investment banks and hedge funds," says Mark Weber, the assistant dean for career services at Harvard Law School. He says Wall Street is hiring more young grads -- the phenomena is too new to say exactly how many -- but the real demand is for midlevel associates.

This suggests that Ruegger's third explanation for the raise -- retaining midlevel associates -- may come closest to the heart of the matter. Simpson is a leader in the representation of investment banks and private equity firms as well as in the small club of firms that represent the big hedge funds. The associates who work on these matters make a lot of money for Simpson, and the firm is desperate to keep them.

Of course, these people are also cotton candy to Wall Street. As both investment banks and the legal industry boom, the battle for associates with a few years of deal-making experience becomes more intense. The use of high-caliber weaponry -- in the form of big raises -- would seem to be a solid strategic move.

But if it's these people Simpson wants to reach, the firm may not have chosen the best message. The pay increase speaks loudest to law students, according to consultant Carolyn Wehmann. Nor will it will change the game in terms of compensation. Law firms can't hope to match Wall Street. A third-year associate recently left Schulte Roth & Zabel for a hedge fund with a salary approaching $700,000, according to Georgina MacKenzie, a New York-based director at Michael Page International, a financial services recruiting firm. An extreme example, perhaps, but one that illustrates the problem facing law firms.

Ruegger acknowledges the gap. He says Simpson can't compete on a "money basis" with the investment banks. Will the raise let Simpson compete on a quality-of-life basis?

Doubtful. Money isn't necessarily an associate's first concern. On The American Lawyer's 2006 survey of midlevel associates, Simpson scored much better in terms of satisfaction with benefits and compensation than it did with overall associate happiness.

"What the salary increase can't and won't do is address associates' myriad of concerns about more communication, more feedback and more robust training opportunities," says Miriam Herman of Blaqwell Inc., a legal consulting firm.

As for overall associate happiness, the raise could have a negative impact.

Many firms will ask associates to cover their own raises with longer days or higher productivity. During the last round of hikes, Dechert raised its New York salary from $125,000 to $145,000. At the same time, the firm raised its minimum billables from 1,950 to 2,000 hours, according to associates at Dechert. An associate at Covington & Burling says that even if there isn't a formal change in the requirements, partners will simply expect more hours.

"We don't say, 'Here's your raise, now work 50 more hours,'" says Roger Warin, chairman of Steptoe & Johnson. "But associates know, for most firms, that's the way the math works."

If the raise was a mistake, it was an expensive one. The game of keeping up with the Wall Street Joneses isn't cheap. While $8 million may represent a mere 2 percent of Simpson's net profits in 2005, it does mean that a minimum of $50,000 of per-equity partner profit will be redistributed to the associates. Not that firms intend to cut partner salaries to pay for the raise. While partner profits have grown almost twice as much as associate salaries over the last decade, consultants say that firms will raise either associate hours or hourly rates before they ask partners to pony up.

"They're going to have to squeeze more blood out of the turnip," says Peter Zeughauser, lead consultant at Zeughauser Group.

Of course, turnips, at least those of the associate variety, aren't complaining about getting paid more money.

"Everybody is happy that salaries have been going up," Harvard's Weber says. "But at what cost?"