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In the latest round of the knock-down, drag-out, sell-your-mother-for-a-Supreme-Court-clerk war for talent, Simpson Thacher & Bartlett struck the first blow. In January, the New York firm raised salaries for first-year associates to $160,000, bumping up the rest of the associate classes as well. And perhaps mimicking the lock-step system most firms use to pay their fledgling attorneys, the rest of New York soon matched. The salary hike, however, didn’t stop at the banks of the Hudson. Soon, Am Law 200 firms around the country were struggling with whether it was worth it to keep up in the recruiting game. Most Washington firms initially jumped from $135,000 to $145,000 before finally matching New York’s ante in late spring. And just this month, D.C. litigation powerhouse Williams & Connolly raised salaries for first-years to $180,000. As of press time, no one else had matched, but you can bet the pressure to do so will mount. The increase in salaries puts both external and internal strain on firms. For those with profits per partner at or less than $1 million, the salaries are a big drag on profitability. Even for more profitable firms, the raises have caused friction with clients. “What has always been frustrating for clients is the issue of rising costs in connection to value. That frustration turned into anger this year,” says Susan Hackett, the senior vice president and general counsel for the Association of Corporate Counsel. Hackett adds that clients are considering drastic measures if rates continue to go up to fund associate salary hikes. Some firms, like D.C.’s Patton Boggs, have tied raises to the number of hours an associate bills. They can bill 2,000-plus hours and make the full $160,000, or they can bill fewer hours, make less, and have more time to watch “Law & Order” reruns. Even so, many firms will be stuck in a difficult position if New York decides to up salaries yet again: forget a raise and lose talent, or hike salaries and cut profits. With those choices ahead of them, firm managers may want to stock up on their ulcer meds.
Attila Berry can be contacted at [email protected].

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