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The great associate pay raise of the year 2000 made a big dent in the massive pay disparity between low-level associates in New York law firms and those throughout the rest of the nation. The revolution began in Silicon Valley firms earlier this year, as a response to the lures of dot-com companies, but it spread rapidly to large law firms in most big cities. As result, the picture for associate salaries nationwide is far different from what it was a decade — or even a year — ago, according to The National Law Journal‘s findings in its latest “What Lawyers Earn” survey of lawyers’ compensation. Ten years ago, salaries for young associates at major law firms in almost every city looked paltry next to the yearly earnings of associates at New York’s top-tier firms. In 1990, for example, when the first-year compensation at top firms in Houston had reached $56,000, the rate in New York was up to $83,000. Even last year, few firms outside New York were in competition with the top New York firms. And large firms everywhere had different pay rates for different markets. Now, New York firms are no longer alone as the biggest spenders for recent law school graduates. Law firms in San Francisco, Washington, D.C., Los Angeles, Chicago, Boston, Houston and Dallas have jumped far above the $100,000 mark. Many of these firms now pay $125,000 to first-year associates at all branches. Some have gone higher: At Boston’s Testa, Hurwitz & Thibeault, the first-year compensation is $140,000. Even firms outside the traditional highest-paying markets are paying more. Class of 2000 associates at Detroit’s Dykema Gossett will receive $95,000 this year — a substantial leap from the $65,000 paid last year. WHERE IT BEGAN When the northern California firms Gunderson Detmer Stough Villeneuve Franklin & Hachigian; Brobeck, Phleger & Harrison; and Gray Cary Ware & Freidenrich began raising salaries in late December and early January, “for the first time in history, these firms jumped ahead of New York and set off a ripple effect,” says Robert A. Major, partner with the San Francisco office of the recruiting firm Major, Hagen & Africa. “New York then tried to keep up, and because Los Angeles firms had branches in the Bay Area, this forced them to raise their pay scales as well.” And so it went. Recent troubles for dot-com companies and other startups on Nasdaq, and the slowdown in initial public offerings, hasn’t had much effect on the desirability of these attorneys, adds Blane Prescott, principal with the San Francisco office of legal consultant Altman Weil Inc. “The demand has slowed down a bit, but there is still a shortage.” He believes salaries may yet rise again. “I would not be surprised if the high-end firms raise salaries again this year.” Some firms, Prescott says, will clearly be bowing out of the salary escalation business, “realizing that their profits are off because they’re paying their associates at such a high rate.” This is particularly true of the local firms that responded to the national firms’ pay raises, said Lisa Smith, partner in the Washington, D.C., office of Hildebrandt International. “Firms that can’t make money to support the increases are already having trouble.” She predicts that the great pay raise of 2000 will eventually “create a sharper divide between top-tier and second-tier firms.” The increases weren’t as substantial for older associates. “We’re raising the bottom,” says Prescott, “but that means there is not as much money available for later associates.” In the mid-tier firms particularly, he says, the pay raises for upper-level associates were only in the $2,000- to $3,000-per-year range. The steep increases in associate pay has slowed the rise in partner income. In firms surveyed this year, profits per partner were up at all but two, and in a couple of instances the increases were massive: from $399,000 two years ago to $651,000 in the past fiscal year, for instance, at San Francisco’s Townsend and Townsend and Crew. But, overall, partner profit margins were not as high as they were in 1990. But if profit distribution is lower, revenues are at all-time highs. At New York’s Davis Polk & Wardwell, for example, revenues for the fiscal year ending Dec. 31, 1989, were $217 million; revenues for fiscal 1999 hit $460 million. OUTSIDE THE COCOON Law firm salaries led those of other lawyers by a wide margin in 1990. This is still true today. Their only close rivals are in-house attorneys. In 1990, the highest total earnings of general counsel in the NLJ survey was $407,136. This year, several topped $1 million. Most other lawyers saw pay hikes of no more than the average of 3 percent to 4 percent per year, with the notable exception of prosecutors. For instance, U.S. attorneys were paid $157,000 in 2000, up from $81,000 in 1990. The pay for entry-level assistant attorneys general in Arkansas has nearly doubled in that period, from a lowly $19,500 per year to $36,000 annually. Considering the experience levels and the importance of their jobs, it is startling that judges remain among the more poorly paid lawyers in the country. A general trial court judge in California, for instance, makes $117,912 per year; a general trial court judge in Montana receives $77,439 annually. And Supreme Court justices — even the chief justice of the U.S. Supreme Court — now make less than some seventh-year associates in large firms. In 1990, that was true only regarding associates at top-tier New York firms and a smattering of firms in Los Angeles.

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