Associate pay raises announced Monday by Milbank, Tweed, Hadley & McCloy weren’t immediately matched by a slew of firms, but industry observers said they expect Milbank’s move to have a cascading effect in the industry.

Milbank told associates around midday Monday that it is raising associate salaries by $10,000 for first through third years, with starting pay at $190,000. Associates in their fourth through eighth years would see their salary increase by $15,000.

A litany of firms did not come forward within hours on Monday to announce they were matching Milbank’s scale. Representatives and law firm leaders from more than 20 firms in the Am Law 100 did not immediately respond to requests for comment on whether they would match or change associate pay in any way, indicating Milbank’s announcement appeared to catch other firms off guard.

But legal observers said they predict other firms would match, even if fewer firms opt to do so compared with 2016, when the industry last boosted associate salaries. And while many firms in the Am Law 200 start associates at $180,000, regardless of the type or tier of firm, Milbank’s move could finally lead to a differentiation among firms in associate pay, some observers predicted.

“I think that would be healthy,” said Kent Zimmermann, a law firm management consultant at the Zeughauser Group.

When Cravath Swaine & Moore set the last associate boost in 2016, “there were a number of firms that followed that weren’t really competing for the same people, and in my view, [that] created a bubble that I think still exists in some segments today,” he said.

Some firms are likely to match Milbank’s pay raises and some may even beat it, Zimmermann said.

“Something to watch for is which firms match. Is the firm competing for the same people?”

A lot of firms may match even though they are not competing for the same profile of associate, And if they do, that may exacerbate the bubble, he said.

In the short term, a number of firms will likely increase associate compensation, Zimmermann said. But further down the road, there could be consequences, “given where we are in the macroeconomy cycle.”

“The economy is going to cool. Demand will decrease for many firms, firms will have overcapacity issues,” leading to a burst bubble that could result in layoffs or other consequences, Zimmermann said. “When the economy cools and demand drops, that’s when this will come home to roost.”

Zimmermann said he wasn’t being critical of Milbank, but critical of firms that seek to match when they are not competing for the same talent. “That’s creating a bubble and it would be shortsighted to do that,” he said. “My advice is that firms think a couple steps ahead, keep the macroeconomy in mind and don’t jump the gun and match Milbank if you don’t really need to, if you’re not really competing for the same profile of associates they’re competing for.”

Dan Binstock, a partner and recruiter at Garrison & Sisson, which frequently works with Am Law 100 firms, said he anticipates other firms will follow Milbank’s lead, but not as many as the number of firms following the pay boost in 2016.

Binstock also pointed to a possible separation in associate pay models between the Wall Street and other highly profitable firms and everyone else. “At one point, everyone else is going to say, ‘Enough. Our business model is not set up this way, our partners aren’t charging the same as partners on Wall Street firms,’” Binstock said. “I predict this could be the start of a bifurcation in associate salaries.”

“A lot of practice areas are feeling rate pressure,” Binstock said, adding he believes Milbank’s associate pay raise “applies to a certain segment of firms.”

Practice areas in financial services and deal work have been thriving for the last few years, but “what about the law firms that are regulatory- or litigation-focused?” Binstock asked.

While associates billing at $600 an hour or more may be fine for some high-level financial institution clients, he said, “most firms around the country, with the exception of the super elite, are facing pressure to reduce rates,” Binstock said. The demand for legal services hasn’t been increasing at such a level that would justify a number of firms increasing associate pay, he said.

Binstock also noted that Milbank, whose profits per partner totaled $3.46 million last year, ranked 12th in the Am Law 100, making it easier to underwrite such a move.

Milbank has about 500 associates, so firmwide raises would likely translate to an immediate overhead increase in the mid-seven-figure range. Still, Milbank’s net income last year was about $502 million, meaning the extra expense from an associate pay raise would represent a small fraction of its net profits.

Binstock also pointed to other under-the-radar consequences for firms that raise their associate pay, including more pressure on associates to make billable-hour targets and less flexibility for underperforming.

“I’ve literally heard managing partners say since we raised salaries to $180,000, we don’t have the luxury of giving associates six to nine months to catch up on their hours,” he said. Instead, firms may now give three to six months before they start a termination process, he said.

“With this increased compensation always comes an increased financial pressure that is often not evident at first blush but is occurring on the back end in order to make things work,” Binstock said. “Partners only have a limited willingness to dip into profitability.”

Brian Baxter and Meghan Tribe contributed to this report.