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As the dust settles after a hectic summer of associate salary raise announcements by major law firms, many questions remain unanswered about why so many law firms decided associate pay needed to be increased.

One argument in favor of increasing salaries is that associate pay, at major firms, had not changed since January 2007, despite a significant increase in law firm profitability. As seen in the graph below, average profits per equity partner at Am Law 50 firms between 2007 and 2015 increased by half a million dollars, leading to sizeable partner pay raises. At Cravath, the firm which launched the associate pay raise frenzy, average partner pay increased by just over two hundred and fifty thousand during this period. Given that the average partner’s annual pay increased by such a large amount in the past five years, it might be reasoned that law firm partners were beginning to feel guilty about not sharing the wealth.

Graph 1

On the other side of the argument were strong forces pushing against increased associate pay. Among the strongest are the continued demands from clients to reduce costs and increase efficiency. ALM Intelligence estimates that the net effect of the associate pay increases announced over the past two months will add nearly $650 million in new costs for the Am Law 50 law firms. For Cravath, the increase in costs is estimated to be $11 million per year.

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Nicholas Bruch, Director, ALM Intelligence

Nicholas is a Director at ALM Legal Intelligence. He is ALM’s principle analyst for the legal market and is the Director of the ALM Intelligence Fellows Program. Nick’s research on the legal market is regularly featured in The American Lawyer and other industry leading media outlets. Nick also speaks extensively on the legal market, keynoting major industry events and speaking at partner retreats for large and mid-sized law firms. Prior to joining ALM Legal Intelligence, Nick was part of Huron Consulting’s Law Firm Strategy Practice in the firm’s New York and London offices. Nicholas’s experience includes advising law firms and law department in developing and developed markets on issues related to strategy, business development, market intelligence, and operations. Nick holds a Masters of International Business from the Fletcher School at Tufts University and a BA in Economics and Philosophy from DePaul University.

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