November 6th, 2007 by Jim Cotterman
The market occupies itself with the compensation contest of the leading law firms. And although this makes for good reading, it is not the whole story. The National Association of Law Placement (NALP) collects and publishes a wealth of information regarding compensation and hiring patterns of recent graduates and associates in law firms.
Test your knowledge of the market:
1. How many law school graduates were there in 2006?
2. What percentage were hired by law firms?
3. What size law firms hired the largest number of those graduates and how many did they hire?
4. What size law firms hired the second largest group of those graduates and how many did they hire?
5. What was the median starting salary for the 2006 graduates?
6. What does the starting salary curve for look like (i.e. bell shaped, skewed, etc)?
7. Since 1992 how much have overall associate salaries increased?
8. How does that compare with inflation for the same period?
9. How does that compare with the profession’s change in prevailing billing rates for the same period?
10. What do the long term starting salaries tell us about the future?
Most of the answers are available from NALP. Spend some time on this site to gain a better understanding of what the recent graduate market is like. Also read this article, The War for Talent and Starting Salaries, from Ward Bower about the supply and demand equation for recent graduates.
Now the rough answers:
2. 55% (24,000)
3. Over 100 lawyers (9,700)
4. 2 - 10 lawyer firms (8,400)
6. Bi-modal with the small firms clustered just below the median (around $45,000) and the large firms forming the upper mode around $140,000.
7. Doubled (100% increase)
8. 1.4 times inflation
9. Prevailing billing rates increase 1.8 times inflation for the same period. Consistent with how the fee production of associates tracks with their compensation costs.
10. Large firms compete for top graduates in top firms. They hold the line on increases during and immediately following a recession, then accelerate the pace of change once the market is solidly underway again. The larger firms drive more aggressively regarding salaries than do their smaller competitors. We will likely see a slow down in increases when the economy faces its next recession. Then afterwards the competition will heat up once again.