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Inside Legal Blogs [By The Judge] The market has been awash in news of large increases in associate salaries for the past few months. It’s been that way since Simpson, Thacher & Bartlett announced it was going to raise first-year associates’ salaries to $160,000 this season. Some say it’s devastating. Some think it’s going to start an ugly salary war. Some believe the recruiters had no other choice and that partners will simply have to share larger portions of their profits.

However, we all know that when taxes are

Erik Mazzone’s Blog currently features an

indicate that legal services are viewed by

raised and the price of something goes up,

entry entitled “The Dark Side of Increasing

firms as Giffen goods. A very old economic

it’s the consumer-in this case, the client-who

Associate Salaries”, which tells part of

theory attributed to Sir Robert Giffen says

really faces the music. Some feel the new

the real story of first-years becoming

that when consumers are not in a position

salaries are outrageous compared to the

overwhelmed-and perhaps even committing

to judge the quality of goods in a market,

salaries of judges who also don’t get bonuses

suicide-as a result of 16-hour-per-day

only the price needs to be raised to get an

and that legal professionals may start

workloads. Now, all that made me wonder,

increase in demand. It’s considered to be

leaving the bench to join law firms.

“How can it be a ‘salary raise’ if the workload

an exception to the normal rule of demand

is increased at the same time?” I mean,

being inversely proportionate to price.

The news even made it to Congress when

a salary raise means more money for the

Justice Anthony Kennedy, testifying before

same work, doesn’t it? If it’s more money

There’s no doubt that in the legal market,

the Senate Judiciary Committee, remarked

for more work, then it’s not a salary raise

clients are rarely in positions to judge the

that law clerks leaving the court made

but a workload increase in which the rate of

quality of services and their worth. So the

more money in their first years in law firms

payment remains almost the same.

recent salary increases may be attempts to

than judges do. In the March 1 issue of The

American Lawyer, Arik Press summed up the situation of the first-year associate: “There is […] a price to taking the king’s shilling […] going to work at a ‘lifestyle firm’ means not having a lifestyle.”

justify trying out the Giffen-goods approach. So what do such high salaries mean?

That’s what I think. Higher salaries mean

While the effects are many and include the

higher fees charged and greater demand for

advertisement of firms, the attraction of new

the Giffen goods-thanks to Simpson, Thacher

talent, the pressuring of smaller firms, and

& Bartlett.

the encouragement of lateral recruitment, these incredible salaries seem to me to


Inside Legal Blogs - american lawyer  
Inside Legal Blogs - american lawyer  

The market has been awash in news of large increases in associate salaries for the past few months. It's been that way since Simpson, Thache...