There has been a good deal of talk lately about associate salaries at big firms, and how they continue to go up and up. Most recently, the rumor was that after first-year associate salaries at national firms hit $160,000 this summer, they might hit $190,000 by the end of summer.
But now, things seem to have ground to a halt. Above the Law reports that, in the midst of all this bubble talk, the bottom has dropped out of the corporate law market. Many lawyers at big firms now have nothing to do.
This, of course, is really no surprise. After all, the economy is slowing, or at least teetering, and there is a good deal of concern over the mortgage market and its effect on the economy. The Fed is taking proactive action to avoid recession. Why, in such uncertain times, would companies enter into high-flying deals or initial public offerings? Many wouldn't, of course. Which means that busy, busy corporate departments are no longer so busy.
There are several points worth making here. First, this is certainly not the first time this has happened. In the early 1990s, for example, corporate associates at my first law firm played football in the hallways because there was nothing else to do. No kidding. Like stock market volatility, such market swings have happened before, and they will happen again.
Second, law firm wages are generally sticky downward. So, absent some sort of collective bargaining by associates to reduce associate pay, associate salaries probably will stay where they are. They will not go up, but they won't go down, either. (Bonuses, however, certainly will be reduced or eliminated.) That means some people will be sacked.
On the other hand--and I suppose this is my third point--while associates historically have not voted to reduce their salaries, large salary increases in recent years have led some big firms to implement two associate tracks--one with higher hours and pay, and one with fewer hours and pay, plus a longer track to partnership. It's also worth pointing out that the latter "quality of life" tracks have developed largely at the request of associates. So it might be that some firms would "allow" associates to choose which track they want, as a means to actually reduce salaries. Not much of a choice, but better than outright firings. In such a case, however, I would not expect "official" salaries to drop--just the de facto ones.
Fourth, once things do turn around, law firms will lag in hiring badly needed associates. In recent decades, firms have been very cautious about hiring new associates at the beginning of an economic recovery. Once bitten, twice shy, I suppose. So that means associates at that time will be absolutely swamped with work, even moreso than usual. No more playing football in the halls--but at least there will be more job security.
Fifth, don't forget that the law market is diverse, not uniform. Litigators are probably still very busy, and bankruptcy lawyers may be very busy soon. International trade lawyers are pretty much always busy these days. So not everyone will experience job insecurity or intramural sports in the halls. But since corporate law practices tend to be the primary drivers of industry-wide salary changes, further big salary bumps are likely on hold for at least the near future.
Finally, I fully realize that these pay raise and layoff trends are in the big U.S. markets right now, like NYC, DC, and LA, and not Charlotte, NC or Jackson, MS. But there is a trickle-down effect, and what happens in the bigger markets, if it is pervasive and long-lasting enough, will eventually cause changes in regional markets too. So whether you are a lawyer (or law student) in a big market or not, watch what's going on, because this may just affect you.