Small Law Firms

Don't Expect Smaller Law Firms To Raise Salaries Any Time Soon

Biglaw is not a rising tide that lifts all boats.

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This website and other legal news outlets have been discussing the salary increases in Biglaw over the past few months. Indeed, junior attorneys at some of the country’s biggest shops recently received pay raises, and starting salaries have crossed over the $200,000 mark for the first time. Even though Biglaw gets an inordinate amount of attention in the legal press, the vast majority of lawyers work at smaller shops. For a number of reasons, lawyers at smaller firms are unlikely to see pay raises any time soon.

Biglaw is not a rising tide that lifts all boats, and the salary decisions of Biglaw firms have little to no impact on smaller firms. As most people in the legal profession already understand, Biglaw attracts a different set of talent than other law firms. Indeed, Biglaw shops usually only hire from top law schools or top students that attend lower-ranked law schools. As a result, smaller law firms do not need to increase their salaries to attract talent since the talent pool that is headed to Biglaw typically does not look for jobs at smaller law firms. As a result, individuals should not think that increased salaries in Biglaw necessarily mean an across-the-board increase in salaries across all law firms.

Moreover, economic factors are perhaps the biggest reason why smaller firms are unlikely to raise starting salaries any time soon. Many law firms previously required an increased headcount in order to attend the court conferences and other appearances attorneys at a firm need to make on cases. Such appearances are often golden billing opportunities for law firms, and many firms are able to bill travel to and from such appearances as well. However, many of these appearances went virtual due to the COVID-19 pandemic, and lawyers missed out on the ability to bill for travel to and from these appearances. Moreover, at many of these appearances, the vast majority of the time is usually spent waiting for a case to be called. With scheduled virtual appearances, there is no waiting, and lawyers can bill a far lesser amount of time for such appearances.

As a result, many law firms had decreased billing opportunities during the pandemic, and accordingly, had a decreased need for headcount. This motivated some firms to make cuts, and the decrease in open positions made the job market even more competitive for those who were looking for legal employment. Accordingly, firms were able to attract talent with relatively low salaries because there were not too many other opportunities available. As courts reopen as the COVID-19 pandemic wanes, many appearances are still being held virtually, and this will likely be the norm for the next year or so, if not indefinitely. As a result, lower firm headcount might be here to stay, which may decrease the salary firms need to offer to attract talent.

Another reason why starting salaries and other salaries at smaller firms are unlikely to increase soon is because the job market may put downward pressure on salaries. As predicted by many people who lived through the Great Recession (including yours truly), numerous people applied to law schools recently in order to ride out hard economic times caused by COVID-19 in academia. Although, it will of course take some time for these students to work their way through law school and become practicing attorneys, the increased number of law graduates will impact the job market in the near term.

Since more people will be graduating from law schools over the next several years, the job market is sure to be more competitive. The pandemic did not measurably lead to an increase in the number of available lawyer positions, and as a result, a higher-than-normal applicant pool will be chasing a steady or perhaps a decreased number of job openings. As a result, law firms will be able to offer relatively low starting salaries to attract talent. Indeed, there were many stories during the Great Recession of salaries for lawyers at some firms starting at $40,000 or less, even in cities like New York City, and this glutted job market may be on the horizon over the next several years.

Moreover, smaller law firms do not have as much of a “keeping up with the Joneses” problem as Biglaw shops so they may not feel as much pressure to raise salaries. Biglaw firms generally like to offer the same salaries and other perks of top law firms so that they can be part of the class of shops that offer such compensation to associates. Indeed, sometimes firms offer such high salaries even though they might not be able to afford it since the image this generates about the firm is valuable. Smaller law firms are less likely to be impacted by what other firms are doing regarding compensation since these shops mostly rely on providing value to their clients rather than a brand name. As a result, smaller law firms may feel less pressure to raise salaries.

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Of course, most people within the legal profession recognize that rising Biglaw salaries will not mean an increase in compensation industrywide. However, some industry outsiders and prospective law students might believe that higher Biglaw salaries mean a lucrative future as an attorney. Nevertheless, Biglaw jobs are very difficult to come by, and substantial salary increases at the vast majority of firms may not occur any time soon.

Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

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