Wednesday, May 9, 2007

Young Lawyer Salaries - a boom or a warning sign?

Wow. Young BigLaw associates are now really turning into loss leaders. $160k is starting to become the new standard for fresh law school grads. That's fine on the face of it, but the consequences down the road are potentially scary. Why? Clients, most of whom are looking to save money, are eventually going to revolt.

Patrick Lamb hit the nail on the head today. Increased salaries = increased billing rates. And it will hurt, even in real estate deals, as clients will pay to have their young associates learn on the job about due diligence and the like. It also sends a message that alternative billing options should be looked into.

Nothing against these very smart and talented young attorneys, but if you are a real estate professional reading this, who do you want working on your deal for $350/hour - a young or even mid-level associate, or a seasoned attorney who happens to be at a smaller firm with less overhead (and who, by the way, will do the work in less time thanks to experience)? (Actually, sometimes the right answer, especially on due diligence, is a senior real estate paralegal who is often the person training the associates and sometimes even the partners!)

Right now, the big clients are sticking with BigLaw (and rightly so sometimes on some deals because of the bodies necessary to close portfolio transactions), but I think others are starting to hedge their bets and that you will see more of that if this salary/billing rate trend continues.

Case in point: One of my friends left BigLaw for a small firm some years ago, lowered his billing rate by $100/hour and has never been happier -- or busier.


Esquire chic said...

Great article, and it goes to show that big salaries + many billable hours does NOT = happiness!