Economy and Education & Workforce Development

Beginning lawyers may see salary boost: Experts think big-city pay raises will trickle down here

December 25, 2006

Starting salaries for young lawyers at the city's largest law firms could be on the cusp of hitting six figures.

First-year associates at several top-tier Indianapolis practices currently earn $90,000 a year. But a wage war playing out among firms on both coasts, and in Chicago, might prompt those here to raise the ante as well.

"It's just a matter of who blinks first," said Mike McConnell, a former legal consultant who chairs the state's Education Employment Relations Board.

"It won't be right away, but it will come."

Premier firms in Chicago and California earlier this year hiked starting salaries $10,000 to $135,000. Not to be outdone, their New York City rivals surpassed the amount by doubling it, setting beginning pay at $145,000.

In most instances, big law firms move in lockstep regarding associate pay. When one bumps, they all do, and those in Indianapolis are no different. The reason is, they're mostly courting the same candidates-those who finish at or near the top of their classes.

The country's 200 largest firms-of which Indianapolis boasts three-hire 10,000 of the 40,000 annual law school graduates each year, according to the Philadelphia-based Altman Weil legal consultancy.

Cheaper living costs enable firms here to pay less, but they at least want to stay within shouting distance of their big-city rivals. Too large a gap makes it harder to convince loanladen law grads of the merits of accepting a position here.

Law school graduates typically amass $80,000 to $100,000 in tuition bills, said Judi Calhoun, a deputy prosecutor in the Delaware County Prosecutor's Office who chairs the Indiana State Bar Association's Young Lawyers Section.

"It's a huge factor, because people are leaving law school with more and more debt," she said. "When you have that type of debt, you consider not only, 'What type of law do I want to practice?' but, 'How much am I going to make?'"

The city's three largest firms-Ice Miller LLP, Barnes & Thornburg LLP and Baker & Daniels LLP-are among the handful who pay first-year associates $90,000.

A $10,000 increase would be the most significant since 2000, when a tepid economy put the brakes on most pay hikes, and would cost firms plenty.

Assuming each of Ice Miller's roughly 90 associates received a $10,000 pay increase, the total cost would be $900,000 annually, not to mention the cost of increases for more senior members.

A consequence of the escalating pay is that practices must find a way to recoup some of the cost. That might mean increasing the amount firms charge clients for services and increasing the number of hours each associate must bill annually.

Big-city firms have a zero-tolerance policy requiring associates to meet a certain amount of billable hours, normally 2,000 a year. Failure to comply could mean no raise, a salary decrease or termination.

Indianapolis firms tend to be less stringent, which bodes well for lawyers concerned about quality-of-life issues. But because they compete with some of the coastal firms, practices here ultimately will need to adjust accordingly, said Ward Bower, a principal at Altman Weil, who has several Indianapolis clients.

"It will get to six figures in a place like Indianapolis, no question," he said. "It has a trickle-down effect."

That's what occurred in 2000, when Ice Miller instituted two separate increases involving an overall jump for the year of 17 percent. Young lawyers who joined Ice Miller then received a base salary of $76,000, or $11,000 more than what the firm's 1999 recruits were offered.

But beginning pay for lawyers flattened nationally after the dot-com bubble burst that year. In 2005, first-year associates at Ice Miller earned their first raise since 2001 when the firm bumped salaries to $90,000.

Another one so soon is unlikely, said Mark Ford, the firm's hiring partner.

"I think there's always a chance that as you evaluate the marketplace for law students that you may be looking at an increase," he said, "but that would be very surprising."

Joe Beachboard, director of client services and business development for Atlantabased Ogletree Deakins Nash Smoak & Stewart PC, said the young lawyers his firm hires consider more than just salary.

Ogletree Deakins has 24 U.S. locations, including Indianapolis, Chicago and New York City. It pays its first-year associates $90,000 here. But clearly, he said, the recent increases put pressure on the firm to bump salaries in those markets.

Said Beachboard: "You don't want the disparity to be so large that it makes lawyers not come to your firm."
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