Talent Wars: Legal Firms Engage in Salary Escalation to Attract Top Associates


US Law Firm Salary Update

Recent analysis of associate salaries among US law firms has revealed a significant increase in first-year associate pay since 2021. As of the beginning of 2023, the median base salary for first-year associates reached $200,000, marking a noteworthy escalation of $35,000 (+21.2 percent) from 2021.

Sizeable increases in associate salaries in the law firm survey since 2021 underscore the fierce competition for legal talent and emphasize the need for law firms to adapt to market conditions.

The increases also show that law firms need to carefully examine their strategies regarding compensation, ensuring they have flexibility to retain top talent.

These salary increases have diverse effects on different firm sizes, geographical regions, and legal markets, with implications for talent retention and acquisition, financial strains on smaller firms, and potential changes in client billing rates.

Salary Increases Across Firms:

The 2023 Associate Salary Survey shows that first-year salaries have risen across all firm sizes since 2021.

Notably, smaller firms with 100 or fewer lawyers experienced the largest growth in median first-year salaries, with a 29.2 percent increase from $120,000 in 2021 to $155,000 in 2023. This suggests that even smaller firms are under pressure to raise salaries to remain competitive in attracting legal talent.

Firms employing between 251-500 lawyers saw a 21.9% increase in median first-year salaries, rising from $160,000 in 2021 to $195,000 in 2023. Similarly, firms with 701-1,000 lawyers witnessed a 20.6% increment, with median first-year salaries growing from $170,000 in 2021 to $205,000 in 2023.

The largest dollar increase was observed in firms with 501-700 lawyers, where median first-year salaries soared from $155,000 in 2021 to $200,000 in 2023 (+$45,000), representing a 29.0% rise.

This data highlights that mid-sized firms are also making significant adjustments to their salary structures to keep up with the evolving legal market.

For the largest firms with over 1,000 lawyers, the median first-year salary reached $215,000 in 2023, a 23.3 percent increase from $174,000 in 2021. Although these firms reported the highest median salaries, their influence on the overall market is substantial, as they account for 75.0 percent of all first-year salaries in this firm size category.

Overall, the salary increases in large firms, combined with rising inflation, have put pressure on smaller and mid-sized firms to raise their salaries as well.

This trend demonstrates the extensive impact of the “talent wars” and the market’s response to the growing demand for skilled legal professionals.

Geographical Influence on Salaries:

Geography continues to play a significant role in salary variations across regions, cities, and states.

The 2023 Associate Salary Survey analyzes 26 individual cities and additional states and regions, revealing a wide range of law firm compensation. Median first-year salaries by city range between $145,000 and $215,000.

Eleven cities now have a median starting salary of $215,000, including Austin, Boston, Chicago, Dallas, Houston, Los Angeles/Orange County, New York City, San Diego, San Francisco, Silicon Valley, and the Washington, DC area.

These cities are located in different regions, reflecting the thriving legal markets in those areas.

In locations outside of the 26 major cities featured in the report, $215,000 starting salaries are less common.

The Northeast had the highest median first-year associate base salary in these smaller U.S. cities and towns ($170,000), followed by the Midwest and West ($165,000 each). The South reported the lowest salaries, with a median first-year salary of $135,000. This regional disparity underscores the importance of considering local market dynamics when setting salaries.

Moreover, the most frequently reported first-year associate base salary across all firm sizes was $215,000.

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