Still buyer’s market for new law school grads

Newly minted law school graduates looking for Indianapolis gigs face both good and bad news. The good news is that law firms are still hiring, and for salaries (at least at the top firms) not too different from their pre-recession levels. The bad news is that most are taking on fewer greenhorns and working them harder.

“It’s a buyer’s market for first-year associates,” said Eric Seeger, a law firm strategy and management consultant at the Pennsylvania-based legal consultancy Altman Weil Inc.

Nationally, median compensation for new associates climbed to $85,000 in 2007 and has been stuck there ever since, Seeger said. As for remuneration at larger firms, surveys reveal that first-year pay in 2011 stood at a median of $115,000—essentially unchanged from 2010.

Indianapolis paychecks have likewise remained more or less static. On the coasts and other “hot” areas, pre-recession legal salaries skyrocketed, forcing a certain degree of retrenchment when things went south. Chasity Q. Thompson, assistant dean at the Indiana University Robert H. McKinney School of Law’s Office of Professional Development, says that based on data from the National Association for Law Placement, some salaries hit peaks in 2008 and began to decline in 2009. But while in some areas paychecks fell off cliffs, in the Indianapolis area the decline was gentler. Mostly because there wasn’t as far to fall.

Grads can expect to work longer hours if they snag one of those paychecks, whether it be here or elsewhere. Seeger says his firm’s review of a decade’s worth of data from the NLJ 250 (an annual list of the nation’s 250 largest legal firms published by National Law Journal) indicates that the number of associates working in large law firms steadily increased before the recession, even as the average of billable hours per associate declined.

“Those trends indicate that there was an oversupply of associates in large law firms even prior to the recession,” he said.

An oversupply that many firms, spurred by the downturn, have corrected and are loathe to repeat. Altman Weil predicts an increase in associate hiring in 2012, but nothing that could remotely be called a surge.

“One might argue that first-year salaries are too high everywhere,” Seeger said.

He notes that it usually takes four or more years for a new associate to become profitable to his or her firm—if they hang around that long. And that clients facing financial pressures of their own are in no mood to pay full rate for new lawyers.

It’s no surprise that this has produced a certain pickiness among top-tier local law firms, which have mostly held the line on first-year salaries but have grown more selective about which (and how many) grads they bestow them on.

“What we’ve done is adjust downward the number of students we’re hiring,” said Toby McClamroch, partner at Bingham Greenebaum Doll LLP. “But they’re maintaining the same starting salary in this market in order to attract the best law students.”

Bingham offers a starting paycheck of $100,000—a figure that hasn’t changed for several years, McClamroch said. However, IU’s Thompson says a slow increase in those numbers could be in the offing.

Barnes & Thornburg LLP, after holding steady at the $100,000 mark for several years, is sweetening that number by $5,000 for the class of 2012, said Managing Partner Alan Levin: “We’re looking at competitive markets, and making sure we hire the top talent.”

Competitive locally, but not even in the ballpark nationally. According to Altman Weil’s Seeger, first-year associates make an average of $160,000 in New York; Washington, D.C.; and Los Angeles, and $145,000 in Boston and San Francisco.

A boutique firm in New York just announced it is raising first-year salaries from $160,000 to $180,000, Seeger said.

“The first firm to do so always gets a marketing bump, and typically other New York firms fall in behind, so they can say they are at the very top of the market,” he said. “However, posturing of this sort in New York won’t translate into salary adjustments at a local law firm in Indianapolis.”

Though local firms can’t match starting salaries on the coasts, they have an ace up their sleeve—the low Midwestern cost of living, coupled with homesickness.

Levin, at Barnes & Thornburg (which maintains 12 offices nationally, including in Los Angeles, Atlanta and Chicago), notes that while graduates may initially gravitate to bigger cities—and their bigger starting paychecks—they often don’t stay there.

“We get an awful lot of interest after people take a starting job elsewhere,” Levin said. “They have ties in Indianapolis or the Midwest, and we get a lot of those resumes two or three years after they begin practicing. It could be something as simple as starting a family and wanting to be closer to home.”•