Law Firm Salaries Climb Despite AI Promise of Lower Costs (1)

Big Law’s associate pay war comes as AI fuels questions about junior attorney hiring at top firms.

A growing number of large law firms are moving to catch up with the new associate salary scale set by Milbank LLP earlier this month. The Manhattan firm, true to its reputation as a first mover on pay, bumped its starting salary for associates to $235,000 on a seniority-based scale that now tops out at $455,000. Litigation powerhouse Susman Godfrey on Tuesday upped its scale a notch higher, starting at $240,000.

The raises ratchet up the cost of competing for junior talent even as artificial intelligence threatens to upend firms’ core operating model and the associate recruiting market with it. They also put more pressure downstream on firms trying to keep pace with the elite.

“I’ve had conversations with major partners at firms who are absolutely terrified about what’s going to happen to the legal industry,” said Sean Burke, founder of legal recruiter Whistler Partners. “With these top firms raising the rates so high, and with AI coming, at what point is there going to be a reckoning about how much money these firms really can charge going by the hour when AI should make this cost less?”

Law firms are already pouring money into AI tools that promise to streamline a wide range of legal work, including tasks typically handled by associates. But there’s little sign so far that they plan to abandon business models built on large ratios of associates to partners and hourly billing.

Milbank boosted its associate salary scale—the raises range from $10,000 to $20,000—after nearly three years of stasis.

“It’s a little bit of a power move,” Burke said. “The top 25 law firms are making more money than ever, and they’re absolutely outpacing the next 25 and then the next 25—it’s not even close.”

Top firms have largely played “follow the leader” in previous years, matching pay raises and bonuses. McDermott Will & Schulte quickly mirrored the Milbank raises this time around, followed by Quinn Emanuel Urquhart & Sullivan, Katten Muchin and Seward & Kissel, among others. It’s not clear whether those firms will boost their scales again to match the level set by Susman, which has far fewer associates than others in its revenue class.

“That’s a really high prestige boutique,” said Kate Reder Sheikh, an associate recruiter for Major, Lindsey & Africa. “So Big Law may not feel pressure to follow suit.”

Some larger firms were just getting caught up to the going rate for associates. Of those that responded to Bloomberg Law’s Leading Law Firms survey this year, 45 firms said salaries start at $225,000 for at least some of their associates.

Barnes & Thornburg, McGuireWoods LLP, Steptoe LLP and Seyfarth Shaw over the last year nudged starting salaries to $225,000. Others, such as Venable LLP, Duane Morris, Fox Rothschild and Davis Wright Tremaine, also moved closer to that mark. As of January 1, Duane Morris upped its starting salaries to $220,000.

Read more: See which firms came out on top overall in Bloomberg Law’s Leading Law Firms.

Recruiters said they’ve not yet seen firms scale back hiring directly in response to efficiency created by AI.

Firms “are not necessarily choosing technology over people,” said Nicole Donnelly, co-founder of New York-based Cardinal Search Partners. “They’re investing in both and wanting to figure out how that works together to produce the most cost effective, but profitable service,” she said.

Early-career associates are largely considered to be at the biggest risk of being displaced by AI. Still, slashing associate rolls would mean firms have to move away from the leveraged model in which they currently employ four or five associates for every partner. That would put even greater emphasis on landing and keeping experienced associates already in high demand, with some firms even bringing back signing bonuses for those in sought after practice areas.

“Firms are looking for more mid-level talent; people that can clearly jump in and are plug and play,” according to Michelle Fivel, co-founder at search firm Hatch Henderson Fivel. She said the latest pay hikes are about landing and keeping those lawyers rather than preparing for disruption from AI.

Entry-level hiring may prove to be a bellwether.

“The real canary in the coal mine will be summer hiring the next few years,” said Reder Sheikh. “That’s where firms will indicate what the near-term looks like.”

The Leading Law Firms score is a weighted combination of four pillar segments, with the Talent pillar accounting for 35% of the overall score.

The data came from a short, yet comprehensive questionnaire by Bloomberg Law allowing law firms to self-report data. Bloomberg Law only accepted data provided by the law firm, and did not source publicly available data to supplement any firm’s submission.

See the main story for more information and full program methodology.

Adds Duane Morris salaries in 11th paragraph. An earlier update corrected the day of the week in the second paragraph.