Big firm economic insanity: game theory, anyone?

 

    NY firms raise first year salaries to $160,000. Other firms nationwide follow suit. Seemingly, no one did the cost of living math–according to the Council for Community and Economic Research, $160,000 in NY is equivalent to…well, let’s just say much more money in other parts of the country where the cost of living is less expensive. So now it looks like the first-year NY lawyers are getting short changed, as their $160K is worth relatively less than the $160K a first year is making in Boston, Chicago, or LA. So there are rumors that NY firms may raise the salary again!

    The game theory part is, didn’t the NY firms realize they were just getting in a big game of chicken, an associate salary arms race between law firms? Who will swerve first to avoid going off the path of financial danger which can be caused by the perceived need to incessantly ratchet up associate salaries, with attendant risk to law firms’ bottom lines–with the perceived risk of being able to recruit less capable lawyers due and losing face by offering lower starting salaries than other firms?

    And the associates aren’t even winning here either despite the higher pay–higher salary means more pressure to bill and firm-wide pressure to decrease partner/associate ratios to maintain healthy per-partner profits–which means less probability that any associate will be elevated to partner status. What’s going on here anyway? Isn’t part of increased salaries to help stop attorney attrition–which isn’t going to be helped by more pressure to bill and less chance of making partner? Looks like the whole staffing paradigm may have to change.

Article: Does It Pay to Make N.Y. Law Firms Pay?

http://www.law.com/jsp/law/careercenter/lawArticleCareerCenter.jsp?id=1181552737950

See this article for another take on legal recruting:

New Breed of Law Firm Touts a Shift From Big-Firm Tradition http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1179824715021

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