Diving into the recent legal market report, we see an industry that is demonstrating resilience, yet could that be derailed by rising compensation costs?
The Thomson Reuters’ depicted a legal industry immersed in an escalating war for talent. Ever since major law firms like Milbank began raising their associate salaries in early 2021, the market has one-upped itself in each ensuing month by raising the average pay of associates.
By the end of the second quarter of 2021, associate compensation growth per associate full-time equivalent (FTE) had reached 5.9% on a rolling 12-month average. By November, that growth had skyrocketed to 11.3%, with no end in sight.
Law firms are slow to change, and even when faced with a crisis, they implement their traditional strategy. To that end, firms began regularly increasing compensation, relying on higher pay to maintain retention. According to the underlying economics, however, this is not merely a poor strategy, it is one destined to lose.
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