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Law Firm Salaries Jump for the First Time in Nearly a Decade

In a move sure to bring cheer to junior associates at major law firms, one of the industry's most elite, Cravath, Swaine & Moore, on Monday said it had increased the annual salary for its first-year lawyers to $180,000, from $160,000.

Salaries for other associates have also been increased by $20,000 to $35,000 annually, up to $315,000 for associates in their eighth year. The news, which came in a memo from the firm's partners, is a signal to other big law firms to fall in line or potentially lose the best new law school recruits.

The salary increases are likely to be matched quickly by high-earning firms including Davis Polk & Wardwell; Skadden, Arps, Slate, Meagher & Flom; and Sullivan & Cromwell — if for no other reason than to make it clear that they all play in the same prestigious league.

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It has been nearly a decade since entry-level lawyer salaries were last increased. Law firms, buffeted by a changing economy, have been struggling to adjust to corporate clients who are increasingly demanding billing discounts and refusing to pay steep rates for junior associates to learn on the job.

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At the same time, partner profits have rebounded as corporations continue to turn to experienced lawyers to handle their high-stakes matters. The seven-figure salaries at the top of the law firm pyramid were stirring some dissatisfaction among the lower-paid lawyers closer to the bottom.

Still, few law school graduates are likely to turn down a spot at a big law firm, leaving competition for those coveted positions as keen as ever. While changes to associate compensation at big law firms are closely watched, in reality only a small slice of the nation's law graduates begin their practices earning salaries in the mid-$100,000 range.

The salaries, however, are a benchmark of how major law firms are faring; the most prestigious firms pay the best. And top firms like Cravath that have demonstrated winning expertise in areas such as litigation or intellectual property are doing very well, with partners richly remunerated for their work for top clients like IBM and JPMorgan Chase.

According to The American Lawyer, an industry publication, Cravath partners each earned, on average, $3.56 million in profits last year.

Cravath's move, announced in a memo signed by C. Allen Parker, the firm's presiding partner, and two other partners, increased pay for associates through their eighth year, by which time most of these lawyers are either clearly going to become partners or leave the firm. The increase, which does not take into account any bonuses that are awarded separately, took effect May 1, and will be reflected in paychecks starting July 9.

A spokeswoman for the firm said Cravath would not comment further on the move, which caught many in the legal world by surprise. The legal website Above the Law reported that associates had raised the issue of salaries with Mr. Parker at recent firm meetings, providing him "with arguments and information in support of an adjustment to the base salary scale."

One point they raised was that since the last associate pay raise in January 2007, the cost of living has risen greatly in New York City, where most of Cravath's lawyers work. Health insurance costs and student loan debt have also risen since that time, when the starting salary at big firms was increased to $160,000 from $145,000.