Are lawyers being paid too much?
Harry Cerasale, March 2020
With firms paying their young talent more than ever, the answer from junior associates is probably a resounding ‘no’. Let’s dive into some numbers.
There are many ways to measure the prosperity of the legal sector: the value of all deals being done. Trainee class sizes across the market... we don’t often think to measure how happy lawyers are with their jobs, but that’s another story for another article. Another indicator of how the legal sector is doing is NQ salaries. A decade ago, the fallout from the Great Recession prompted many firms to cut back on their trainee classes and NQ salaries were paralysed as one way of cutting costs. Despite uncertainty surrounding Brexit and other market-bothering fears, the last five years have seen firms splash the cash at unprecedented levels. If associate pay is anything to go by, the legal industry is doing rather well.
Assessing associate salaries is trickier than you might think. Some firms roll bonuses into their compensation figures; others pay different rates in different offices. The general trend despite all this is unmistakable and only goes in one direction: NQ salaries are rising faster than a rocket covered in helium balloons. The top end of the market is where you’ll find the most extreme example of this:
In just five years NQ salaries have grown massively at the top paying firms, all of which are American giants (it’s worth noting that Sullivan & Cromwell did not disclose its salary data in 2019). Akin Gump, Kirkland & Ellis and Vinson & Elkins all pay the US market rate in their London offices: currency conversion may cause some ups and downs, but big big money is guaranteed. Since 2015, there’s been an average 41.6% increase among the highest-paying outfits in London. Part of this explosion has come from the shift at some firms to paying associates the same salary in the UK as in the US, converted from dollars – this would of course be vulnerable to changes in currency value. Chambers Student editor Antony Cooke put together an analysis of changes at the top of the market in 2019. Theoretically, an associate could now complete their training contract aged 23 and begin by earning $190,000 (nearly £150k at the time of writing) in their first year of ‘real’ work. Now that’s some serious cheddar.
US invaders are seriously outgunning the UK elite – including the magic circle – in the salary wars. Collectively, US firms pay an average £124,279 qualification salary compared to £100,000 at the traditional British elite. Herbert Smith Freehills now holds the title of the highest paying UK-based firm, matching White & Case at £105,000. These huge sums of money have driven up the average NQ salary in London to £84,016, which represents a staggering 106% increase on the average first year trainee salary of £40,337. However, remove the US firms from the equation and the average qualification salary comes in at just shy of £70,000.
Outside of the M25, salaries are unsurprisingly more modest - the happy side of the coin is a significantly lower cost of living, plus the prospect of home ownership without needing to inherit millions from a distant relative you’ve never heard of. There are plenty of metrics we could use to prove this point – we'll just note that shortly after the University of Sheffield law fair we were able to buy a pint for £3 and leave Londoners to cry into their own beers. Our research shows that regional trainees can expect an average first year salary of £28,803, 38% lower than in London. The gap is much bigger at NQ level: £45,554 average outside the capital is a whopping 81% lower than inside it.
While it’s fair to say that the average cost of living is probably not 81% higher in London, the price of properties certainly is. According to Zoopla, the average property price in London in December 2019 was (brace yourself) £635,191; in Manchester it was £199,075. Take all this into consideration when you decide whether the Big Smoke – and the big money that comes with it – is right for you.
In the long run, the growing inequality in NQ salary rates – both between firms in London, and outside it – will likely become unsustainable. Money isn't everything, and a thorough analysis of the strengths and weaknesses of each firm is essential. The Chambers Student True Pictures will help you see beyond the pound (or dollar) signs.