June 08, 2007
Cost of Living Can Make A Major Difference In Quality of Life
Students often fail to consider cost of living when comparing starting salaries at firms in various different markets. With the recent spike of starting salaries to $160,000 in New York and other cities, students may falsely conclude that they are comparing apples to apples when considering firms paying $160k in different markets. However a new article in the National Law Journal cites research which shows that a $160,000 salary in NY is equivalent to a whopping $278,373 in Chicago and $205,631 in Los Angeles. The research is conducted by the Council for Community and Economic Research, an organization that tracks and studies cost of living disparities nationwide. The article can be found at www.nlj.com. A portion of the article is reprinted below.
FROM THE UPCOMING ISSUE
Does it pay to make NY pay?
Leigh Jones/Staff reporter
June 11, 2007
It may be a stretch to argue that beginning lawyers at big law firms need more money, but those practicing in New York could make a strong case for a raise.
With more law firms now paying first-year associates in Los Angeles, San Francisco, Chicago and Boston the same amount they are doling out to their starting lawyers in New York, it seems that attorneys in the Big Apple are getting shortchanged in the deal.
Several big law firms in the last few weeks have boosted salaries for first-year associates in large cities in the West to match the $160,000 that their New York beginners receive.
A "nationalization" of their practices is the reason many firms give for paying the same amounts in different locations. But a look at the cost-of-living differentials shows that the copycat compensation is creating some significant pay disparities among associate ranks.
Law firms in California say recent raises are based on what individual markets demand and not on how far a dollar goes in a particular area.
"The marketplace was less regional than we thought," said Orrick, Herrington & Sutcliffe Chairman Ralph Baxter, referring to his firm's decision in May to raise associate pay in California to match its New York offices. Orrick had upped its New York pay in January to $160,000 along with several other law firms at the time.
Orrick's West Coast raises last month set off a rash of salary increases in California that is still spreading. Several firms in Chicago have raised pay to $160,000, including McDermott, Will & Emery; Kirkland & Ellis; and Sidley Austin. Firms in Boston, including Foley Hoag, Goodwin Procter and Ropes & Gray also have followed suit.
On one hand, firms say that their decisions to boost salaries in Los Angeles, San Francisco and Chicago are necessary to stay competitive in recruiting. Firms want to avoid the embarrassment of becoming pegged as a holdout for upping salaries. On the other hand, they say that as their specific practice areas have broadened to include attorneys from both coasts and cities in between, it is inequitable to pay an attorney in Los Angeles one amount and an attorney in New York another.
"If it were cost-of-living driven, we'd pay less in Walnut Creek," said Morrison & Foerster Chairman Keith Wetmore, referring to one of its California offices.
But maybe it should. Cost-of-living differences are huge among major U.S. cities. According to the Council for Community and Economic Research (CCER), the equivalent of a $160,000 annual salary in New York is $205,631 in Los Angeles. The CCER, a 46-year-old nonprofit organization, comprising economic development organizations, government agencies, universities and others, produces the Cost of Living Index.
In Chicago, $160,000 balloons to the equivalent of $278,573, according to the CCER. In the pricey San Francisco market, the equivalent of $160,000 in New York is $190,789. In Boston, it equates to $241,397.
Housing provides some of the sharpest contrasts. An apartment costing about $2,000 per month in San Francisco runs more than $3,400 in New York. The same apartment goes for about $1,600 in Chicago.
Posted by hafeezt at June 8, 2007 11:45 AM