The income gap is widening — among lawyers.
While billing rates for law partners increased in 2011 by around 4 percent, year over year, that good fortune was unevenly distributed. Top earners secured a roughly 5 percent increase, while the bottom of the market eked out just over a 1 percent increase.
Last year, the hourly rate for the highest 25 percent of law partners averaged $873, while the bottom 25 percent earned a comparatively meager $204, according to the Real Rate Report, an annual survey of fees at 4,000 law firms by the Corporate Executive Board Company and analytics firm TyMetrix Inc. The report noted a similar pattern of rate increases for legal associates as well as partners.
"Rates for lawyers who have traditionally commanded the highest rates are increasing faster than rates for their lower billing colleagues, suggesting a flight to quality and experience," the report said. "[T]he legal market is increasingly bifurcating into two groups of legal providers: one with pricing power and one without."
Unlike other industries, the demand for legal services is less vulnerable to economic downturns; fees did rise during the recession, but at roughly half the current rate of increase. What the recession did do was widen the gap between the highest-priced lawyers and the rest of the field. In just two years, 17 percent of lawyers raised their hourly fee by $100 or more, while 12 percent lowered their rates.
The recession and recovery have also created a larger class of four-figure attorneys. "[B]efore 2006, the $1,000 per hour partner was a rarity," the report observed.
This is no longer the case; since 2009, the number of $1,000-an-hour law firm partners shot up by 75 percent. The report's authors said that demand for finance, corporate and commercial legal services were driving the rate increases at the top of the spectrum. Of these, finance represented the largest contingent with 41 percent of the group.
The report noted that finance and securities lawyers had the largest percentage increase in hourly rates, which it attributed to higher demand for legal work in the wake of Dodd-Frank financial reform legislation, increased stock buyback programs and higher borrowing spurred by low interest rates.
Location also made a difference; 95 percent of these top earners were based in New York, Boston, Chicago, Washington, D.C., San Francisco or Los Angeles.