Starting Salaries Re-Examined: A Critical Look at Averages

NALP Bulletin, October 2010

Salaries earned by new law school graduates have been well-known and documented for many years. Even as the focus has often been on the high end of the scale, career services offices have seen and tried to convey the broader picture.

How this broader picture is conveyed changed with the class of 2006, when NALP introduced another picture of salaries, literally, with what has since come to be referred to as the bimodal curve, a graphic distribution of reported salaries for new law school graduates that shows two distinct peaks and one very deep trough. (See the distribution curve for the Class of 2009.)

Reported salaries, however, are not the whole picture, and so with the Class of 2009 NALP introduced the concept of an adjusted salary mean. Essentially the adjusted mean compensates for the fact that the distribution of reported full-time salaries is not the same as the distribution of reported full-time jobs, particularly when it comes to law firm jobs. Whereas salaries for most jobs in large firms are reported, fewer than half the salaries for jobs in small law firms are reported. The adjustment is accomplished by giving more "weight" to the mean or average salary in small firms, and less "weight" to the mean or average salary in large firms to calculate an adjusted mean. That adjusted law firm mean is used in turn to calculate an adjusted mean for all full-time jobs. (Both the Jobs & JDs report and the Starting Salaries monograph for the Class of 2009 offer a detailed explanation of the adjustment process and its implications for salary analyses at both the national and sub-national levels. It is important to understand that smaller or more homogeneous groupings of salaries are not particularly subject to the same sort of disproportionate reporting.)

The adjustment procedure applied to the Class of 2009 shows that the average law firm salary based on reported salaries alone overstates the average by an estimated 12%. The unadjusted overall salary for all full-time jobs likewise overstates the mean by an estimated 10%. Adjusting these two means for under-reporting of small firm salaries yields something closer to true averages. However, it remains the case that relatively few jobs pay the mean salary, either adjusted or not. That is, the bimodal nature of the salary distribution would remain, even if salaries were reported more consistently across all employer types.

The evolution of that bimodal curve has been documented, with the first evidence of a bimodal distribution appearing with the Class of 2000. (See "Salaries for New Lawyers: How Did We Get Here?" in the January 2008 NALP Bulletin.) A parallel inquiry would ask, "Has the average starting salary always been overstated by 10%?" The answer to that question is "no" and in fact the increase in that overstatement coincides with the period over which the bimodal curve evolved, and over the period that the two peaks on the bimodal curve grew increasingly farther apart. The table below compares reported and adjusted means for both full-time jobs as a whole and for law firm jobs specifically for six graduating class years from 1999 to 2009. In general, the extent to which the overall average is overstated has almost quadrupled, from an estimated 2.7% to an estimated 10%. The extent to which the law firm average is overstated has considerably more than doubled, from an estimated 4.7% to an estimated 12.2%. It is evident that the biggest jumps in the overstatement factors came first between 1999 and 2001, coinciding with the run-up in salaries at that time (to $125,000 in many firms) and then again from 2007 and 2009, as big firm salaries headed up again, after a period of stability.

It is likely that disproportionate reporting of salaries will continue. The amount of difference between the mean based on reported salaries and an adjusted mean will hinge on the movement of large law firm job numbers and salary levels relative to those in smaller firms and with other employers.

Salary Averages and Adjusted Averages — 1999-2009

  FULL-TIME JOBS FOR ALL EMPLOYER TYPES FULL-TIME JOBS IN LAW FIRMS
Reported Mean* Adjusted Mean Overstatement Factor Reported Mean* Adjusted Mean Overstatement Factor
1999 $59,110 $57,531 2.7% $70,053 $66,878 4.7%
2001 71,236 68,299 4.3 87,284 81,616 6.9
2003 69,999 66,863 4.7 84,242 78,613 7.2
2005 72,743 69,811 4.2 87,628 81,713 7.2
2007 86,794 81,891 6.0 107,895 99,423 8.5
2009 93,482 84,952 10.0 115,511 102,959 12.2

*Note: To provide comparability with the adjusted means, which do not factor in salaries reported for law firm jobs for which firm size was not reported and jobs for which employer type was not reported, means based on reported salaries were recalculated to exclude those same jobs. Hence the reported means shown in this table differ slightly from the means reported in the Jobs & JDs reports for those same years.

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