The junior lawyers in London earn their wages of £150,000

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As of this month, there are more lawyers in their 20s in London who can afford to dine in expensive restaurants and take luxury holidays. Linklaters last week became the latest law firm in the city to increase rates for its junior graduates to £150,000 a year, with US rivals paying even bigger sums.

This is quite a pay gap for young graduates in professions such as publishing and the arts, where £30,000 is considered a decent salary – but it is believed that the lucky ones can get a break to relax. When you work 50 to 70 hour weeks, with your evenings and weekends often spent on urgent legal deals for corporate clients, time is precious.

They are also not as pampered as it might sound to the companies that pay the huge legal bills to employ them, or to the junior doctors in the NHS who at a similar stage of their career receive less than a third of receive that amount. After taxes and student loan repayments, the new lawyers whose talents global law firms eagerly compete for will be left with £80,000, much of which will go towards London rent.

Still, I’m glad to see that at least some of this hard-pressed generation are being treated so well, with the prospect of receiving more over the years and one day becoming partners whose profit shares in British companies could amount to £2 million. It’s a salutary contrast to other professionals who have little hope of such rewards, despite having attended top universities and working quite hard themselves.

We can thank the US for making this possible. Linklaters followed Freshfields Bruckhaus Deringer, his rival law firm in the “magic circle” City. Under pressure from US companies, Freshfields has increased fees by 50 percent for lawyers who qualified after two years of training by 50 percent over the past five years. Quinn Emanuel, a US law firm specializing in litigation, has increased the UK starting fee to £180,000 this month.

I once lived in New York next door to two young lawyers who had attended Ivy League law schools and had just joined an elite Manhattan firm. We had a nice chat when they arrived and I hardly saw them after that because they spent most of their lives at work. The best proof that they still existed were the pizza deliverers who rang their doorbell late at night.

They were paid handsomely (the benchmark rate for newly minted lawyers in New York is now $225,000, excluding bonus), but they had to sacrifice a lot. Employees are busy with legal discovery and preparing endless transaction documents. “They use their intellect to make a lot of money, but the hours are often brutal,” said Chris Clark, director of legal search firm Definitum.

Compensating junior lawyers in this way is profitable for US firms in London: “It sounds like a lot to pay, but it’s not,” says one senior partner. An associate solicitor can receive more than £200,000 three years after qualifying, but will also contribute 2,000 billable hours which can be billed to their clients at £400 or £500 per person. That will give the partners up to £1 million in revenue.

It also means that young lawyers are in high demand: US firms traditionally offer at least 20 percent more to lure them because they qualify for training at firms like Linklaters. They can outbid traditional British firms because their large and profitable domestic market gives them deep pockets: payouts to partners at top US firms can exceed $5 million.

This raises the question of whether companies are being forced into a magic circle into a battle with American rivals over pay that they cannot win. They pride themselves on offering a (slightly) better work-life balance, as well as broader opportunities, but money talks. One Magic Circle partner says juniors sometimes protest: “If I’m working this hard, I might as well go work for an American company.”

The American presence in itself means that young lawyers in the city are earning far more than other professionals can imagine, close to the amounts available to junior financiers. Without the arrival of major US law firms like Latham & Watkins and Kirkland & Ellis, the magic circle would not have had to increase wages for them and those higher up the pyramid.

A similar phenomenon has not occurred in the NHS, where junior doctors have struck for higher wages over the past year. These doctors also work extremely long hours, but they are employed by state-backed NHS trusts and have to emigrate to other countries to take advantage of better pay and conditions. Other healthcare systems will not flock to them in the same way that US law firms have moved to London.

It is difficult to argue that junior doctors are less valuable employees than corporate lawyers and do not deserve equal treatment, but they will not get it because there is no higher offer than an alternative to the NHS. The lesson is quite stark: if you’re a professional, work in an industry that competes globally, otherwise you’ll find yourself making a lot less money than you could.

If junior lawyers get enough time off from work, they can take their friends out for dinner. They have worked for their happiness, but they need to spread it.

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