In recent years, the legal job market has oscillated between sustained post-GFC economic growth, the brief but screeching halt in the early days of the pandemic, our rapid post-pandemic economic recovery, and now the of fear of a looming recession.
While partners have experienced whiplash, lawyers in their first nine or ten years of practice have shorter memories and have to date known mostly good times.
This has brought with it the luxury of high expectations: that they’ll always be busy enough to hit their targets, that hitting targets is enough to secure a decent pay rise, and that their jobs are secure and their firms are profitable.
Suddenly, many are having to come to terms with some harsher commercial realities.
Supply and demand
While each corner of the market has its own unique trends, we are witnessing a cooling of a market that has run red hot for over two years.
Where 2020 saw more conservative growth strategies, 2021 and 2022 saw both growth and turnover increase dramatically.
We saw huge numbers of lawyers moving overseas and creating local vacancies and firms attempting to grow in hyper-speed to make up for time lost during lockdowns.
Suddenly, lawyers were in high demand and short supply. They had all the options, leverage and bargaining power they could wish for.
2023 has seen the pendulum start to swing back the other way: the London market has tightened, making it harder for lawyers to exit the Australian market, and larger firms that are more sensitive to economic conditions have begun to tighten their belts amid serious fears of recession.
Salary trends
Salary growth over the past two financial years has been remarkable. We’ve seen salaries for first year Senior Associates – a reliable indicator of each firm’s general approach to remuneration – increase by between 15% and 25%.
We’ve also seen whole cohorts of junior lawyers at mid-tier firms successfully organise to make collective demands of their firms for enormous pay increases.
Salary trends have mirrored the rollercoaster of supply and demand discussed above and, as above, have started to cool off significantly in this most recent pay review season.
Lawyers’ attitudes and expectations
Many firms are now having to deal with lawyers’ expectations that no longer match market conditions.
This is hardly surprising.
A confluence of factors has driven those expectations sky high – a cost-of-living crunch combined with firms handing out mega salary increases across the market for two consecutive years, offering above-market salaries to lure new recruits, and trumpeting their strong financial results in the media.
The first clue for many lawyers that the best of times had come to an end was when they received disappointing pay increases on 1 July.
What remains to be seen is whether that widespread disappointment is enough to drive lawyers to seek better financial opportunities and whether other firms can match their heightened expectations.
Where to from here?
The short-term buoyancy of the legal job market will depend on how both firms and lawyers respond the changed market conditions.
Already, we’re seeing firms start to be more considered and strategic about their hiring practices.
Some have preferred to prioritise hiring senior lawyers who can perform both senior and junior-level work, while others have simply not been able to construct business cases to justify hiring more senior lawyers on higher salaries. Others still have preferred to try to reallocate under-utilised lawyers into busier teams to avoid increasing headcount.
Whatever the future holds, lawyers need to accept that their market value is tied to supply and demand and doesn’t always increase along a linear path.