Quick quiz:   Q1:  If you made $125,000 in 2000, how much would you have to make in 2005 to have the same purchasing power (straight CPI adjustment per the Minneapolis Fed)?

A1:  $141,250.

Now add in this observation, from one of the leading law firm recruiters in London (in the context of an analysis of associate attrition rates at the UK's top 50 firms): 

"Candidates are calling the shots again," said [Joanne] Street [of Hays Legal]. "Law firms have to be very careful about looking after their associates because, as confidence in the market picks up, people will start moving around again."

One more data point: 

There is speculation that Cravath, Sullivan & Cromwell, et al., will be paying $30,000 year-end bonuses to first-year's.

Are we in, then for another "ratchet round" of starting salary boosts?   Arguing the case for:

• Just do the math per the Minneapolis Fed; we're overdue.
• As reported yesterday with the NLJ 250 total lawyer headcount at those firms is up 4.4% year over year, its best showing since 2000.  But last time I looked, the elite law schools (Harvard, Stanford, Yale, Columbia, etc.) haven't been boosting their graduate numbers at all.  Increased demand, meet stable supply.
• Starting MBA's from blue-chip schools going to the Goldman-Sachs' and McKinsey's of the world can pull down $150,000/year without blinking—and they only have two years of student loans to pay off, not three.  Smart 24-year-olds are going to figure out this arbitrage and stay away from law school unless something gives.

Arguing the case against:

• Firms have just now finally digested the financial hit they took (and the associate billable-hour expectations boost) imposed on them by the 2000 salary spike; they're too smart to put themselves back behind that same eight-ball again so fast.
• Variable costs (read: bonuses) are always and everywhere preferable to fixed costs (salaries).  So firms will proclaim they are holding the line on salaries while making the adjustment under the covers in bonuses.
• It's just plain irrational for all the name-brand firms to march in lockstep on starting salaries.  After all, what you can get for $125,000 in New York will only cost you $80,000 in San Diego (but it will cost you $123,000 in Hong Kong)—and in general associates' salaries have outpaced inflation over the long run.

Where do I come down on this?  With ambivalence.  Clearly the vast majority of very junior associates are money-losers for their firms, and starting them at (say) $140,000 would only make a bad situation worse.  On the other hand, those associates have options (business school, for one) and the firms do not (no MBA's need apply).  I predict a break in the logjam, accompanied by "Stop me before I kill again" protestations from senior partners. 

Extra-credit bonus quiz:  Q2:  If you made $15,000 in 1968 (the notorious Cravath Spike), how much would you have to make in 2000 to have the same purchasing power?

A2:  Only $74,250.

We have, in short, seen this film before.