We’ve all heard of the gender pay gap where women are paid lower than their male counterparts for conducting the same job. With the creation of The Equal Pay Act of 1963 it has become unlawful in the U.S. to pay women less for work of equal value. Even though more than 50 years have passed, however, the gender pay gap still exists.
While most people may not deliberately pay women less, there is often systemic discrimination which adds additional obstacles to a woman's career path. These obstacles make it more difficult for women to successfully climb the corporate ladder, which translates to less compensation. It is important to carefully analyze the working environment in order to pinpoint these obstacles.
Major, Lindsey & Africa regularly conducts surveys in the U.S. in regards to earrings, compensation, and career satisfaction among law firm partners. More than 60,000 partners are invited to participate.
These are the results of the fifth biennial Partner Compensation Survey which is based on the responses of the 1390 law firm partners who participated. It was conducted in partnership with the legal market research specialist Acritas.
The study found that male partners at top U.S law firms earned significantly more than female partners. While male partners earned an average of $959,000, female partners earned an average of only $627,000. That’s a difference of 53%!
The four previous studies have consistently shown that men receive higher average compensation than women. Looking at the data it appears that the gender pay gap is actually getting worse. In the 2010 study, men were earning 32% more than women, 48% more in 2012, 47% in 2014, and 44% in 2016.
The highest paid partners are grouped by compensation which exceeds $4.1 million. Only one female partner was among this group.
It’s important to note that the partners who participate in each survey are not the same from one survey to the next. But clearly there is a gender pay gap that needs to be addressed.
The latest study attempts to get a better understanding of the factors contributing to these figures. Understanding the underlying reasons for the discrepancies may be a crucial step in closing the pay gap by identifying and removing the barriers faced by women.
One major factor that the survey revealed has to do with origination. This practice rewards partners who secure business from new clients by giving them credit for all work performed for that client as long as that client remains with the firm. Male partners earned average origination credits of $2,788,000 compared to $1,589,000 for female partners.
Over the course of the 5 surveys, even when controlling for origination credit, female partners still reported lower average earnings than males nearly 80% of the time. The average billing rate of male partners is also significantly higher than that of female partners. Men bill an average of $736 per hour while women bill $650 per hour.
Origination credit and the discrepancy in billing rates were responsible for almost 75% of the observed gap in compensation. The study also looked at other factors contributing to partner compensation such as practice areas, compensation transparency, and lateral status.
The Big Picture
There is a huge difference in compensation between equity and nonequity partners. While salaried nonequity partners earn an average of $371,000, equity partners who share in the profits earn an average of $1.136 million. The study looked at obstacles that nonequity partners felt they face to becoming equity partners and 79% listed generating more business as one of their top 3 barriers.
Law firms place a large emphasis on individuals who generate business and bring in substantial amounts of money. Women often feel that it is more difficult for them, with fewer mentorship opportunities and fewer people willing to hand down institutional client relationships. Firms that heavily reward origination credits and higher hourly rates are inadvertently putting women at a disadvantage.
Have you experienced any discrepancy in your pay as compared to your male colleagues?