Over ten years, on average each year five percent higher hourly rates for large U.S. law firms

In a June 2010 report, Jomati Consultants includes a chart to show that U.S. partners put up their rates on average by 4.9 percent each year between 1997 and 2007. Associate rates went up by 5.4 percent on average each of those years. Since a typical U.S. legal department spent 60 percent of its budget outside, those rate increases alone – assuming on a blended basis they averaged 5 percent annually – would have swollen the budget each year by three percent.

Such a conclusion rests on several assumptions. It assumes staffing pyramids at the law firms that represented the law departments – the mix of paralegals, associates and partners – remained similar and so did numbers of billers at each level for matters. It assumes no changes effectuated by law departments in how they influence costs. It assumes no changes in which law firms are used or in the mix of work dispatched to firms – a shift toward more complex work, all other things held constant, raises rates. In short, the three percent cost-of-living bulge depends heavily on ceteris paribus.

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