February 11, 2013
Chen: Law Grads Must Earn Salary = 2/3 Debt to Make Law School Worth It
Jim Chen (Louisville), Measuring the Downside Risk of Law School Attendance:
Legal education has come under severe political pressure, both external and internal, for its perceived failure to deliver tangible economic benefits to law students. But legal education is not alone. The financial crisis of 2008 and the economic recession triggered by it have forced many other industries, to reevaluate their balance of costs and benefits. Many institutions, even entire industries, must now endure stress-testing in the form of debt-to-income or debt-to-capital ratios. This document focuses on student welfare, especially the core economic question of whether law school attendance delivers a valuable return on students’ investment. It also describe the tools, drawn from quantitative finance and econometrics, that it uses to evaluate downside risk and inequality within any cohort of law school graduates.
Just how much do new law grads need to earn? Jim Chen, a professor and former dean at the University of Louisville’s Louis D. Brandeis School of Law, told the task force he has crunched the numbers. Law graduates need an annual salary equal to two thirds of their law school debt to make law school viable, he said. The problem could be solved, he said, by eliminating the third year of school, or by requiring law professors to take a one-third pay cut or give up job security. But change won’t happen without outside pressure, he said.
He suggested that state supreme courts, either alone or in concert with bar examiners, should reduce the number of subjects tested on the bar exam so that only two years of legal education would suffice. He also suggested following the lead of the medical profession by creating the legal equivalent of a nurse practitioner. Law schools could still offer a third year of education, he said, perhaps by offering clinical experience, subject matter specialties, or a BigLaw and academic track.
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Hmmm...Law prof budgets often make up between 25-40% of the school budget, right? So a 1/3 pay cut = an 8-12% decrease in total cost of attendance? While eliminating 3rd year is 33% decrease. How are these equivalent?
Posted by: Math is Hard | Feb 11, 2013 12:56:56 PM
Given that the soi disant upper class in the U.S. have exempted themselves from the strictures of the law, what need have we of lawyers?
Posted by: PacRim Jim | Feb 11, 2013 3:38:48 PM
If the number of years required goes down, the cost per year will go up.
Legal education is structured to extract the surplus value the education provides to students, not to cover the costs of providing the education.
Posted by: Kevin | Feb 11, 2013 3:52:57 PM
So let me get this straight -- a college grad smart enough and ambitious enough to get through law school makes, on average, about $50k when they leave college.
The average law school debt is around $125k, and it is unclear whether or not that includes undergrad debt. However, using this 2/3 idea, the student must make $83k to make the math work.
HOWEVER, this means that the increase in earnings is only $33k, on an investment of three years, plus slavery before bar exam, plus the loss of wages during school, etc. I fail to see how the math for the increase in wages of $33k is worth the extra debt. Presumably this means that the law school debt alone can be no more than $45k or so (the increase of wages divided by 2/3)? Which of course implies that the undergrad debt would be $80, which is not impossible but at least improbable.
Posted by: geek49203 | Feb 11, 2013 4:04:47 PM
So we're complaining about a glut of lawyers, yet we are lowering standards to enable new ones to enter the profession? How does that make sense? And assuming the elimination of the 3L year, wouldn't that mean the elimination of 1/3 of the faculty, rather than 1/3 of their salaries? There are certain core courses that no law school can get rid of, but there are seminar courses that could be (theoretically) eliminated if well-rounded graduates and lawyers are no longer the goal of law school...
Posted by: This makes sense how??? | Feb 12, 2013 1:48:16 PM
The increase in earnings is ~$33K per year X 40 years, discounted to present value, which is in fact $600,000.
Not bad for $100,000 in tuition and 3 years of showing up in class 70 percent of the time, occasionally not hung over.
Posted by: Anon | Feb 13, 2013 3:55:55 AM