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Thursday, July 18, 2013

NY Times, WaPo, Others Debate The $1 Million Value of a Law Degree

One MillionFollowing up on my prior posts (links below):

This data refutes some of the arguments made by those who say law school is a “scam.” It is no surprise that this study would be attacked by many of the same people. After all, the law school scam industry has been bountiful for some, just like being a Kardashian.

To be fair, this criticism is also well intentioned. These commentators are springing to the defense of real law students who cannot find jobs. But it is simply that, and when the rhetoric dies down, perhaps this paper will turn to a more serious and needed study of what is going on in the law market and what the true value of a law degree really is. (And yes, in fair disclosure, my bias is that of a tenured professor at a major law school.)

In particular, even beyond its salary points, the paper by Professors Simkovic and McIntyre makes a number of new points that should inform the debate. Bureau of Labor Statistics data on lawyer salaries is often cited to justify the assertion that law school is not economically justified based on current lawyer salaries.

The study’s first major point is that these Bureau of Labor Statistics figures are probably biased downward. The reason is that the numbers do not include the salaries of self-employed lawyer, who are not only sole practitioners but also mostly law firm partners....

The study’s second major point is that loan default rates for law graduates are much lower than for college graduates....

The study’s third major point is that about 40 percent of lawyers currently do not practice law. Much has been said about the number of law school graduates who are not finding law jobs, and surely there are many who do want law jobs but cannot find one.The full-time employment rate for law graduates who obtained legal jobs was only at 56.2 percent last year, according to the American Bar Association. But given these figures, it appears this has always been the case, and it is hard not to conclude that many lawyers do not go to law school to be lawyers (again, no one has really looked to see if this is true or not, though). Indeed, according to the Simkovic-McIntyre study, 50 percent of senators and 10 percent of chief executives at large companies are lawyers....

Ultimately, that is what the debate over law school boils down to these days. Will the recent turbulence persist, or will the historical data win out? If the current figures represent the new normal, something about law has changed and there will be fewer jobs going forward.

But that may not be the case. The market may recover, as markets tend to do and as the population grows. There may even be more legal jobs if, for example, the Dodd-Frank Act becomes a full-employment act for lawyers.

As for the argument that technology has changed everything in the law market, I was struck by a quote in a study from the Harvard Law Review in 1901, decrying modern technology by stating, “[t]he stenographer and the typewriter have monopolized what was his work … and he sits outside of the business tide.”

This quote from a hundred years ago shows that claiming change is afoot – bringing obsolescence and wholesale disruption in the law market – is a century-old phenomenon. The question is whether this time is different.

[Simkovic-McIntyre] find that law school grads get a median earnings bump of $32,300 per year, and a mean bump of $53,300 a year. The premium grows as the years pass:

Lifecycle lawschool

The biggest weakness of the study, undoubtedly, is that it doesn’t include classes that graduated during the recession. It can’t, as there just isn’t information, but it’s totally fair to argue that something has changed that the current data don’t capture. But Simkovic and McIntyre demonstrate pretty convincingly that the case that way too many people are going to law school is, at best, speculative. It requires arguing that longstanding trends in earnings numbers are all of a sudden stopping because of the recession, without much evidence that a change that large is happening.

There’s a case to be made there. But if the last few decades were not, in fact, an anomaly, law school remains a really, really good investment for most students.

Prior TaxProf Blog coverage:

Update:

http://taxprof.typepad.com/taxprof_blog/2013/07/ny-times-wapo-others-.html

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Comments

Will refrain on commenting on what I feel is a thorough yet incomplete study, but...

solid Dr. Evil reference, bro.

Posted by: LOL, no | Jul 19, 2013 12:43:56 AM