TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, March 10, 2015

McIntyre & Simkovic: Lifetime Value of Law Degree Drops Only $30k For Those Who Graduate Into a Poor Economy

Frank McIntyre (Rutgers) & Michael Simkovic (Seton Hall), Timing Law School:

We investigate whether economic conditions at labor market entry have persistent effects on law graduate earnings. We find that unemployment levels at graduation continue to affect law earnings premiums within 4 years after graduation. For law graduates entering the labor market in strong economies, early outcomes are particularly good. However, the effect quickly fades as law graduates gain experience and the impact on lifetime earnings is relatively small. Outcomes data available prior to matriculation do not predict unemployment or starting salaries at graduation. Earnings premiums are not predicted by either cohort size or projected job openings. Even an effective “timing” strategy would likely be outweighed by the opportunity cost of a two-year delay in law school completion.


Deborah Jones Merritt (Ohio State), Timing Law School:

Simkovic and McIntyre conclude that graduates reap most of the value of a JD whether they graduate in good economic times or poor ones. ... Simkovic and McIntyre’s latest analyses, they hope, will reassure graduates who earned their degrees in recent years. If history repeats, then these JDs will reap as much financial benefit over their lifetimes as those in previous generations. Simkovic and McIntyre also warn prospective students against trying to “time” law school. It’s difficult to estimate business cycles several years in advance, when a 0L must decide whether to take the plunge. And, again according to historical data, timing won’t make much difference. Under most circumstances, delay will cost more financially than any reward that successful timing could confer.

History does repeat, at least in the sense of economic conditions that cycle from good to bad and back again. There’s no doubt that recent law school graduates have suffered poor job outcomes partly because of the Great Recession and slow recovery. It’s good to know that graduates may be able to recover financially from the business-cycle component of their post-graduation woes. Although even here, Simkovic and McIntyre acknowledge that past results cannot guarantee future performance. The Great Recession may produce aftershocks that differ from earlier recessions.

All of this, though, edges around the elephant in the room: Have shifts occurred in the legal profession that will make that work less remunerative or less satisfying to law graduates? And/or have changes occurred that will make remunerative, satisfying work available to a smaller percentage of law graduates?

Simkovic and McIntyre have limited data on those questions. Their primary dataset does not yet include anyone who earned a JD after 2008. A supplemental analysis seems to encompass some post-2008 degree holders, but the results are limited. Simkovic and McIntyre remain confident that any structural change will help, rather than hurt, law graduates–but their evidence speaks to that issue only in historical terms at best. What is actually happening in the workplace today?

Five years ago, the Class of 2010 was sitting in our classrooms, anticipating graduation, dreading the bar exam, and worrying about finding a job. Did they find jobs? What kind of work are they doing? 

I decided to find out by tracking employment results for more than 1,200 graduates from that year. I’ll be releasing that paper later this week, but here’s a preview: the class’s employment pattern has not improved much from where it stood nine months after graduation. The results are strikingly low compared to the Class of 2000 (the one followed by the massive After the JD study). The decline in law firm employment is particularly marked: just 40% of the group I followed works in a law firm of any size, compared to 62.3% for the Class of 2000 at a similar point in their careers.

Stephan A. Diamond (Santa Clara), New Research by Simkovic and McIntyre Delivers Another Blow to Law  School Critics’ Case:

Simkovic and McIntyre have extended their earlier work posting a new research paper to SSRN that reaffirms their earlier conclusions from a new angle. While still a working paper, the authors conclude that efforts to time one’s decision to go to law school relative to the ups and downs of the economy are not worthwhile. The idea that someone who wants to earn a JD should consider delaying that effort because of a downturn in the economy is only likely to reduce the lifetime premium one can accrue by earning a JD. ... 

I asked co-author Michael Simkovic to summarize the key takeaways of the new paper. He responded with the following list:

1) If the decision is between going to law school and entering the labor market with a bachelor’s degree, most people will be much, much better off financially over the course of a lifetime with a law degree, whether they graduate into a good or bad economy

2) The luck of timing (graduating into a good or bad economy) matters for the first few years, but in the long run, doesn’t make much of a difference

3) Short term indicators like employment or earnings 9 months after graduation from NALP or the ABA are not very useful. These short term fluctuations don’t predict what you can expect 3 or 4 years in the future when you graduate. Better to focus on long term historical averages rather than recent short term fluctuations (i.e., read The Economic Value of a Law Degree).

4) You can’t “time” the market by waiting for the “right” time to go to law school, so don’t try. The best time to go to law school doesn’t depend on entering class sizes and it doesn’t depend on what’s currently going on in the economy.
(there might be an exception if law school is particularly inexpensive at a particular point in time because of more scholarship money, and the quality isn’t any lower, but that’s a cost issue, not a value issue).

5) The best time to go to law school is the earliest point possible after which you make the decision that you’d eventually like to go. By waiting, you’re spending more of your limited working life working for lower wages, and you aren’t changing your chances of graduating into a more favorable economy.

6) There’s no evidence that young law graduates in recent years are doing worse, relative to bachelor’s degree holders, than would be expected based on the historical data and the recent economic downturn. In other words, there is no evidence that structural change has reduced the value of a law degree; if anything, it seems to be increasing over time as the earnings of highly educated workers keep increasing in real terms over the long run.

7) You probably won’t become a partner in a big law firm and that’s okay. You’ll probably still earn a lot more over the course of a lifetime than you would without a law degree.

8) You probably won’t get a job at big law firm; most people don’t now and most people haven’t in the past. That’s okay. You’ll probably still earn a lot more over the course of a lifetime than you would without a law degree.

9) You don’t need to practice law to benefit financially from a law degree; around 40 percent of law graduates do not practice law, and they still generally earn substantially more than they would have with just a bachelor’s degree

10) If you’re deciding between law school and another type of graduate school, stay tuned; we hope to have better information on this question soon; What little information is available suggests that a law degree probably compares reasonably well to most alternatives other than a medical degree in terms of the boost to earnings and the cost.

Among the most telling of these points is that a very substantial number of JD earners do not practice as lawyers and even among those that do very very few end up as partners of major law firms. Yet, much of the attack on law school has centered on nine month employment rates in JD required jobs. That kind of focus is misguided and has been for many years. What might be more useful would be a debate about aligning what we really know to be the case about JD earnings and the cost of going to law school. There may be a mismatch in assets and liabilities – in other words, debt repayments should be structured to allow young JD holders time to get established in the work force. IBR and other payment plans may have this effect but this area could likely bear closer scrutiny. Insulting law schools and law professors will not move the needle very much.

ABA Journal, Why Time Law School? Value of Law Degree Drops Only $30k In Bad vs. Good Economy, Study Says:

Though unemployment levels at graduation affect pay for the first four years, particularly in boom times, the impact fades as law graduates gain experience ... Overall, the value of a law degree, compared to an undergraduate degree, declines by about $30,000 for those who graduate when unemployment is high rather than low, according to McIntyre and Simkovic.

National Law Journal, Study: Law Grads’ Earning Advantage Seems Recession-Proof:

There’s no use trying to time enrollment in law school so you’ll graduate into a strong job market—the four-year lag is simply too long to allow an accurate economic forecast, new academic research suggests.

Moreover, whether someone enters the profession in boom times or recession doesn’t significantly affect long-term earnings. Neither does graduating with a large versus a small cohort of students.

Legal Education, Scholarship | Permalink


The S&M study includes JDs who earned their degree only pre-2008. I think a new SIPP panel began in 2014. I presume that the 2014 panel will include individuals who earned a JD prior to and as of January 2014, right? When will such data be available, and won't such respondents be the best measure of whether something has changed or not after the mid-2000s?

Posted by: Jojo | Mar 10, 2015 2:24:24 PM

I have not yet read the latest bit of S&M, and to be quite frank, since it is above 40 degrees for the first time in what seems like several years up here in metro Beantown, I have every intention of sitting outside in a t-shirt all week. But I will remark on how very different the conclusions appear to be relative to every other study I have read concerning earnings outcomes for recession-era graduates & workers versus non-recession-era graduates & workers. For instance, we have:

- Paul Oyer, Stanford Business School, The Making of an Investment Banker: Stock Market Shocks, Career Choice, and Lifetime Earnings (surprise! A MBA from SBS, which any rational reader will agree is both more versatile and noteworthy than the normative JD, has a $6 million lifetime earnings difference between graduates of bear markets and graduates of bull markets).

- Lisa Kahn, Yale, The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy.

- Philip Oreopoulos, University of Toronto and NBER, The Short and Long-Term Career Effects of Graduating into a Recession: Hysteresis and Heterogeneity in the Market for College Graduates.

- Brian Clark, Duke University, The Career Prospects of Overeducated Americans.

- Joni Hersch, Vanderbilt Law School, Catching Up is Hard to Do: Undergraduate Prestige, Elite Graduate Programs, and the Earnings Premium (even among graduates of the same elite law schools, people with elite undergrad credentials earn considerably more than their law school classmates).

- Till von Wachter, Columbia University, Long-Term Earnings Losses due to Mass Layoffs During the 1982 Recession: An Analysis Using U.S. Administrative Data from 1974 to 2004.

Well, I guess all those studies must be wrong or something. And all of the pronouncements that the profession is undergoing permanent structural change: calls made by international law firms, their clients, the ABA, the NALP, the BLS, senior law professors, etc, are wrong, too. It's rather like how the handful of anti-climate change scientists insist that the tens of thousands of climate change scientists are wrong.

Anyways, the JD must certainly be much more resilient and versatile than the garden-variety bachelors degree to have so little earnings variance in and out of recessions, as S&M posit. If that's the case, though, why was the unemployment rate for the class of 2013 8.4% for undergrads and 14.5% for JDs?

Posted by: Unemployed Northeastern | Mar 10, 2015 6:51:24 PM

It's a good thing Mike Simkovic says that NALP's data is meaningless, because otherwise he and Steve Diamond might look terrible for encouraging people to attend law school when only 50-60% of graduates in seven years have found work for which their degree was required within nine months of graduating.

Posted by: Morse Code for J | Mar 11, 2015 8:36:43 AM