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Sunday, July 23, 2017

McIntyre & Simkovic:  Timing Law School

Frank McIntyre (Rutgers) & Michael Simkovic (USC), Timing Law School, 14 J. Empirical Legal Stud. 258 (2017):

We investigate whether economic conditions at labor market entry predict long-term differences in law graduate earnings. We find that unemployment levels at graduation continue to predict law earnings premiums within 4 years after graduation for earners at the high end and middle of the distribution. However, the relation fades as law graduates gain experience and the difference in lifetime earnings is moderate. This suggests that earnings figures from After the JD II and III — which track law graduates who passed the bar exam in 2000 — are likely generalizable to other law cohorts because these studies are outside the window when graduation conditions predict differences in subsequent earnings.

Figure 2

Outcomes data available prior to matriculation do not predict unemployment or starting salaries at graduation. Earnings premiums are not predicted by BLS projected job openings. While changes in cohort size predict changes in the percent of law graduates practicing law, we find little evidence that changes in cohort size predict changes in earnings. This suggests that law graduates who switch to other occupations when law cohort sizes increase are not hurt financially by larger cohorts. For medium to high earning graduates, successfully timing law school predicts a higher value of a law degree ex-post, but simulations show that no strategy for ex-ante timing is readily available.

http://taxprof.typepad.com/taxprof_blog/2017/07/mcintyre-simkovictiming-law-school.html

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Comments

But of course lawyer salaries in that cohort are hardly uniform. Even back then, employment and salary outcomes were largely determined by where you went to law school, just as is the case today. From a 2012 analysis on the After the JD cohort:

“There were also pay differences based on schools and grades. Graduates of the top 10 law schools who worked full-time earned median pay that was $73,500 more per year than graduates of Tier 4 schools. And among graduates of Tier 3 schools, grades made a big difference. In that group, those with the highest grade point averages had median pay that was $121,500 more than those with the lowest grades.”

““These are the golden age graduates,” said American Bar Foundation faculty fellow Ronit Dinovitzer after the presentation, “and even among the golden age graduates, 24 percent are not practicing law [twelve years after graduation].””

http://www.abajournal.com/news/article/twelve_years_after_the_jd_20_percent_arent_practicing_law/

Posted by: Unemployed Northeastern | Jul 23, 2017 8:50:54 PM

As for debating when/how to “time law school” today, it would be disingenuousness of the highest order not to inform 0Ls that the reauthorization of the Higher Education Act is in the offing and it may well radically change the finances of attending law school. It would be poor timing indeed to borrow to attend law school to work as a public defender only to see Public Service Loan Forgiveness repealed in your 2L or 3L year, after all. Trump’s version of IBR, which would replace IBR and PAYE/REPAYE for future students, would extend graduate student loan repayment out to 30 years and be based on 12.5% of all income instead of 10% of discretionary income. And now conservative think tanks like Heritage and AEI are, for the first time, openly advocating for the end of GradPLUS loans, or at least capping it at a relatively low number. Presuming that private lenders will even extend their money to students of nonelite law schools, the end of GradPLUS is the effectively the difference between graduating with a student loan payment based on your income and graduating with a mortgage payment. In other words, the coup de grace for just about everyone who doesn’t land a six figure salary.

In fact, it may not even take as long as the reauthorization of the HEA; Inside Higher Ed is reporting that the House budget resolution released this week would nearly guarantee major cuts to IBR plans and federal student lending. See https://www.insidehighered.com/news/2017/07/21/gop-budget-would-mean-billions-cuts-higher-ed.

Posted by: Unemployed Northeastern | Jul 23, 2017 8:53:55 PM

Finally, let's take a look at what the American Bar Foundation called "the golden age" Class of 2000 versus the Class of 2015, which is the most recent for which the NALP has released a full report. All data is from NALP.

Class of 2000:
- 6.4% not employed
- 77.3% in jobs requiring a law degree
- 2.5% in *JD Advantage* jobs
- Of those hired by firms, 41% in law firms over 100 lawyers
- Of those hired by firms, 30.2% in firms under 10 (excluding solos)
- NALP median starting salary for all law firm jobs: $80k. Expressed in real dollars: $116k and change.
- A tale of two tuitions: Suffolk cost $21,830 in 1999-2000 ($31,678 in today’s dollars). Harvard cost $25,711 in 1999-2000 ($37,310 in today’s dollars).


Class of 2015:
- 11.6% not employed. In fact, we have had double digit unemployment every year since 2011, far eclipsing the unemployment rate for both recent four-year college graduates and the overall population.
- 66.6% in jobs requiring law degree. Here we have not seen a number above 70% since 2009.
- 14.5% in *JD Advantage* jobs
- Of those hired by firms, 35.7% in law firms over 100 lawyers; >40% hasn’t been seen since 2009 and of course every industry outlook (Altman Weil, Thomson Reuters, Citi Private Bank) predicts lesser hiring in the future as disruption and clients place further pressure on firms to streamline their operations. They also all call the changes in the legal market since the Great Recession structural, not cyclical.
- Of those hired by firms, 40.1% in firms under 10 (excluding solos)
- NALP median starting salary for all law firm jobs: $100k; compare to the $116k median for the Class of 2000 in today’s dollars. In fact, in real dollars this 2015 median starting salary barely tops the $50,000 median starting salary across all law firms for the Class of 1990, which work out to $96,136 k in today’s currency. That’s not even a 4% real dollar gain over 25 years. Timing law school? Best to have gone decades ago.
- This is not to be confused with the overall NALP median starting salary for the Class of 2015, which is but $64,800, or about 20% less in real dollars than the $72k starting salary for the Class of 2008, which is about $83k in today’s dollars.
- And fewer actual graduates found full-time jobs as attorneys than at any point since 1996.
- Suffolk cost $46,042 in 2014-15. Harvard cost $55,842 in 2014-15.

Posted by: Unemployed Northeastern | Jul 23, 2017 8:59:09 PM

Great research! I would like to employ these authors to publish a study concluding football improves cognition, memory, and promotes brain health.

Posted by: Roger Goodell | Jul 24, 2017 7:04:06 PM