Paul L. Caron

Thursday, May 10, 2012

Seto: Could 2012 be a Great Time to Go to Law School?

Theodore Seto Seto(Loyola-L.A.) shared this response on the TaxProf Email Discussion Group in response to Tuesday's post, Tucker Max: Why You Shouldn’t Go To Law School (reprinted here with Ted's permission):

The best time to buy is when everyone else is selling. If August 2012 law school matriculations are truly as bad as the common wisdom expects, then three years from now law grads with decent credentials will be in higher demand than they otherwise would be. This does not mean that English majors who can't figure out what else to do should go to law school. And it does not mean that prospective students should ignore costs. But when markets correct misallocations, they often overcorrect, particularly in markets with imperfect information. In my view, there is reasonable possibility that the current decline in law school applications represents just such an overcorrection.

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"The best time to buy is when everyone else is selling." --Seto

I could swear that I heard Jim Cramer say the same thing on CNBC when the price of Bear Stearns began to totter.

Posted by: dybbuk | Jun 19, 2012 2:30:29 PM

Kudos to Loyola for presenting better (and much more depressing) employment statistics this year.

It is full of data, manipulated of course. For example, while 58% of graduates or 212 attorneys are supposedly employed in "Private Practice Law Firms," salaries are only provided for 121 of them. But do not worry about the excluded salaries because Loyola writes that "Data excludes comparatively high or low anomalous figures." That is perfectly reasonable because, you know, you do not want all those millionaire graduates mucking up the average salary figures. However, at least they provided you enough information to notice these things which again is an improvement that they should be commended for.

On that note, I am not surprised to hear that BLS data will be Mr. Seto's key resource. If you are not aware, that was also Cooley Law School's key resource when they published their rosy study of national legal employment:

Ironically, the BLS data paints a terrible picture if you understand how it is collected and defined. For example, if you look at the number of lawyers in the country in 2000 and compare that to 2010 you will see virtually no increase, which begs the question of what happened to the 500,000 people who graduated law school during that decade. However, it is not in Cooley's or Mr. Seto's interest to dig that deeply. They will simply point to BLS statistics like, "Unemployment among lawyers was 1.5% in 2010, far below the national unemployment rate of 9.6%" without bothering to look into how BLS defined the terms that went into that statistic, and why the statement is terribly misleading when presented outside of the context of those definitions.

Do not think that such acts go unpunished in legal academia. Cooley likes to think they can bully and fool people, but they fool no one. Rather than carry itself with the honor necessary to compete with new upstarts like UCI, Loyola seems to be lowering itself to such levels.

Posted by: MDCI | May 13, 2012 5:40:44 PM

"Second, when I started at Harvard Law School in 1973, we were told at orientation that, statistically, only half of us would ultimately practice law; the rest would go into jobs for which a legal education might be useful, but not required."

Wow, so law schools were honest in prehistoric times. Frankly Harvard should still be making this disclosure because it probably applies today in the long run. Loyola should be making a far scarier disclosure.

Posted by: anon | May 11, 2012 10:07:18 AM

'To dream the impossible dream" which is a major six figure income after law school pontificating on the details found in legal education. Reality: 99.999% will not receive these jobs. For the .001% who do they work 24/7 with little time to come up for air.

Posted by: Nick Paleveda MBA J.D LL.M | May 11, 2012 5:54:33 AM

Ted Seto wrote, "The best time to buy is when everyone else is selling."

This statement is sometimes true, but in no way is it always true. In fact, in general it is not true. If everyone is running from something, a good rule of thumb states that you should from it too. I can provide examples but I hope they are not required.

Posted by: anon | May 11, 2012 4:58:15 AM

Prof. Seto:

Loyola grads are suffering mightily. They are not getting the jobs they reasonably thought they would based upon representations by the school itself (from its career services professionals, its deans, and its web site). Loyola can ill-afford yet another blogosphere embarrassment, such as your post.

As Prof. Merritt pointed out, Loyola is still hiding the ball. It has its class of 2011 stats, yet they are nowhere to be found on your website. Why? Because other schools haven't posted theirs yet during this peak recruiting time? That sounds like an excuse a child would make. Hell, we only know the truth about Loyola's class of 2010 because the data were published elsewhere.

A while ago, you took a stand on an issue that was near and dear to you, because people you cared about "asked." North Carolina was a set back.

Well, Prof. Seto, we're asking. Will you bring your keen intellect to bear on this matter as it relates to Loyola? Will you review the outcomes of its graduates in relation to what the school tells prospective students (and the astronomical amount of high interest, non-dischargeable debt incurred by most of your students), and take a stand?

Will you look at the data? It tells a very sad story, which unfortunately, is not a result of this most current economic situation. This is nothing new.

Posted by: Loyola Grad | May 10, 2012 10:25:58 PM

Professor Seto, As a colleague at another school, I suggest you look very closely at your own school's employment data--as well as at the way the school portrays those data to applicants. According to the data that Loyola-LA sent to the ABA (recently made public by the ABA), 129 of your 2010 graduates found only short-term jobs. Short-term does not mean judicial clerkship; clerkships count in the "long-term" category, even though they typically last only one year.

16 of these short-term positions were with the law school itself; 32 were with firms of 2-10 lawyers; 43 were in public interest; and 17 were in business and industry. These short-term positions account for more than one third of the "employed" graduates reported by Loyola-LA.

Yet on the school's website, you will find no hint that so many of these jobs are short-term; graduates are simply reported as "employed." Worse, the school's website reports salaries after silently sifting out all of these short-term jobs. The school's site, for example, reports that 104 graduates were employed by "very small" firms of 2-10 lawyers. On the next page, the site reports that these lawyers had a median salary of $60,000, with 51 out of 68 graduates reporting. What happened to the other 36 graduates "employed" in these firms? Their employment was so tenuous that NALP doesn't even count their earnings as a salary to be reported. But Loyola-LA doesn't explain that to potential students.

A reader has to have been following the job market, NALP guidelines, and associated literature very closely to understand (or even notice) that Loyola has silently brushed over outcomes for a third of its class. Incoming students wouldn't possibly follow these omissions. The data, as presented on Loyola-LA's site to applicants, are misleading.

And then there is the matter of debt to income ratio. According to ABA data (this time as reported to US News), 86% of your students graduate with law-school debt. Their average debt--for law school alone--is $132,875! Yet 6% of your 2010 graduates had no income after nine months; another 33% had short-term jobs with salaries that Loyola didn't even calculate. Even among the grads who obtained long-term jobs, the median salary in the largest group (those at firms of 2-10) was just $60,000.

For a substantial number of your graduates, the gap between income and debt appears crushing. Indeed, it is one of the highest I have seen--although I haven't finished the calculations I'm performing for all US schools. I would think very seriously about the type of investment you are urging students to make. You may hope that the legal market will improve dramatically, but that change would have to be beyond exuberant to close this gap. As someone who has been following the forces of technology, globalization, unbundling, and other factors closely, I think any turnaround is unlikely. A turnaround of the magnitude needed to sustain an average debt of $132,875 would have to be massive.

Posted by: Deborah J Merritt | May 10, 2012 6:50:06 PM

"Second, when I started at Harvard Law School in 1973, we were told at orientation that, statistically, only half of us would ultimately practice law; the rest would go into jobs for which a legal education might be useful, but not required."

I find this very interesting, considering at most schools well over 90% of the students take the bar after graduation. This would seem to indicate they plan to take jobs as attorneys. What I have seen is that many students do end up in very interesting or lucrative non-law jobs, but they are jobs for which some years of legal practice are required as an additional credentialing factor beyond the JD. Therefore, the quality of the initial employment matters. Many lawyers have become investment bankers after a few years at Skadden or Simpson Thacher. I doubt very many have done so after a few years working part-time at a small DUI/wills and trusts/PI firm or being a low-paid DA, the likely outcome from most schools ranked below the top 25 and a very good outcome at many of them.

I think one thing prospective law students should keep in mind is uncertainty. We can debate endlessly whether the changes in the legal market are systemic or cyclical, hiring is going to bounce back in three years, or the decrease in applicants (there are still about 67K applicants of 45K seats) is going to lead to improved outcomes sufficient to justify a 200K debt load and three years out of the workforce. The fact that we are uncertain about any of this, however, speaks in favor of waiting. Too often students become caught up in a binary decision tree- go to law school now or never go to law school. But a third option is to hold off. LSAT scores last for five years and you get up to three retakes. Work experience can only add to your resume, even a job at Walmart or Starbucks isn't going to hurt you. Whereas the downside of locking yourself into three years and about 150K in debt (including likely tuition increases and accrued interest) is extremely substantial.

The problem is that many cash-strapped schools are going to find themselves in serious trouble if students commit to waiting a few years, as they are very dependent on consistent growth in both tuition and class size. If there are less applicants, and the remaining applicants are more price-sensitive, I predict a very tough time for law schools in the near future.

"But I have made my way in life by questioning the common wisdom. Before we join the lemming pack and jump off the nearest cliff, we may want to take a closer look at the underlying numbers. I'm not yet fully persuaded by the work done to date."

The common wisdom is that law school will lead to a full-time, decently paying job as a lawyer, that the JD by itself is valuable in obtaining non-lawyer work, that education debt is good debt, that it is a good idea to take on 150K of debt for a JD from ANY school, and that most schools are placing 90% of students into six-figure jobs (as per self-reported, misleading statistics).

Posted by: bored3L | May 10, 2012 3:46:24 PM

Let me make a limited defense of this remark.

90% of everyone currently going to law school should not be going. We know that. But let's say you are the kind of person that in normal times might have "only" gotten into, say, Georgetown or Michigan. But with the dramatic drop in applicants, you can get into HYS, maybe even with some tuition assistance. In that very, very limited circumstance, he might be right.

Posted by: MC | May 10, 2012 2:44:22 PM

Professor Seto's argument is dumb. Law schools will just lower admission standards. The supply/demand balance is so out out of whack, it would take law schools to close for five years to balance it out. The only reason why people still go to law school in droves is because of the easy credit student loans. If law schools had to supply the credit, then you would see a balanced market between law graduates and law jobs. Seto comments are made out of his own self interest, not because he cares about the health of the legal job market.

Posted by: Joey | May 10, 2012 2:32:19 PM

I think Seto made a mistake and meant to say 30 years, not 3. Seto fails to realize that the market has been over-saturated for years and it will take a very long time for all those under and unemployed lawyers to find work, if ever. I think Seto, in being a member of the law school scam, as well as employed by a school that pays him a ridiculous salary and should be closed down, is just another self-interested shill who gets paid to encourage people to take out yet more taxpayer funded loans so he can be continue to be overpaid without doing much work.

Posted by: Jerry | May 10, 2012 2:02:58 PM

Seto, the market has shrunk compared to ten tears ago. even if the attorneys produced per capita is less than it was a decade ago, the pool is much much smaller. Do you remember Loyola 4L, the pre recession Internet presence that called your school out on it's dismal placement?

Also, the BLS data suggests that for the next several years the sector will not grow enough to sustain the current numbers of grads. Combined with increased tuition and falling salaries, what possible reason aside from blind hope do you have for claiming now is the best time to cash in?

Posted by: Farner Melville | May 10, 2012 1:44:17 PM

Professor Seto, as I mentioned, you make some interesting assertions about markets. But the actions of your institution are undermining the integrity of your arguments.

It's text book econ 101 that imperfect information leads to market failure, but for whatever reason the faculty you are affiliated with will not release your previously-collected, easily-disseminated data on employment outcomes. You mention that Loyola "is likely to meet or exceed its admissions goals this year." Perhaps the reason for this state of affairs is imperfect information?

I would also note that the per-capita number of graduates is not the appropriate way to examine the legal employment market. As has been discussed ad nausium, the market for legal education is different than the market for legal employment, and demand for one does not directly drive demand for another.

While I don't dispute your experience at Harvard in '73, let me assure you that law schools, both publicly and privately, are no longer so direct about their students future prospect. Especially since the eye-popping increases in tuition, law schools would be in the awkward position of admitting they are charging hundreds of thousands of dollars for what is essentially a fifty-fifty bet.

I certainly don't mean to impinge on you personally, and I appreciate your attention to these issues. But collectively, I just don't understand how can sustain your arguments when collectively you are part of an organization that is acting in what appears to be bad faith by hiding information. Can you please ask Dean Gold to just put the information on the web page already?

Posted by: Greg Meeker | May 10, 2012 11:25:15 AM

The points made by Mr. Meeker and chuckR are fair ones. I have not yet done the work needed to either agree or disagree with them. My research assistants are in the process of gathering the underlying data in preparation for an article on this topic to be published in the Journal of Legal Education. My conclusions there will be driven by the data.

I would, however, make two preliminary points. First, law schools are currently producing FEWER law graduates per capita than they were 10 years ago. (This does not take into account recent decisions on the part of several law schools to cut class sizes.) There was no apparent oversupply of lawyers 10 years ago. This raises the question: What do the BLS data mean?

Second, when I started at Harvard Law School in 1973, we were told at orientation that, statistically, only half of us would ultimately practice law; the rest would go into jobs for which a legal education might be useful, but not required. There is no obvious reason to believe the situation has changed since then. If so, one first-cut interpretation of the BLS data might be that it's correct, but understates the effective demand for law graduates.

I have no axe to grind here. I'm tenured at a school that is highly unlikely to go out of business before I retire. Near as I can tell, my school is likely to meet or exceed its admissions goals this year.

But I have made my way in life by questioning the common wisdom. Before we join the lemming pack and jump off the nearest cliff, we may want to take a closer look at the underlying numbers. I'm not yet fully persuaded by the work done to date.

Posted by: Theodore Seto | May 10, 2012 9:30:19 AM

$200K in expenses plus lost income for three years. If you don't have a burning vocation that compels you towards this or any profession/career that has similar costs to enter, this looks like a very bad deal indeed. It might take more than three years to clear the oversupply, the same way it will for foreclosed houses.....

Posted by: chuckR | May 10, 2012 9:00:36 AM

Professor Seto makes an interesting assertion about that future state of the legal profession. It would be great to discuss this assertion on the basis of some empirical data, for example, with data on the employment outcomes of current and past Loyola law students.

This data would be particularly useful because the BLS has shown that there are now two law students graduation for every available entry-level legal job, so that would be quite a market correction in three years. If we had the data, we could then compare the current employment outcomes of Loyola graduates with Professor Seto's projected ones based on our understanding of technological or economic driver of the legal market, as illustrated in great detail by Bill Henderson and many others.

Alas, Loyola still has not made this data public, despite reporting it to NALP on a simple form. So forgive me if the assertion comes off as the wistful hopefulness of the legal academy and avoids the unpleasant possibility there are too many law schools.

Posted by: Greg Meeker | May 10, 2012 7:55:57 AM

While respecting the membership restrictions of the "Law Professors Tax Discussion List," currently at 353 members, it would be nice if the site allowed people outside the academic world to, at least, read the insights from professors, as non-participants.

Posted by: Woody | May 10, 2012 7:31:14 AM