Following up on my prior posts (links below):
A fascinating new paper argues that a J.D. is worth $1 million over the
course of a career, and that the recession hasn't dampened its value.
But don't go racing for your LSAT prep book just yet. ...
Having scoured through it -- and having asked the Hamilton Project's Adam Looney, who has done similar work on college graduates, for a second opinion -- Simkovic and McIntyre's paper seems to be both based on a reasonable set of economic assumptions and a very by-the-book interpretation of their numbers. ...
That said, I'm not sure young political-science majors should take this study as a green light to go rushing back to their LSAT prep books. For ease of digestion, here are my reasons in bullet-point form:
Reason 1: The Legal Job Market Continued Deteriorating Well Past 2008. ... The question is whether the problems law graduates have faced a temporary jobs drought thanks to the recession, or if something has fundamentally changed in the industry.
Reason 2: The Boom Times Might Be Over for Good. ... [T]he slow rebound nonetheless suggests something's amiss in law-firm land. Unless government hiring rebounds with a vengeance, or jobs open up en masse thanks to retiring boomers, it's hard to see the hiring picture dramatically improving for young J.D.'s.
Reason 3: Students From Bottom of the Bottom Schools Are Still Suffering. ... Even if law-school graduates on the whole do reasonably well, the
law-school boom of the last decade helped spur the growth of bottom-tier
institutions that now post 20% or higher unemployment rates among their graduating classes. ...
I'm not yet comfortable saying that many young Americans are missing out by saying no to law school.
If the Simkovic & McIntyre analysis of the value of a law degree is correct, there are two somewhat counterintuitive implications. First, law schools have been massively undercharging for tuition in the past.
If what is now a $150k investment produces $1M increase in income, why
are law schools permitting students to capture all of that benefit?
Presumably there'd still be plenty of takers for a $300k investment that
produces $1M in benefits. And recall that the study is using data from
1996-2011, but that tuition in 1996 was hardly $50k/year.
The second implication is that if Simkovic & McIntyre are correct
about the system basically holding going forward, it also suggests that
law schools should be raising their tuition. To the extent that it
reduces enrollment, it might only boost the value of the degree by
constraining the supply of lawyers. Still, I can't imagine any schools going this route (competition is apparently keeping tuition in check).
I think the best critiques of the study I’ve heard so far are:
- Maybe there really is a structural shift going on in the way legal
services are delivered. ...
- Because it uses general averages, the study may mislead people who
invest large sums in law degrees from low-quality (or even
low-prestige, which isn’t necessarily the same thing) institutions. ...
- The study doesn’t discuss bar passage. ...
- The study doesn’t discuss the financial, much less hedonic,
consequences of carrying heavy debt from college and law school. ...
- The study treats the experience of law school as neutral, neither
better nor worse than the three-year alternative job. ...
- I happened to
have a really good time in law school, so for me it was a net benefit;
other people report hating the experience and for them it is a net cost. ...
Thus, the study is a useful data point for law school
applicants/entrants and a useful corrective to some recent sturm und
drang. But it’s not by any means 100% of the story either.
Clearly, this article has given new life to those who would defend the
status quo. However, even assuming the statistical methodology is sound
(which I do, as I have no reason to believe otherwise and no time to
recreate it), the study suffers from a number of crucial weaknesses.
In general law school graduates might be slightly better off than
their peers with no graduate degrees, but a damn lot of them still have pretty bad jobs.
It’s also possible the problem might still get worse; law firms are
simply not at the size where they were before the Great Recession began,
nor are they likely to expand again in the future.
But the new study is a very important contribution to this debate.
Law school is perhaps no longer the easy ticket to financial stability
that it seemed back when I was in college, but it’s not really clear
that law-school is a straight-up bad investment.
Prior TaxProf Blog coverage:
- Merritt on The $1 Million Value of a Law Degree (July 21, 2013)
- Diamond on The $1 Million Value of a Law Degree (July 22, 2013)
- Tamanaha: How 'The Million Dollar Law Degree' Study Systematically Overstates Value (July 23, 2013)
- Tamanaha: How the 'Million Dollar Law Degree' Study Understates Risk (Part I) (July 24, 2013)
- Tamanaha: Why the “Million Dollar Law Degree” Study Fails (Final Post) (July 25, 2013)
- Rasmusen: Critics of The Economic Value of a Law Degree Are Making the Paper Better (July 25, 2013)
- Pasquale and Simkovic Respond to Tamanaha (July 25, 2013)
- The American Lawyer: Paper on Law Degree's Economic Value a Non-Sequitur (July 26, 2013)
- Simkovic Responds to Tamanaha (Part 3) (July 26, 2013)
- Tamanaha: Short Term Versus Long Term Perspective (July 27, 2013)
- Harper, Diamond: The $1 Million Value of a Law Degree: Distraction, Astronomy, or Astrology? (July 28, 2013)
- Simkovic Responds to American Lawyer Op-Eds (July 29, 2013)
- Diamond Responds to Tamanaha (July 29, 2013)
- Rasmusen: The Economic Value of a Law Degree and the 'Typical' Law Student (July 29, 2013)
- Simkovic Responds to Tamanaha (Part 4) (July 30, 2013)