Paul L. Caron

Wednesday, February 3, 2016

McIntyre & Simkovic:  Law Class Size Does Not Predict Changes In Financial Benefits Of Law School

Michael Simkovic (Seton Hall), Smaller or Larger Law Class Sizes Don’t Predict Changes in Financial Benefits of Law School:

One of the most surprising and controversial findings from Timing Law School was that changes in law school graduating class size do not predict changes in the boost to earnings from a law degree.* Many law professors, administrators, and critics believe that shrinking the supply of law graduates must surely improve their outcomes, because if supply goes down, then price—that is, earnings of law graduates—should go up.

In a new version of Timing Law School, Frank McIntyre and I explore our counterintuitive results more thoroughly. (The new analysis and discussion appear primarily in Part III.C. “Interpreting zero correlation for cohort size and earnings premium” on page 18-22 of the Feb. 1, 2016 draft and in Table 10 on the final page).

Our results of no relationship between class size and earnings premiums were robust to many alternative definitions of cohort size that incorporated changes in the number of law graduates over several years. This raises questions about whether our findings are merely predictive, or should be given a causal interpretation.

We considered several interpretations that could reconcile our results with a supply and demand model and with the data. The most plausible interpretation seemed to be that when law class sizes change, law graduates switch between practicing law and other employment opportunities that are equally financially rewarding. While changes in the number of law graduates might have an impact on the market for entry-level lawyers, such changes are much less likely to have a discernible impact on the much larger market for highly educated labor.

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I find it amusing how Timing Law School directly contradicts at least a half-dozen studies done by actual economists with actual PhDs in Economics that ALL found that the difference between graduating into a recession or a boom has fairly profound, career-long consequences on wages. This is the case for everyone from bachelor's recipients to Stanford MBAs.* The most well-known is Lisa Kahn's (professor, Yale School of Management) "The Long-Term Labor Market Consequences of Graduating from College into a Bad Economy." And lest we forget, these studies focus on the much milder recessions of the 1980's and 1990's. An era when employers still trained new hires. An era before automation and offshoring of white-collar work. An era when there were FAR fewer college graduates competing for jobs.

*The Stanford MBA study found a $6 million lifetime earnings difference between recession-era SBS grads and boom-era SBS grads. And that is pretty much the most bullet-proof degree in the world. But we are supposed to believe that every juris doctor from every law school is immune from lower wages in a recession because... And what to think of those NALP reports that show law school graduates from recent years are making a median that is $10k to $15k less than law school graduates from ther 2004-2007 era?

Posted by: Unemployed Northeastern | Feb 3, 2016 9:51:13 AM

That's because the field is already saturated. Whether you add a little or a lot to an already saturated market, it will not show up in the data.

Posted by: Jojo | Feb 3, 2016 7:15:27 AM