Exhaustive analysis by law professor Michael Simkovic and finance professor Frank McIntyre demonstrated conclusively that earning a JD provides a lifetime earnings premium relative to going through life with just a BA degree. That paper, The Economic Value of a Law Degree (but known widely as “The Million Dollar Degree” paper because that is the present value of the premium earned (pre-tax and pre-tuition) at the mean for JD holders), was recently published in a leading peer reviewed journal.
The results of that research undermined the credibility of the attack on law schools by a range of figures inside and outside the academy. That attack rested largely on anecdotal information, weak assessments of the small amounts of data that was examined as well as outright bluster, so the appearance of rigorous empirical research was jarring to the critics. Some tried a range of unfair personal attacks on the authors or floundered around in a futile attempt to undermine their methodology. These attacks reflected badly on the collegial culture that is so essential to the academic enterprise.
Now 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.
Here is the abstract from the new paper, entitled “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.”
Relying on Census Bureau data, the authors track the earnings of new JD holders (80% of a larger group of professional degree holders other than those in medical fields) and find that even those unfortunate enough to graduate into the worst financial crisis in American history have out-earned their college colleagues who decided to stop their education with a BA. Here is a table demonstrating those results (the vertical black line demarcates 2008):
As the wider macroeconomy improves, the market for JDs is also improving as discussed here, here and here. Combined with the longterm and in depth research of these authors, this development does not augur well for the few remaining critics of law school.
Much of the effort by the critics to persuade students not to go to law school revolves around a peculiar obsession with the short term. Perhaps that is understandable for people in their 20s and it may go a long way to explaining the volatility of the rate of applications to law school. Those applications cycle up and down even though the actual number and incomes of employed lawyers has increased steadily for many years. In light of this new research, however, it borders on professional irresponsibility for experienced legal academics and lawyers to feed into the short term meme.
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.