Ilya Somin cites Aaron Taylor's recent column as evidence for the proposition that going to law school is still on the whole a good investment. Taylor's argument relies on the BLS statistic that the nominal unemployment rate among lawyers in 2010 was 1.5%. We can begin to get a sense of how far this statistic is removed from social reality by observing that around half of the people who received law degrees from ABA-accredited schools between 1974 and 2008 were not working as lawyers in 2008 (Note this statistic does not take into account the effects of the current recession, or the employment status of the 130,000+ graduates of ABA law schools over the past three years). Obviously large numbers of these graduates left the practice of law more or less voluntarily. Just as obviously, the number who didn't is many orders of magnitude greater than 1.5% of all ABA law school graduates.
We should also note that, even if we take the highly problematic NALP data at face value, use a generous definition of what counts as a real legal job (one that includes temp work as well as permanent positions), and once again ignore the effects of the current recession, at least one third of law graduates between 2001 and 2007 did not obtain jobs as lawyers within nine months of graduation. And Somin/Taylor's discussion of the salaries lawyers supposedly make is no more reliable than their glance at employment percentages. (NALP entry-level salary data is nearly useless since it omits more than half of law school graduates; at many schools less than a quarter of graduates report any salary data).
Furthermore Somin's analysis assumes not only an increasing demand for legal services going forward, but an increasing demand for the legal services provided by graduates of ABA law schools. These two things are hardly identical, as outsourcing, technology, and other economic factors have all made increasingly clear over the course of the last decade.
But what's most problematic about Somin's post is that it doesn't contain a word about the cost side of the cost-benefit equation. Law school is, in real terms, several times more expensive than it was 25 years ago. Getting a law degree now routinely costs hundreds of thousands of dollars in high-interest nondischargeable loan payments, without even taking into account opportunity costs. It seems too obvious to point out out that a stock that might have been a bargain at $10 a share could be a terrible investment at $40 per share, yet it's not unusual to read legal academic discussions of whether law school is still a good investment that feature little, or as here, simply no discussion of the effect the skyrocketing cost of legal education has on its long-term economic value to potential law students.
I applaud Somin's willingness to consider questions such as whether ABA accreditation standards, bar passage requirements, and the like are creating major inefficiencies in the price of legal services. But what lies at the root of the current crisis is, above all, the amazing rise in the cost of legal education, which has risen four times faster than even the rapidly rising cost of an undergraduate degree. No discussion of this general topic can afford (literally) to ignore the cost part of a cost-benefit equation.
Monday, October 17, 2011
Calculating the return on an investment requires taking into account the cost of making the investment
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You can also see the absurdity of Mr. Somin's BLS statistic by noting how, according to BLS, there are only 563,000 lawyers in the country when in fact law schools graduate that many students every 10-12 years.ReplyDelete
That was a very disappointing post at Volokh. It confirms how truly out of touch most law profs are.ReplyDelete
In addition to the points Prof. Campos makes above, the "good investment" argument ignores the fact that a law degree rapidly loses whatever value it has if its owner does not get a job practicing law within 6-12 months after graduation. If you fail to get that job, the investment is essentially worthless. It's not like buying real estate, where even if you invest while prices are going down you still could come out even or ahead in the long run. There is no "long run" for the investors who fail to secure JD-required positions their first year. That's the saddest thing of all.
Excellent point Lemuel. The rapid depreciation of a law degree (if you don't immediately find a job) is something that we don't talk about enough.ReplyDelete
That is a powerful point, Lemuel. You are absolutely right that taking a "vacation" for a year is an absolute killer. As somebody pointed out (maybe you?) some days ago even assuming that we go back to the world as it was, which I profoundly doubt, the new hires will be from new law grads. Their will be no lateral moves from zero to $100K. That truth makes it even more important that bankruptcy prohibition be removed. As I am sure you know there is a bill in Congress that would forgive all student loans. I support that bill but I think its likelihood of passage is next to nil. Bankruptcy change is a better option since it would have more legislative support I think.ReplyDelete
I just want to echo what Lemuel said. I don't think anyone with a new legal opening is looking for a member of the class of 2010 who has spent the last year working at starbucks or some other none legal area.ReplyDelete
Going with Campos's theme regarding the increases in law school tuition, I think that the rapid increase, especially over the last 10 years has really divided the legal community. I think that part of the reason that it has taken so long for outrage to occur, is that the more recent graduates are getting disproportinately hammered by high tuition costs, especially in California.ReplyDelete
For example, a graduate of Boalt Hall, UCLA, Hastings, Davis, woud have paid $12,000 a year iin tuition in 2003. A grand bargain by today's standards.
In 2005, a person attending these schools would have paid 21,000 per year, which is still a grand bargain by today's standards.
In 2010, however, tuition jumped up to an astronomical 43,000 per year.
Therefore, a person unemployed after law school who graduated in 2005 would have around 50k in debt, and those who graduate in 2006, or 2007 would probably have around 75k of debt, a significant sum, but a manageable sum. A student who graduates in 2013 would have near 150k of debt.
But many student who graduated with the lower tuition in or before 2005 or 2006 also benefited from huge increases in salaries. Salaries went from 125k to 160k during the peak bubble years of 2005-2008.
In the end, you have a group of people who paid (relatively) little in tuition, but benefitted from startlingly high salaries. THe best of both worlds. And those that got chewed up and spit out by the system had relatively small amounts of debt. That's why I think that high tuition costs are the driver of law student outrage. If you pay full ticket for law school nowadays, even if you win the BIGLAW lottery, paying back your student loans represnts a huge burden. Again, even at 160k, it still takes significant sacrifice for YEARS to pay off your law school loans. The dichotomy between a 2006 Boalt grad and say, a 2011 Boalt grad is HUGE. 5 years makes a huge difference.
Notice it's always a law professor or dean out there, writing the article to debunk all this unfounded hysteria about massive unemployment and underemployment. I guess that there weren't enough recent graduates or practicing attorneys willing to commit that sort of moral breach cost-free.ReplyDelete
What do we call the obvious phenomenon that Lemuel gave a voice to? Decaying value?ReplyDelete
Another issue in assessing law school is an investment is that you have to go "all in."ReplyDelete
By contrast, consider a stock which has an 80% chance of doubling and a 20% chance of going bust. It's a great investment if you have an extra 5 or 10k to put in. But you'd be crazy to invest your entire life savings.
So too with law school. Even if the expected return were great (which it isn't) there is still a serious chance of financial disaster.
@1:34pm These are all EXCELLENT points that more thoroughly examine the situation from year-to-year over the past 6-7 years. Law school tuition at my school was $43,000/year by the time I graduated in 2010. I accumulated roughly $180,000; however, because living expenses were easily over $15,000/year in Washington, DC. When that amount is added to the pre-existing undergraduate debt, I am easily over $200,000 in debt.ReplyDelete
I'm always so astonished when people ask me how my debt could be so high. Well, if you are 21 and don't have your parents paying for anything---and didn't somehow accumulate wealth and riches to pay for it yourself between the ages of 18 and 21, how the hell else would I have come up with the money to pay for law school? It wasn't as if I had an extra $50-100,000 laying around at the age of 21 to somehow offset my debt burden. As a result, I took the only option for me at the age of 21: student loans.
Don't these increases at California state schools relate to the on-going budget crisis in California? Here, you are blaming law schools for the fact the the California legislature has not been able to control spending.ReplyDelete
In all of the discussions about student loan debt and law school, are any assumptions being made about parents paying anything? Are the outraged people the ones who had their parents pay their undergraduate tuition and/or some portion of their law school tuition?ReplyDelete
Yes, some of the increases at the CA school related to budget cutbacks, however if you look at any private school, you will notice a similar trend. For example, a student who attended University of San Diego School of Law and graduated in 2005 or 2006 would have paid about 80k in tuition costs. A student who graduated from the same school in 2012 would have paid about 125k in tuition costs. The difference over a 5 year span is not as pronounced as at a UC school, but it's still huge.ReplyDelete
One more thing, whereas a student who graduated pre 2006 can expect to pay anywhere from 2-4% on his/her student loans, graduates from 2007 on tend to be paying about 8.5% interest on Grad PLUS loans and 6.67 on Stafford loans. Put simply, each person who entered lawschool from 2006 onward will owe significantly MORE money at HIGHER interest rates.
The outraged people are the ones who found $100,000 or more in funding from whatever source, and gave it to a law school because they were stupid enough to believe that school's employment reporting.
At least Ilya isn't in a profession where he's expected to teach people analytical skills.ReplyDelete
The other noteworthy thing is that people are paying more for something (a JD) that is worth less and less.ReplyDelete
Also, professor's salaries are probably increasing, even though whatever marginal benefit they give to students is decreasing as well. Tis life.
@2:15 Yes, yes, and YES. Thank you for highlighting these very pertinent details. It truly underscores how awful it has been in terms of opportunity and costs for those who went to school and/or borrowed after 2005.ReplyDelete
To 2:15, who sets tuition costs for state schools in California? Isn't it the state?ReplyDelete
To 2:41: It does't matter. Whether it's the state or the Board of Regents (the Regents set tuition, FYI), the overall point is that tuition has increased.ReplyDelete
Even if the state was the one increasing tuition, which it is not, the take away is still that tuition has markedly increased over the last few years.
John's 1:42 comment = disgusting because it's probably true.ReplyDelete
I get the feeling that the Stockholm syndrome is wearing off for more and more law students and grads. Good. Once we can convince them that they will gain nothing from brown nosing academic parasites, then the ivory tower of legal academia can finally be seen for the crap-stained porcelain toilet it is.
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@LOC -- Thanks. I'm not the person who mentioned this point earlier. (Not sure who it was.)ReplyDelete
So, the public law schools in Cal. don't set the tuition. It is the Board of Regents, who are mainly appointed by the Governor.ReplyDelete
Off Topic, but this is for LawProf:ReplyDelete
Since you have "seen the light," how many students at your law school have you talked into dropping out if their performance was lacking?
I'm not being snide, I'm seriously curious as to whether or not you share your thoughts with the students at your school or if you just put them on the web (for all I know, maybe you're prohibited from discussing these things with your students).
If that is not the case, I'd expect when I check the ABA sheets for your school that I'd see a higher attrition rate than in prior years since now there's someone on the inside giving poorly performing students the straight scoop.
Good point 1:42. It's amazing how law professors don't understand a simple thing like CONFLICT OF INTEREST.ReplyDelete
I'd also be interested to hear what sort of reaction this blog is getting among the students/faculty at Colorado and whether you've shared your ideas with anyone during lectures like some other (I believe Horwitz said something like that).ReplyDelete
Good question. LawProf what have you done at your law school?ReplyDelete
He's risked his career to help publicize the law school scam, in the face of very hostile criticism from professors (Leiter) who asked for him to lose his job, and other professors who come on here every day and harass him with "why haven't you done more" nonsense.ReplyDelete
One thing he,through this blog, has done is to push the ABA to do more. I take success one step at a time. This is not much, but it is a start.ReplyDelete
HomeNewsABA Legal Ed Section to Draft a Standard Specifying Penalties for Schools That Misrepresent Data
ABA Legal Ed Section to Draft a Standard Specifying Penalties for Schools That Misrepresent Data
Posted Oct 17, 2011 3:16 PM CDT
By Mark Hansen
He didn't risk his career. He has tenure.ReplyDelete
The "what have you done?" question is indeed pretty nonsensical. You're not bad simply because you haven't done every single could thing you could do. Supererogatory action, look it up. Interesting concept, sexy word.ReplyDelete
But, for people interested in how the movement is advancing, it's a fair question. Plenty of reason to be curious if LP's seeing any effect.
So Somin and Taylor are adamant that the legal field is a bed of roses, full of opportunity and that jobs are out there for the taking!ReplyDelete
I guess the numerous recent law graduates who responded to the ABA's recent survey documenting their inability to find a job and/or make a salary above $40,000, which would allow them to make a payment on their student loans must all be out of touch with reality. (See the link below.) Couldn't be the professors who are out of touch with reality now, could it?
I wrote Boxer, Coburn and Grassley today. One long email to each describing the miserable hell of my life post law schoolReplyDelete
Interesting note, given the references to Cal schools: I'm not sure if others have noted this already, but Hastings has published their full NALP figures online. http://www.uchastings.edu/prospective-students/careers/index.html. The numbers look pretty grim to me: 252 of 421 grads employed full-time; 220 of the 252 in jobs requiring a JD. 60% of those employed full-time reported their salary. Essentially, the numbers support--from a single school's perspective--the overall NALP report.ReplyDelete
I admire Hastings for reporting this!
In contrast, here is the link to George Mason's 2010 career numbers as advertised on their website: http://www.law.gmu.edu/assets/files/career/employment_stats_class_of_2010_updated_march_2011.pdfReplyDelete
If GMU has a significant number of grads employed part-time (which is certainly what NALP overall figures suggest), this is even more misleading than many other websites I've seen. There's no indication of how many grads fall into the different private practice categories (which some schools, at least, provide); and, of course, no breakdown of full-time versus part-time work. Notice also that the footnote about salary reporting lumps the caveat about percent reporting with a caveat in the opposite direction about bonuses. It almost sounds as if the "upreportable" information was about people earning bonuses on top of these salaries. "Wow," an outsider might think, "even more money than what they report here!"
I'm preaching to the choir, but when I look at the format of GMU's handout, the "99% employment rate" at the top strongly colors how a reader would interpret the information that follows. Starting with that banner, I would think "gee, these graduates do so well in the job market that they must all have their choice of the following jobs. As long as I go to this school, I can choose between a public interest job paying $77,000 (or more, since median means that half of even their public interest attorneys make more than that!) and one of the big firm jobs at $160,000 or more. What a great range of well paid choices I'll have!"
Imagine if this sheet began with the heading: "65% employed full-time nine months after graduation." In addition to disclosing the actual bottom line (if that's true in this school's case), that would also have a very different effect on how readers interpret the rest of the information.
Of course, I'm taking the liberty here of assuming that George Mason's underlying numbers are similar to those of other schools (e.g., Hastings, which has virtually the same US News ranking). If the vast majority of their 2010 grads are employed full-time at salaries comparable to the reported ones, congratulations to them and their grads! But if the real numbers are at all like those of other schools, this site strikes me as particularly deceptive.
The Chronicle of Higher Education had a story about law schools today.ReplyDelete
Although I can guess the major theme it won't let me read the full article without a subscription.
DJM, Hastings is still describing a population using salary data from a biased sample so I don't give them any accolades.ReplyDelete
after reading the GM 2010 career stats, all i could do is chuckleReplyDelete
For example, Hastings states that 252 graduates had full time jobs and they made an average of $107184, a minimum of $36000, a median of $100000 and a maximum of $165000 based on the salaries of 150 members of this group.ReplyDelete
They should have reported this as "150 graduates with full time jobs and the salaries above" and "102 graduates with full time jobs but unknown salaries." There is no reason to think the latter group made the same as the former. They probably made much less, if they had full time jobs at all, but Hastings wants you to believe that the two groups have the same salary profile.
10:23, I agree completely. I'm an upbeat, encouraging sort--as you may have figured out--and Hastings is the only school I've found so far that has published its full NALP report. That's a start, at least, in trying to break through the denial I see on law faculties and in offering some of the real story to prospective students. I wanted to praise them for that, and I wondered if any other school has gone even this far.ReplyDelete
I used to do some empirical scholarship and I am appalled at what many schools are doing with these numbers. The point of universities is to increase understanding, not to trap prospective students with badly distorted statistics. Arggh
DJM, I agree, but it's so easy to simply scan the survey results (blacking out the student's name if necessary) and publish all 400 of them in one giant PDF document that I don't see why schools can't do just that.ReplyDelete
@5:32 AM, YES, it could be THAT easy. It is THAT easy to get all the LSAT, personal statement, credit, and background information on each and every single one of those applicants before they enter law school....so why is it so hard or complicated to simply get that information on the back end????ReplyDelete
The student has to give permission for schools to obtain the information you are describing.ReplyDelete
@6:33 AM, And there is nothing in those upfront admissions documents which precludes getting that same information on the back-end. This dereliction of duty is nothing more than willful ignorance.ReplyDelete
I would be curious to know if those of you who went to private undergrad colleges (here in CA almost everyone goes to public schools, other than people who get into Stanford or USC) was the $25,000-$35,000 a year in tuition just as much of a scam as law school (on a smaller scale? I graduated from a state school where tuition for the entire four years was $21,000. Unless you went to Stanford what exactly is your $140,000 undergrad degree (over four years) buying?ReplyDelete
11:52, at last, someone has caught on. Undergraduate education is just as big a scam as law school, and has been for decades, ever since the value of a B.A. or B.S. dropped to what the value of a high school diploma was in the wake of WW2. The whole system's to blame!!ReplyDelete
UG can be distinguished b/c you can always do a community college -> cheap state school.ReplyDelete
Yes, but I'm willing to bet that a good number of law students, and people who populate this blog paid $$ to go to pricy liberal arts colleges etc., and BTW there are still a few cheap state law school's out there (all Tier 4 and in the south) as well as CA's state-accredited schools.ReplyDelete
"(all Tier 4 and in the south) as well as CA's state-accredited schools."ReplyDelete
Education system is becoming increasingly costlier.ReplyDelete
I wish to highlight the data demonstrating that a very large percentage of the holders of a J.D. degree since the 1970's are not working in a job that requires a J.D. degree or bar membership. Whatever the percentages are and admittedly they may be difficult to quantify with absolute precision, the truth is that even landing a first or a second or a third job as a lawyer does not mean that obtaining a law degree was a good investment. I know dozens of nurses who bought JD degrees who are back to nursing, accountants who bought a JD who are back to accounting, medical doctors who bought a law degree who are unemployed or early deceased and JD holders who subsequently became teachers, and I know several former partners in big law firms, even those who once offered me a job, who are no longer working as lawyers. From my near 20 years of experience, I can assure you that very few if any of those referenced chose to abandon law or their particular lawyer jobs completely voluntarily. Very little seems to be written about these unpleasant and largely unspoken truths.ReplyDelete
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