A number of law school skeptics think they know why: it just doesn't pay any more. Washington University law professor Brian Tamenaha writes in his bluntly titled Failing Law Schools, "Law school is not a secure path to financial security - that much is obvious." Paul Campos, a professor at the University of Colorado Law School, agrees, writing in his book Don't Go to Law School (Unless), "It's likely that somewhere around four out of five current law students would be better off if they hadn't gone to law school."
The numbers the skeptics cite are sobering: 12.8 percent of members of the class of 2012 were still unemployed in February 2013. Only 64.4 percent got jobs that actually required passing the bar. The median starting salary — $61,245 — was about 15 percent below the 2009 median. At law firms, starting salaries were down 30.8 percent.
That all sounds really bad. But they get away from the central question here: is the amount of money law graduates make greater than the amount they would have made if they hadn't gone? And is that premium greater than the cost of law school? The answer to both questions, a new study finds, is yes. Seton Hall's Michael Simkovic and Rutgers's Frank McIntyre conclude, "For most law school graduates, the net present value of a law degree typically exceeds its cost by hundreds of thousands of dollars."
Those familiar with the data on the returns to education shouldn't be surprised by that conclusion, but Simkovic and McIntyre are more careful than most in reaching it. They rely on the United States Census Bureau’s Survey of Income and Program Participation (SIPP) and the National Education Longitudinal Study (NELS), both longitudinal studies that allow Simkovic and McIntyre to track the earnings of individual people. Even better, SIPP identifies which people have law degrees, something most Census data don't do.
They also control for a variety of observable characteristics — such as college major, socioeconomic status, race, and more — that might cause law school graduates to have higher incomes than those who didn't go for reasons that have nothing to do with law school. NELS allows them to single out characteristics that differentiate law students from those who don't attend, to ensure that they're comparing those who go to law school to demographically similar people who didn't.
And they find that law school grads get a median earnings bump of $32,300 per year, and a mean bump of $53,300 a year. The premium grows as the years pass:
But not everyone's at the median, of course. Tamenaha objects to Inside Higher Ed that the study "blends winners and losers," and doesn't consider people for whom law school might not pay off. That's false - the study does look at the bottom half of law school graduates. And they find that even those at the 25th percentile get a lifetime earnings premium of $350,000 (before taking the cost of law school into account):
These numbers are likely to be too low. "Several studies that have compared SIPP earnings data to matched Social Security Administration earnings records have concluded that highly educated, high-earners tend to underreport their earnings to SIPP, while less educated, lower earning workers tend to overreport their earnings," Simkovic and McIntyre note. If high-earning law school grads are underreporting their income, that could mean the premium is even higher.
Yeah, yeah, but surely recent years are different right? "It's really hard to say how applicable, if at all, that data is to recent graduates," Campos says. If unemployment is up and salaries are down enough, surely the earnings premium will be shrinking, perhaps to a point where law school's no longer worth it. But Simkovic and McIntyre find that the recent drops in salaries are well within historical patterns. It's just that salaries always fall during recessions. But even given that, the premium in recent years has been above what it was in booms in the past. "Indeed, the premium was lower in the late 1990s and early 2000s than in the last three years, and the premium today is about the same as it was in 1996," they write.
Of course, law school has costs too. But the average tuition for three years is about $90,000, far less than even the 25th percentile of law school grads earn. Even if you assume an annual tuition of $60,000 — above what even the most expensive law schools charge for tuition, fees, and books — that comes to $180,000, below the $350,000 premium that students at the 25th percentile get. The annual rate of return at the median, in real terms, is about 13 percent, well above, say, stock or bond returns. "These results suggest that even at the 25th percentile, the value of a law degree exceeds typical net-tuition costs by hundreds of thousands of dollars," the authors write.
That stays even when you take federal taxes into account — taxes which are higher precisely because law school provides a wage premium. Going to law school also typically requires foregoing three years of earnings, or at least greatly reducing them, but Simkovic and McIntyre's hold up after taking that into account too.
What about student loans, though? Surely those have been exploding, right? Sure, but there's little sign that law school grads aren't able to pay them back. The default rate for law school grads is about a sixth of the rate for bachelor's grads:
And has been that way for a long, long time:
"The data suggests that the law degree reduces the risk of distress by reducing the likelihood of unemployment, increasing labor force participation, and increasing expected earnings over the course of a lifetime," they conclude.
Campos still has his doubts. While he concedes that the study includes control, there are still causation issues, especially because the study finds that only 58 percent of law degree holders identify their profession as "lawyer." That's obviously not the only job for which a law degree helps, but Campos thinks it makes it harder to identify the positive impact of a law degree on the 42 percent of graduates who aren't working as lawyers. "I'd be shocked if 40 percent of people who got degrees from AMA medical schools are not currently doctors," he says. And while SIPP may underestimate high earners' incomes, Campos argues that low-earning lawyers may be less likely to participate in SIPP in the first place because of the stigma involved in admitting that, even anonymously.
The biggest weakness of the study, undoubtedly, is that it doesn't include classes that graduated during the recession. It can't, as there just isn't information, but it's totally fair to argue that something has changed that the current data don't capture. But Simkovic and McIntyre demonstrate pretty convincingly that the case that way too many people are going to law school is, at best, speculative. It requires arguing that longstanding trends in earnings numbers are all of a sudden stopping because of the recession, without much evidence that a change that large is happening.
There's a case to be made there. But if the last few decades were not, in fact, an anomaly, law school remains a really, really good investment for most students.