Category Archives: Law School

Study Finds the Net Present Value of a Law Degree is Highly Positive

The hot legal paper of the moment is undoubtedly The Economic Value of a Law Dregree by Michael Simkovic and Frank McIntyre who are respectively a law professor and professor of finance.

Their data-driven conclusion (p. 49) flies directly in the face of recent conventional wisdom:

After controlling for observable differences, we find that a law degree is associated with approximately a 60 percent increase in expected median monthly earnings and a 50 percent increase in hourly wages, as well as reduced risk of unemployment or underemployment. We find earnings differences between men and women, and that these differences are due primarily to differences in hours worked. The law degree earnings premium is cyclical and recent years are within historic norms. Applying reasonable discount rates, we estimate the mean lifetime value of a law degree in 2012 dollars as of the start of law school to be approximately $1,000,000 before taxes, and $700,000 net of taxes. Median pre-tax lifetime values are approximately $600,000 (after taxes, $420,000). This suggests that, for most law school graduates, the value of a law degree typically exceeds its cost by a very large margin.

Some other key findings:

  • [A] law degree increases both work hours and wages per hour, and most of the increase in earnings is due to increased earnings per hour. (p. 15)
  • The mean annual earnings premium is approximately $53,300 …. starting salaries are not very good predictors of lifetime earnings. (16)
  • Law degree holders’ annual earnings grow faster and peak later than bachelor degree holders (20).
  • “Even at the 25th percentile, the earnings premium is large …. on a percentage basis, the earnings premium is similar for those at the median and 25th percentile, and considerably higher for those at the 75th percentile. In 2012 dollars, the annual earnings premium increases from $17,300 at the 25th percentile to $32,300 at the 50th percentile, to $62,200 at the 75th percentile.” (22-23)
  • “The data does not suggest that law graduates were unaffected by the recession. Rather, earnings dropped for both law graduates and college graduates after the late 2000s recession, and law graduates maintained their relative advantage. It is this relative advantage—not absolute outcomes— that measures the value of the law degree. Our data suggest that law degree holders are not immune to economic downturns, but they have continued to fare better in the recent downturn than bachelor’s degree holders without advanced degrees. Moreover, long-term historic data remains a reasonable and appropriate data source to forecast future earnings premiums.” (32)
  • “Rounding to the nearest $10,000, we find that the mean value of a law degree is $990,000, the median is $610,000, and the 25th and 75th percentiles are $350,000 and $1,100,000 respectively. The Internal Rate of Return at the median is 13 percent in real terms, or approximately 16 percent in nominal terms.” (41)
  • “[E]ven at the 25th percentile, a law degree exceeds typical net-tuition costs by hundreds of thousands of dollars. At the mean and 75th percentiles, the difference is close to one million dollars. We therefore reject the claim that law degrees are priced above their value. Indeed, the value compared to net-tuition prices suggests that legal education is a competitive market in which surplus redounds to the benefit of student-consumers.” (41)
  • There is a large gender difference at the high end: “Rounding to the nearest $10,000, the mean value of a law degree is $1,030,000 for men and $820,000 for women. The median values are $580,000 each for both men and women, although the premium is higher for women in earlier years and higher for men in later years. At the median, internal rates of return are 11.5 percent for men and 14.3 percent for women. Higher earnings for men at the high end of the distribution are likely due to longer hours and increased labor force participation.” (42)
  • “Even at the 25th percentile of women, our estimate of the lifetime earnings premium of a law degree, $350,000, exceeds the typical cost of a law degree by a wide margin. That is, in spite of lower average lifetime earnings premiums for women compared to men, a law degree remains a good investment for most women who obtain a law degree.” (42)
  • These are pre-tax dollars, but the after-tax story, at current tax rates, is similar: “the mean after tax value of a law degree is $720,000 for men and $570,000 for women. For low earners, such as those in the 25th percentile, values should be multiplied by 0.75. For very high earners, such as 75th percentile men, or for those anticipating higher tax rates in the future, values can be approximated with a 0.65 multiple.”
  • The paper also presents data suggesting that the current law school ‘crisis’ is similar to previous cyclical downturns; they argue that the decision as to the value of law school should be based on relative earnings and unemployment to those with just a BA — to the extent everyone is doing badly now, law school graduates may still be doing well in relative terms.
  • Key point: “Because we discount our estimated law degree value to the start of law school, interested parties can multiply annual net-tuition by three and compare the results to our estimates of after-tax value.” (43 n. 109)

I should note four assumptions in the calculations, set out at pages 39-40, that I think increase the claimed value of the law degree, although I don’t think any or all of them would change the bottom line enormously:

  1. The authors assume that students graduate at 25 (thus giving them more years to realize the increased earnings).
  2. They assume that law school costs $30,000 per year in tuition and expenses (which they say is consistent with ABA data on average net tuition after scholarships and grants in 2010-2011) — this allows them to say the opportunity cost per year is c. $55,000, which feels low to me although I admit I’m not clear on whether in light of #4 below this number includes living expenses; if it doesn’t it might be reasonable.
  3. They assume law students earn an average of $24,000 in summer and term-time work during the 3 years of law school, which may be high.
  4. They assume costs of living while in school are similar to costs of living while working full-time and that “any differences reflect consumption benefits, and therefore need not be accounted for separate from opportunity costs of lower in-school earnings.”

It seems like a careful job. I do want to stress that the numbers offered are present discounted value in current dollars and that they do NOT take account of the cost of tuition. Thus, to figure out how these numbers work for a prospective student, the student would need to compare the total of three years of law school tuition with a PDV of income estimate adjusted for these factors:

  1. Age at graduation (the higher it is, the lower the PDV of the increase in the projected lifetime income stream)
  2. Tuition (but not living expenses unless they are much higher than the alternative)
  3. Lost salary during law school, after taxes (?), if much in excess of $25,000 per year
  4. Gender, if you think existing patterns of work and/or discrimination will continue
  5. Where you think you might be in the income distribution

Thus, to take a near-worst-case scenario assume you are a woman planning to graduate at age 25, who believe sex discrimination will continue, or that you may choose to drop out of the workforce, or take reduced hours, for a chunk of your career. Assume further you are risk-averse, and thus want to find out if a degree is a good value even if you earnings are at the 25th percentile in the class. [Note that the study ranked earnings by percentile, it did NOT estimate earnings by class rank, although we know there is some imperfect correlation. Thus the 25th percentile here is an income outcome not an educational outcome.] The present discounted value of your expected earnings is $427,500 (which is less than a similarly distributionally challenged male, who would have a PDV of $540,000). If your law school tuition and expenses (other than room and board you would pay anyway) are less than this in 2010 dollars, odds are you are making a smart bet in terms of net lifetime earnings. So if tuition is $160,000 total, and before law school you make $65,000 per year, you compare ($160,000 + (65,000 – 25,000)*3*[1-tax rate]) to the PDV post-tax value of the degree, which is $427,500. Because, say, $280,000 is less than $427,500, the law degree has a real positive net present value — over your expected life time, even if not in your first year out of law school. And of course the numbers are substantially better with less restrictive assumptions.

Note, however,that the analysis assumes you graduate. And it doesn’t attempt to take much account of the practical effects of an increased debt service burden when combined with undergraduate debt (except to note the historically low rate of student loan default for law grads as a group). Nor does it consider the effect that debt may have on your career choices or happiness. It could be that having less debt young might allow you to buy a house younger and thus be happier while having less money over all. But economists are not concerned with that sort of issue; this is a strictly financial calculation. Even so, it’s interesting work — and encouraging stuff for those of us engaged in the production of law graduates.

[Note: Latter part of next-to-last paragraph edited and expanded for clarity.]

Posted in Law School | 7 Comments

Innovative Thinking Could Save Law Schools $$$

Although not directed primarily at law schools, the innovative suggestions in Forget MOOCs–Let’s Use MOOA could easily be used to save most US law schools a very large chunk of change. Perhaps this should be in our next strategic plan?

(Spotted via Naked Capitalism.)

Posted in Completely Different, Law School | 4 Comments

Yet Another Law School Ranking

Given the source — — I would have been prepared to dismiss it out of hand. But Brian Leiter, who is a very discerning consumer of rankings, says that that the “ATL Top 50” is “not nuts and contains some useful information”. Coming from him, that is fairly high praise.

U.Miami Law comes in at 49th on the list — considerably higher than our usual US News rank, and right near the middle of the range (41-55) I would put us at if I were Ratings Czar. And Yale is #1, so they got that right too.

Posted in Law School, U.Miami | 1 Comment

Research Assistant Wanted

Apologies, blog readers, but this announcement is for UM Law 1L & 2L students only:

I would like to hire a part-time summer research assistant. The hours are negotiable, but likely would be in the 15-20 hours per week range. It would be best if you could start very soon after exams finish. Current UM 1Ls and 2Ls are welcome to apply.

My research assistant will help me with my summer writing projects. The job requires someone who can write clearly, is well-organized, and who is really good at finding things in libraries and on the Internet. There may be some bluebooking involved too. (If you happen to have some web or programming skills (some or all of HTML, MySQL, Perl, Debian), that could be useful, but it is not in any way a requirement.)

The hourly pay of $ 13 is set by the university, and is not as high as you deserve, but the work is sometimes interesting.

If you are interested, please send me an e-mail with the words RESEARCH ASSISTANT (in all caps) followed by your name in the subject line. In the email tell me:

– how many hours you’d ideally like to work per week and what other jobs/courses you have planned for the summer (if any),
– when you are free to start, and whether you have vacation plans (no problem if you are planning to take a week or two off during the summer)
– your phone number and email address.
– whether it is OK for me to share your application with other interested faculty members who might also want a summer research assistant.
– whether, if things work out, you might be interested in continuing on at 10/hrs week during the next academic year.

Please attach the following to your email:

1. A copy of your resume (c.v.),

2. A short writing sample (non-legal is preferred — in any case, please do NOT send your LCOMM memo),

3. A transcript (need not be an official copy).

(You might also mention that you saw the ad here. Can’t hurt.)

Please note that this job is different from the Jotwell summer editor position.

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Counter-Cyclical Law School Application Strategies

Every couple of years David Bernstein writes a blog post I agree with:

the best time to buy real estate, or really any investment, is when “everyone” is saying it’s a terrible investment. …

If we’re not as this stage with regard to demand for law school, we are damn close, with applications running about half the level of six years ago. Law school certainly isn’t for everyone, and how worthwhile economically it might be for anyone in particular has to start with that individual’s opportunity cost and where he gets admitted…

But there hasn’t been a better time to apply to law school in a long time, if ever. Worried about going into debt? Go to a law school school somewhat below where your credentials would allow, and they will shower you with aid… Always dreamed of going to a top 10 law school? You may never have less competition than now. Want to keep your current job and go part-time, but got rejected a few years from the only law school in town with a part-time program? This year, they will probably take you.

Whether law school makes sense for you still depends enormously on what you want to do in the long run, and what your alternatives are. Even if this is the ‘new normal’ for applicant numbers — and I’ll bet that numbers will rebound substantially from this trough within five years even if they don’t go back to old peaks — it’s clear that for now law schools as a class are only making partial adjustments to the new state of things, part of which involves competing aggressively by offering scholarship money and/or lower admissions standards. Thus it’s a buyer’s market from the potential student’s point of view.

Posted in Law School | 6 Comments

On Teaching From Badly Written Cases

[Occasionally I resurrect a draft blog post that somehow never made it to publication when I first wrote it. This is one of them.]

C.E. Petit, he of Scrivner's Error, pens (?) a rant about the poor state of legal writing amidst law graduates:

Yet another set of law school deans wrings its collective hands over law schools' failure to teach writing skills sufficient for lawyers to survive in practice. The problem is that it really is the deans' fault…

Among his targets, Mr. Petit would blame the judiciary, for writing so poorly, and the legal academy for inflicting generations of judicial butchery of the English language upon the poor unsuspecting 1Ls, 2Ls, and 3Ls.

While admitting there is a legal writing problem, as a law professor engaged, so it seems, in corrupting the keyboards of the young, I would like to plead justification (necessity).

Mr. Petit proffers a solution to the bad-legal-writing problem:

Perhaps most important of all, the deans need to trash virtually every casebook currently in use. The biggest problem with legal writing is that law students see mostly examples of bad (or worse) legal writing in the bulk of their classwork, particularly in the common law courses. In Contracts, students study Sherwood v. Walker exhaustively, and still can't figure out what the holding is because the judge couldn't bloody write (even by nineteenth century standards in Michigan); in Property, even the casebooks try (ineptly, with one exception) to make head or tail of the actual ruling in Shelley's Case; in Torts, the string of double negatives (which can be helpful rhetorical devices when used sparingly, but not in a string) in the leading cases on product/strict liability causes more confusion than anything in the discussion over comparative/contributory negligence; and in Criminal Law, just try reading M'Naghten's Case. More casebooks need to follow the path that Professor LaFave did in Criminal Procedure: Clear, concise summaries, supplemented by extended quotations where helpful… and that California's Justice Mosk did in establishing the concept of comparative negligence by writing more simply and more clearly than did the advocates of the contributory negligence system.

I think this is mostly wrong. There is real value in teaching from real cases, without potted summaries, even (especially?) the badly written ones. This is the reality of law practice: Judges often write badly. (I have said this for years: see my Legal Writing Tips.) Lawyers need to know how to decipher bad judicial prose. Meaning-extraction (or even and especially meaning-creation) is an important legal skill we work hard to impart to our students. How will they learn whether to appeal a badly written case except by struggling with its ancestors?

In addition, students need to know the big cases. Even if they are badly written, that doesn't detract from the leading cases' importance. A student who knows her way around the original has an advantage over someone who just learned from a summary.

I agree that it is hard to first show students precedents — some eloquent and many ham-handed — tell them the cases matter, sometimes matter a great deal, and then in the next breath ask students not to write as badly as those very judges whose torturous prose we've force-fed them, but those are the cards lawyers are dealt. Those cases are real. They have authority. They must be confronted and dissected, even if that carries risk of their being emulated.

[Original draft, Sept. 2010]

Posted in Law School, Zombie Posts | 7 Comments

My Students Want a Neuter Singular

I’ve been reading draft student papers. One extremely common locution goes like this: “If a person does [something] then their liability will be [whatever].” That “their” is there because students don’t want to say “his” or “her” nor use the clunky “his or her”. English doesn’t currently offer a neuter word; “their” is a plural when the grammar requires a singular, but to my students’ ear that is less of an issue than picking a single gender to refer to both.

Why exactly they don’t pluralize the whole thing (“If people do [whatever] then their liability will be [whatever]“) I don’t know.

This language shift suggests that at some time in the future the non-prescriptivist definition of “their” will shift to include a role a neuter singular possessive. But I don’t believe we are there yet on “their” so I’m marking “their” up whenever I find it misused.

Then again, I may be behind the times: already offers “their” a secondary singular meaning:

2. (used after an indefinite singular antecedent in place of the definite masculine form his or the definite feminine form her): Someone left their book on the table. Did everyone bring their lunch?

Posted in Law School | 5 Comments