Law Schools, Money, Student Loans

Another Garbage Study Offering Misleading Statistics On The Value Of A Law Degree

This study isn’t throwing darts at a dartboard, this study is going up to the dartboard, placing the darts where you want, and then hoping nobody notices.

I don’t know how the intellectually dishonest people who try to trick people into going to law school based on misleading statistics sleep at night. It’s one thing to see economic drivel rerouted through the admissions mouthpieces who are just looking to make a sale to keep their jobs. But when it comes from law deans or law professors — people who are supposed to be educators and apply a modicum of rigorous intellectual thought to their writings — it’s just sad.

We’ve got another one of these “studies” that purports to show that a law degree is actually quite valuable, while blatantly ignoring all of the things that have led to ruinous financial consequences for so many students drawn into the clutches of law school. I was going to ignore it: partially because I’ve knocked down all these terrible arguments before when looking at the intellectual drivel emanating from the Denver Sturm College of Law, partially because I wonder sometimes if giving these smoke and mirror studies the light of day does more harm than good.

But, tipsters are emailing in and the ridiculous claim is the lead story on other websites, so whatever, let’s address the claim that a law degree is worth $1 million dollars over the course of a lifetime…

Please note the UPDATE at the end of this post, with commentary from Professor Michael Simkovic.

In their report “The Million Dollar Law Degree”, professors Michael Simkovic of Seton Hall Law School and Frank McIntyre of Rutgers University Business School argue that a law degree is, on average, worth $1 million more than a bachelor’s degree over the lifetime of a career.

That’s right, I said “on average.” The professors used census data and the National Education Longitudinal Study to compare J.D. holders to non-J.D. holders form 1996 to 2008. I keep trying to think of different ways to explain why looking at the “average” is a particularly useless metric when talking about lawyer salaries and J.D. value, and here’s today’s attempt: I think everybody agrees that a Yale J.D. is much more valuable than a bachelor’s degree from, say, Western Michigan. A Yale Law degree is way more than a million dollars more valuable over the course of your life than a WMU undergrad degree. But does anybody think that a Cooley Law degree is anything approaching $1 million more valuable than a Yale undergrad degree? Does anybody think that it’s more valuable in absolute terms? Is a Cooley Law degree more valuable than just being the local New Haven friend of a bunch of Yale undergrads? That would be an interesting study.

Averages are a joke. But this whole study is a joke. Take a look at this from the ABA Journal:

The data covers four panels of graduates from 1996 through 2008 and looks at salaries through 2011. The study does not factor in tuition costs since they vary so much. Nor does it compare the value of a law degree from higher-ranked versus lower-ranked schools. Future earnings are estimated based on historic data.

“The data does not suggest that law graduates were unaffected by the recession,” the study says. “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.”

Inside Higher Ed also adds this nugget:

These numbers do not include tuition costs or taxes. Simkovic said he did not factor in tuition costs because they are so varied across law schools.

“People are paying so many different prices. It would be really complicated and take up a lot of space to include a lot of the possibilities,” he said.

Okay, everything here is so bad I’m just going to have to resort to bullet points to get through this in a timely manner:

  • Cutting your study off in 2008, before the market significantly changed, means that your study HAS NO CREDIBILITY. NONE.
  • “Future earnings are estimated from historical data.” Really? Aside from the massive market correction in lawyer earnings, one might point out that current tuition has completely shot through the roof of all historical models.
  • Oh, but that’s right, you don’t care about tuition. You managed to do a whole study about the value of a law degree, BUT DIDN’T FACTOR IN TUITION. You didn’t look at how much the thing cost!
  • Because it was too complicated.
  • And you didn’t look at taxes on earnings. Put another way, I could say: “Manhattan offers the best home buying opportunities in the entire world, IF YOU DON’T LOOK AT HOW MUCH IT COSTS OR TAXES!!!!!

There are other problems with this study. They say that two-fifths of the J.D.s sampled were working as non-lawyers… so they are just assuming that a law degree added some value to 40% of the careers they’re looking at. That’s a huge and patently incorrect assumption. And let’s not forget that the entire philosophy behind this study, comparing J.D.s to bachelor degree holders, is flawed. Most people who pursue a law degree wouldn’t have just stopped their education had they not gone to law school. They would have gotten additional training, sometimes not formalized, but often training that would be memorialized in some other degree or distinction. At the very least, you should be comparing law degree holders to other people who have engaged in some kind of post-graduate education.

The question isn’t whether investing in your skills is worth it in some kind of theoretical never-never-land where things like TUITION don’t matter. The question is whether investing in a three-year, expensive J.D. program is worth the time and money it costs to do so. And if so, which programs are valuable and which ones are not.

This study doesn’t answer that question, this study doesn’t answer any question of practical or academic utility. This study is a garbage advertising piece for law schools still hoping that they can trick prospective law students into making bad choices.

UPDATE (3:00 p.m.): Professor Michael Simkovic responded to this article with the following corrections, which were also published on Brian Leiter’s Law School Reports:

Your coverage of our research, “The Economic Value of a Law Degree” contains several inaccuracies that you may wish to correct.

1) The study does not only look at averages, as you state in your post. It also considers the median, 25th percentile and 75th percentile outcomes. Even at the 25th percentile, the value of a law degree exceeds the cost.

2) The study includes earnings data from 1996 to 2011–the coverage does not stop in 2008 as you state. The most recent law school and college graduates in sample for the earnings portion of the study are from the class of 2008, but earnings are reported through 2011.

3) The study notes the typical tax rate on the earnings premium and reports both pre-tax and after tax-values. It does not only report the value of a law degree before taxes, as you state.

4) The study includes a range of possible tuition values in our internal return calculations and explains clearly how to compare the cost of the degree to the value of the degree. It does not simply provide “theoretical never-never-land [estimates] where things like TUITION don’t matter”, as you state.

5) The study presents student loan default rates for many low-ranked law schools. The default rates are lower than average default rates for former college and graduate school students.

So there’s that. The study states that the $1 million figure is an average, and it is an average, so I’m not sure where saying that there are other things in the study that are not averages gets us when the main figure is an average. I think that looking at the value of a law degree without looking at the value for the recent, post-recession classes is wrong. And I still think that extrapolating future earnings based on historical data is wrong and misleading.

In terms of tuition, again, Simkovic specifically stated that his million dollar figure didn’t take into account tuition rates because “[p]eople are paying so many different prices. It would be really complicated and take up a lot of space to include a lot of the possibilities,” so I don’t really know what to do with that beyond what I’ve already said. I don’t see how you can publish a study in 2013 about the “value” of a law degree over other things without adjusting for what that degree costs versus those other things.

The Upside of Law School [Inside Higher Ed]
What’s the value of a law degree? $1M in a lifetime, report says [ABA Journal]
The Million Dollar Law Degree [SSRN]

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