Intriguing Study Finds Law School Worth It..Debate?

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jwinaz
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Intriguing Study Finds Law School Worth It..Debate?

Postby jwinaz » Fri Aug 09, 2013 10:56 am

http://www.washingtonpost.com/blogs/won ... -the-cash/

Seton Hall's Michael Simkovic and Rutger's Frank McIntyre have new study out suggesting that over the long run law grads will make more $ by going to law school than having not gone.

“For most law school graduates, the net present value of a law degree typically exceeds its cost by hundreds of thousands of dollars.” ...

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):


Image

Opinions?
Last edited by jwinaz on Fri Aug 09, 2013 11:03 am, edited 3 times in total.

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NoodleyOne
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby NoodleyOne » Fri Aug 09, 2013 10:58 am

Nice... before taking the cost of law school into account. What's 150k+ with fifteen years of 8% interest on a shitty salary? Also, lol at Seton Hall and Rutgers running the study.

RoaringMice
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby RoaringMice » Fri Aug 09, 2013 11:01 am

How can they not take the cost of law school into account in these results? It's ridiculous not to do so. If the cost of law school is, say... $400k (I'm making up that number, but I'm trying to guess at tuition plus interest plus opportunity costs during law school years), and your earnings bump lifetime is only $350k, then...

jwinaz
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby jwinaz » Fri Aug 09, 2013 11:07 am

RoaringMice wrote:How can they not take the cost of law school into account in these results? It's ridiculous not to do so. If the cost of law school is, say... $400k (I'm making up that number, but I'm trying to guess at tuition plus interest plus opportunity costs during law school years), and your earnings bump lifetime is only $350k, then...


According to the article:

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.

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JamMasterJ
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby JamMasterJ » Fri Aug 09, 2013 11:14 am

The problem is not the average, it's that one large segment does way better than this study suggests, while a much larger segment is completely fucked. Also, his "down the line" stats are going to be inherently using pre-ITE numbers so whatever

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guano
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby guano » Fri Aug 09, 2013 11:15 am

TTT professors trying to justify their jobs

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Monochromatic Oeuvre
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby Monochromatic Oeuvre » Fri Aug 09, 2013 11:26 am

Everybody already murdered this deeply flawed study point-by-point. The TLDR version was that by not accounting for skyrocketing tuition and choosing to end the study in 2008, the study deliberately cherry-picks the best-case scenario while ignoring many things that actually account for the extraordinary cost of attending a TTT.

A lengthy post (not mine) that does a good job of it reproduced below:

To my mind, this study has a very serious flaw - that is, it derives its results around the assumption of synthetic work-life earnings. For the non-labor economists reading this, that means that the future earnings of recent JDs are predicated on the lifetime earnings of old JDs. In the classic mini-treatise "Flaws and Fallacies in Statistical Thinking," Stephen K. Campbell describes the concept of "arithmancy" as "a derogatory term suggesting that somehow the manipulation of past numbers has imbued the resulting estimates of future numbers with a kind of magic" under his section on the "Uncritical Projection of Trends."

Bear Stearns and Lehman made the uncritical projection assumption that housing prices would always rise w/r/t to subprime lending, to their doom. In point of fact, bubble inflators have ignored the sage advice that "past performance is no guarantee of future returns" to their doom since that thing with the tulips in the Netherlands in the 1600's. Yet, it is the central assumption of this study. Huh.

Campbell then offers a host of questions that I will discuss at the bottom of the post.

The study also chooses 2008 as the most recent year to include new attorneys, despite extraordinarily negative changes to the legal hiring market since then that show no sign of abating anytime in the next ten years. Huh.

And it fails to take into consideration student loans when calculating lifetime earnings premiums. Huh.

Or taxes. Huh.

And it improperly compares lifetime wages of JD holders to bachelors holders, instead of other groups who spent a similar amount of time and money in school, like doctors, dentists, MBAs, and MS holders in Computer Science. Huh.

OK, back to the central flaw. This foundation on the synthetic work-life earnings assumption ignores the possibility that the enormous structural changes in law, as acknowledged by everyone from the ABA to the NALP to the BLS, represent a Black Swan (an unpredicted, catastrophic event) for the legal profession - even as the paper otherwise incorporates data from the NALP and BLS. To analogize, Polaroid and Kodak had record earnings right before the advent of digital cameras. Now they no longer exist. Digital cameras were a black swan. I'm sure the highest salaries for phaeton builders were in the years right before the Model T was introduced. Concorde mechanics probably earned their highest salaries just before the planes were pulled out of service because of safety concerns. Scriveners probably made a great salary right until typewriters went mainstream. One can go on and on.

The advent of automated, predictive technologies for discovery and drafting, the continual relaxation of the boundaries of UPL and subsequent competition for legal work between attorneys and less-expensive compliance workers, HR personnel, paralegals, offshore professionals, real estate agents, ADR folk, and IT workers, among others; the exploding growth of the LPO sector, and so forth may prove to be a Black Swan for lawyers. The eventual repeal of IBR/PAYE and/or PSLF would be a Black Swan for law students. The repeal of GradPLUS loans (as Senators Simpson & Bowles desire, as well as the higher ed foundation duopoly of Gates and Lumina) would be a Black Swan for law schools. The study acknowledges that these are unprecedented times of change in the legal profession, but then almost incredibly waves aside all of these dark scenarios with one stock turn of phrase, we can't predict the future, even as they go back to their thesis that career trajectories for new lawyers (and new JD holders not working as attorneys) will exactly track the path of JD recipients who are now 65. It's facially absurd.

Taken hand-in-hand with the purposeful exclusion of JD-holders into the marketplace post-2008, and we have some seriously flawed methodology.

Campbell's questions regarding possible instances of uncritical projection of trends:

1. What kind of reputation does the source enjoy as a supplier of statistical estimates or as an authority on the relevant subject?

I'll leave this judgment to others, but the lack of taxes or tuition in the lifetime earnings premiums smacks of bias. Particularly since one who debt-finances a Seton Hall Law School education (where the author is employed) and has the average undergrad debt amount will pass the bar with about $260,000 in student loans ($70k * 3 + bar expenses, principalizing interest on all graduate student loans, and $28k undergrad debt). $260,000 on a 20 year payback, whether on IBR/PAYE or not, will result in an additional $220,000 in interest payments. That works out to $480,000, which is considerably higher than the 25th percentile earnings premium for JDs, where a good number of Seton Hall grads can expect to end up, at least going by their ABA employment disclosures. Gives quite an incentive to proclaim that tuition levels are just too tricky to incorporate, even though it seems that variable is considerably simpler to handle than the blended SIPPS and BLS data.

2. Does the supplier of the data have an "axe to grind"?

Well, Seton Hall has had to reduce its class size dramatically over the last few years, possibly as much as 35%, resulting in millions of dollars in lost revenue. They may also conduct untenured faculty layoffs next year, as has been widely reported. And the study's cutoff date of 2008 just coincidentally lines up with the beginning of Seton Hall's (and every other law school's) troubles. According to the most recent ABA disclosures, only 204 of 310 Class of 2012 Seton Hall grads landed full-time, long-term, bar-passage required jobs. At any salary. More importantly, only 31 of those 310 graduates landed jobs at law firms with more than 100 attorneys, which are the ONLY employers who can justify spending $70,000/year to attend Seton. In fact, the student loan calculator I used at finaid.org to find the additional interest payments on a Seton Hall payback under question 1 specifically states that one needs to make $240,000 per year in order to afford such a burden, an amount vastly higher than even the market rate for white shoe firms in NYC. Seton Hall sports similarly depressing numbers for the past several years, though of course the paper in question chooses not to include them in its analysis.

3. What supportive evidence is offered?

For the notion that synthetic work-life earnings is an appropriate method of analysis? None that I could find - it seems to be taken for granted that this is the method that should be used.

4. Does the underlying assumption, theory, or methodology seem OK?

Not really. Beyond the issues I have outlined above, the study glosses over well-examined theories regarding 21st century hiring practices and long-term unemployment (i.e. HR software filters auto-reject resumes that do not match the job's requirements, including overqualified candidates; after six months of unemployment, the unemployed - including fresh grads - are dead in the water).

5. Do the estimates appear plausible?

No. To my mind, it smacks of confirmation bias, experimenter’s bias w/r/t the exclusion of student loans and taxes in the premium calculations, hostile media effect, possibly the inverse gambler’s fallacy w/r/t “past performance is determinative of future results,” illusion of validity from the same assumption (and stemming from shortcomings in NALP and ABA salary disclosures), irrational escalation, normalcy bias w/r/t the structural changes in the legal profession (and wider economy) over the last five years, observer-expectancy effect w/r/t excluding student loans from the equation, and the Semmelweis reflex w/r/t the notion that higher levels of education no longer automatically equate to higher levels of income. But then again, I am not a labor economist. I am just one of America's tens of thousands of un/underemployed attorneys.

Oh, and within two hours of posting this on Volokh Conspiracy (a libertarian law professor-run blog), my web browser was banned from the Social Science Research Network (SSRN) where this paper was released (error 401 you are not authorized to access this webpage), so my commentary has evidently drawn blood.

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jingosaur
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby jingosaur » Fri Aug 09, 2013 12:41 pm

Bear Stearns and Lehman made the uncritical projection assumption that housing prices would always rise w/r/t to subprime lending, to their doom. In point of fact, bubble inflators have ignored the sage advice that "past performance is no guarantee of future returns" to their doom since that thing with the tulips in the Netherlands in the 1600's. Yet, it is the central assumption of this study. Huh.


This person has obviously never done the LSAT PrepTest about the tulip bulb prices. This renders his whole argument irrelevant.

But on a more serious note, this study isn't even close to being accurate. There are so many assumptions that they make that just make this ridiculous. Do they even realize that about 40% of grads from New Jersey law schools (and NJ has no TTTs) don't find legal employment after nine months? So when they use that "average lawyer salary" number at the 25th percentile, it's really referring to people above median. After taxes, the cost of attendance, and opportunity costs, someone with really crappy alternative job prospects will come out around even.

Being the special snowflake optimist that I am, law school is really only worth it in some way, shape, or form for less than 1/3 people who go to law school. And that's being INCREDIBLY generous. It's probably more like 20%.

senorhosh
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby senorhosh » Fri Aug 09, 2013 1:12 pm

there's already a thread on this.

If i remember correctly (too difficult to access by phone but I'll check later)....
This article does nothing but say the legal market USED to be good. We all knew that. It doesn't tackle the issue of unemployment among new grads today and the downfall of the legal market.

" 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".


Most people believe it WAS an anomaly and the legal market had been irreversibly affected by the crash (not to mention the unprecedented amount of new law schools spitting out grads the recent years). However, if you aren't convinced, you better be willing to bet a very large amount of money on it

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star fox
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby star fox » Fri Aug 09, 2013 1:21 pm

Don't see it. 20 years ago probably. Too many people graduating law school making salaries they could have gotten with a worthless humanities degree or worse, with boat loads of interest accumulating debt to go along with it. Doesn't seem like if you're a non lawyer or shit law J.D. your earning power is going to come back around once you hit your 40s. Getting that critical experience right away seems necessary given how badly oversaturated the profession is.

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scifiguy
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby scifiguy » Fri Aug 09, 2013 1:41 pm

Deborah Merritt analyzed the paper here:
leiterlawschool.typepad.com/files/law-school-cafe-small-samples.pdf‎

I haven’t been surprised by the extensive discussion of the recent paper
by Michael Simkovic and Frank McIntyre. The paper deserves attention
from many readers. I have been surprised, however, by the number of
scholars who endorse the paper–and even scorn skeptics–while
acknowledging that they don’t understand the methods underlying
Simkovic and McIntyre’s results. An empirical paper is only as good as its
method; it’s essential for scholars to engage with that method.
I’ll discuss one methodological issue here: the small sample sizes
underlying some of Simkovic and McIntyre’s results. Those sample sizes
undercut the strength of some claims that Simkovic and McIntyre make
in the current draft of the paper.

What Is the Sample in Simkovic & McIntyre?
Simkovic and McIntyre draw their data from the Survey of Income and
Program Participation, a very large survey of U.S. households. The
authors, however, don’t use all of the data in the survey; they focus on
(a) college graduates whose highest degree is the BA, and (b) JD
graduates. SIPP provides a large sample of the former group: Each of the
four panels yielded information on 6,238 to 9,359 college graduates, for
a total of 31,556 BAs in the sample. (I obtained these numbers, as well
as the ones for JD graduates, from Frank McIntyre. He and Mike Simkovic
have been very gracious in answering my questions.)

The sample of JD graduates, however, is much smaller. Those totals
range from 282 to 409 for the four panels, yielding a total of 1,342 law
school graduates. That’s still a substantial sample size, but Simkovic and
McIntyre need to examine subsets of the sample to support their
analyses. To chart changes in the financial premium generated by a law
degree, for example, they need to examine reported incomes for each of
the sixteen years in the sample.



You can goto link to see rest of her response.

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Nova
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby Nova » Fri Aug 09, 2013 1:43 pm

This article's reasoning has been ripped to shreds many times over

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Monochromatic Oeuvre
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby Monochromatic Oeuvre » Fri Aug 09, 2013 1:54 pm

Also not mentioned in that particular response, but always relevant when TTTs talk about the "lifetime earnings" you can gain, is the opportunity cost of a foregone investment.

For example, you may very well get lucky at a TTT and wind up earning $1M more over the course of your career than someone with a Bachelor's. But when you stop and do the math, investing $250k to get a $1M return in 40 years is actually quite a bad rate of return--3.6% annually. You could get a better rate of return just by throwing darts at the S&P every year.

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scifiguy
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby scifiguy » Fri Aug 09, 2013 2:26 pm

Monochromatic Oeuvre wrote:Everybody already murdered this deeply flawed study point-by-point. The TLDR version was that by not accounting for skyrocketing tuition and choosing to end the study in 2008, the study deliberately cherry-picks the best-case scenario while ignoring many things that actually account for the extraordinary cost of attending a TTT.


Where do they end the study in 2008? It's 1996-2011, no? ...Or is the last panel the class of 2008 and income measured for three years post-graduation?
Last edited by scifiguy on Fri Aug 09, 2013 2:42 pm, edited 1 time in total.

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Captain Hammer
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby Captain Hammer » Fri Aug 09, 2013 2:36 pm

$350K before taking the cost of law school into account? That's nice.

I calculated out what I'll end up paying on my student loans once. While I'm borrowing around $180K, once you add in interest (nearly 8% on average) for 30 years, it ends up being over $400K.

So, after accounting for cost, I guess I'll end up $50K in the hole. That really motivates me to study.

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Archangel
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby Archangel » Fri Aug 09, 2013 2:42 pm

JamMasterJ wrote:The problem is not the average, it's that one large segment does way better than this study suggests, while a much larger segment is completely fucked. Also, his "down the line" stats are going to be inherently using pre-ITE numbers so whatever


Exactly, because the distribution of salaries are bimodal... Plus, the other flaws like COA & compounded interest make the study LOL GTFO.

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scifiguy
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby scifiguy » Fri Aug 09, 2013 2:43 pm

Captain Hammer wrote:$350K before taking the cost of law school into account? That's nice.

I calculated out what I'll end up paying on my student loans once. While I'm borrowing around $180K, once you add in interest (nearly 8% on average) for 30 years, it ends up being over $400K.

So, after accounting for cost, I guess I'll end up $50K in the hole. That really motivates me to study.


30 years to repay?

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scifiguy
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby scifiguy » Fri Aug 09, 2013 2:49 pm

https://papers.ssrn.com/sol3/papers.cfm ... id=2250585

Here's the paper. Let us break it down!

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vanwinkle
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Re: Intriguing Study Finds Law School Worth It..Debate?

Postby vanwinkle » Sat Aug 10, 2013 12:41 am

scifiguy wrote:Let us break it down!

jwinaz wrote:Opinions?

Banned for being the same person.




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