The economic value of a law degree Forum

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latinx

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The economic value of a law degree

Post by latinx » Tue Jan 11, 2022 11:24 pm

I came across an interesting paper published 8 years ago in the Journal of Legal Studies by Simkovic and McIntyre (faculty at Rutgers and Seton Hall) which is relevant to choosing a law school. You may find the full article in the link below, which has lots of great tables and figures:
https://www.jstor.org/stable/10.1086/677921

One noteworthy conclusion:

In other words, roughly the top 15 to 20 percent of law school graduates obtain a lifetime earnings premium worth more than $1.1 million as of the start of law school. Roughly the next 30 to 35 percent obtain an earnings premium between $1.1 million and $600,000. In the lower half of the distribution, roughly the first 30 to 35 percent obtain an earnings premium between $350,000 and $600,000. Roughly the bottom 15 to 20 percent obtain an earnings premium below $350,000. These numbers are pre-tax and pre-tuition.

Even toward the bottom of the distribution, even after taxes, and even after tuition, a law degree is a profitable investment. And that is before income based repayment, which can substantially reduce the risk at the bottom of the distribution.


Another noteworthy conclusion is that the default rate on federal student loans is about 2% for law schools but 7% for bachelors schools and 9% for all postsecondary.

Both results firstly show that attending a Tier 1 institution, even at sticker, is likely (not guaranteed) to be highly profitable. However, even for lower-ranked law schools, obtaining a law degree is likely to be profitable over not attending law school (note that the profitability decreases along with the quality of the school).

It would be nice to know if there is any follow up work done by this team or some other researchers, but I am not going to search for that. Nonetheless, I thought I would post as it may be helpful to some as they choose a law school.

The Lsat Airbender

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Re: The economic value of a law degree

Post by The Lsat Airbender » Wed Jan 12, 2022 11:45 am

latinx wrote:
Tue Jan 11, 2022 11:24 pm
These numbers are pre-tax and pre-tuition.
...which also means they disregard the interest payments made on student loans. The bottom half of lawyers would have been better off putting their tuition payments into a checking account and keeping their old jobs. Another 30–35% are doing okay, basically breaking even compared to what they could have achieved by buying a house or getting into the stock market. Only about 15–20% of lawyers (suspiciously similar to the number who get big-firm jobs or win the plaintiff lottery) are actually earning an economic premium from their law degree.
latinx wrote:
Tue Jan 11, 2022 11:24 pm
I thought I would post as it may be helpful to some as they choose a law school.
Indeed!

nixy

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Re: The economic value of a law degree

Post by nixy » Wed Jan 12, 2022 2:24 pm

So, I can't access the article b/c I'm not associated with an academic institution/library (and since I'm not picking a law school I'm not going to create a JSTOR login). Is this premium compared to all other possible graduate degrees, or compared to only having a BA/BS? Also, what does "below $350k" mean? I can't imagine that it's $349K for the majority of that 15-20%.

latinx

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Re: The economic value of a law degree

Post by latinx » Wed Jan 12, 2022 8:11 pm

nixy wrote:
Wed Jan 12, 2022 2:24 pm
So, I can't access the article b/c I'm not associated with an academic institution/library (and since I'm not picking a law school I'm not going to create a JSTOR login). Is this premium compared to all other possible graduate degrees, or compared to only having a BA/BS? Also, what does "below $350k" mean? I can't imagine that it's $349K for the majority of that 15-20%.
Due to copyright law, I won't post the article, but I can email you a pdf. Just send me an email or private message me your email if you want that. As I read the article, the objective was to compare lifetime earnings if someone got a JD versus just a BA/BS, which is essentially the decision most 0Ls face. They point out that these are median numbers and many will do better or worse, given circumstances. There almost certainly will be some that lose money relative to what they would have earned without a JD, perhaps even some T14 grads. I have also seen some critical reviews of the article that essentially say the results may be overoptimistic, particularly for Tier 4, although not significantly enough to alter the main conclusions. Also this is strictly an economics appraisal; it does not account for any suffering or joy that was incurred during law school itself (hard to quantify that).

nixy

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Re: The economic value of a law degree

Post by nixy » Thu Jan 13, 2022 12:39 am

latinx wrote:
Wed Jan 12, 2022 8:11 pm
nixy wrote:
Wed Jan 12, 2022 2:24 pm
So, I can't access the article b/c I'm not associated with an academic institution/library (and since I'm not picking a law school I'm not going to create a JSTOR login). Is this premium compared to all other possible graduate degrees, or compared to only having a BA/BS? Also, what does "below $350k" mean? I can't imagine that it's $349K for the majority of that 15-20%.
Due to copyright law, I won't post the article, but I can email you a pdf. Just send me an email or private message me your email if you want that. As I read the article, the objective was to compare lifetime earnings if someone got a JD versus just a BA/BS, which is essentially the decision most 0Ls face. They point out that these are median numbers and many will do better or worse, given circumstances. There almost certainly will be some that lose money relative to what they would have earned without a JD, perhaps even some T14 grads. I have also seen some critical reviews of the article that essentially say the results may be overoptimistic, particularly for Tier 4, although not significantly enough to alter the main conclusions. Also this is strictly an economics appraisal; it does not account for any suffering or joy that was incurred during law school itself (hard to quantify that).
Thanks for the offer (definitely not asking you to post it here), but the above is sufficient. I think the critiques that you summarize are the primary concerns I'd have about their conclusions. My other comment would be that the choice is never just JD vs. BA/BS - there are lots of other grad degrees out there, and just from general discussions I think most studies suggest other grad degrees also lead to improved lifetime earnings compared to just a BA/BS.

I get that your point is to push back on the idea that a low-ranked law school is inevitably economic ruin when you look in terms of a lifetime, and I accept that to a point (underemployed low-ranked school grads aren't dying in the streets in droves or anything; like everyone else, they deal with their circumstances as they come and will carve some kind of life and probably career for themselves). I just think wrt to the last point about suffering/joy, there can be a much bigger gulf between expectations and reality in law than in many other career fields (not just financially, of course, although I think there are still too many 0Ls who think any law degree is the path to riches).

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