How much is a law degree worth?

By Felix Salmon
January 10, 2011
David Segal is the best writer on the NYT's business desk, so it's a good thing that he was chosen to pen today's 5,000-word disquisition on the economics of law degrees.

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David Segal is the best writer on the NYT’s business desk, so it’s a good thing that he was chosen to pen today’s 5,000-word disquisition on the economics of law degrees. He’s taken a particularly dry subject and turned it into a compelling and accessible read; that’s no mean feat.

At the heart of the article is law schools’ bait-and-switch operation: universities rake in millions of dollars in tuition fees from students who are given to understand that a well-paid job lies waiting for them upon graduation. But such jobs are hard to find and precious few law graduates will ever waltz straight into a $160,000-a-year Biglaw job, especially if they graduate from a non-top-tier school.

The connection between well-paid jobs and top-tier universities is well known and as a result, there’s something of a statistical arms race going on between universities, all of which want to improve their rankings. Segal doesn’t quite accuse the colleges of outright lies, but he comes very close: at one point, for instance, he talks about the “several different explanations” which Georgetown Law provided to explain a suspicious-looking offer of temporary work to unemployed graduates, one of which claimed that the university — which was also the graduates’ employer — didn’t know where those alums were.

But I’m a wonk and I’d like to have seen a few more numbers in this piece. For instance, when Segal says that only “a small fraction of graduates are winning the Big Law sweepstakes”, I’d like to know what that fraction is: roughly what proportion of the nation’s law graduates, each year, is going to get one of those $160,000-a-year jobs?

And then there’s this:

In the Wonderland of these statistics, a remarkable number of law school grads are not just busy — they are raking it in. Many schools, even those that have failed to break into the U.S. News top 40, state that the median starting salary of graduates in the private sector is $160,000. That seems highly unlikely, given that Harvard and Yale, at the top of the pile, list the exact same figure.

Even at Harvard and Yale I’m suspicious of that $160,000 figure; for the non-top-tier colleges, it’s clearly fictional. No matter how many of your graduates go on to $160,000-a-year jobs, there’s always going to be a significant number who earn a lot less than that and there are going to be almost none who earn more. As a result, the mode might be $160,000, but the median will never be that high. (And in reality the distribution of law-grad salaries is highly bimodal, with the first mode at a much lower level.)

Dean Baker has a more serious criticism of Segal’s piece, noting that “most of the new jobs that are being created are at the top and the bottom of the skills level”. If that’s the case, he says, “then the NYT has seriously misrepresented the state of the legal market”.

I wouldn’t go that far. For one thing, I’m not sure that someone clutching a law degree from Thomas Jefferson School of Law in San Diego really counts as being at the top of the skills level; Segal’s whole point is that lower-tier law schools are churning out graduates who would have been better off not getting a graduate degree at all, partly because they could put their skills to better use in the world of employment rather than racking up hundreds of thousands of dollars in student loans.

But Baker’s point is well taken: “the economy,” he says, “could simply be suffering from a situation in which there are too few jobs in total”. Given the NYT acreage afforded him, Segal could and should have spent a little time looking at how the number of law-school graduates has changed over time and how their employment prospects have changed as well. If the number of graduates is holding roughly constant even as the number of jobs has plunged, then that looks like a problem with the broad economy more than a problem of law school mendacity.

Comments
7 comments so far

First, I think Dean Baker’s criticism is mistaken because he’s zoomed out too far. There are not enough legal jobs for fresh graduates that pay the high wages that would justify taking out 150k-200k in loans. There might be a skills deficit in our workforce, but not all graduate education is created equal. An MS in Computer Science from a regional school is probably worth more than a JD from the same school.

Second, as someone who will be attending a “top-tier” law school this fall, I think I can shed some light on those salary figures. Usually, schools report that $160,000 is the median starting salary for those employed in the private sector, meaning that lower government salaries are excluded. It’s reasonable that Harvard and Yale legitimately boast median private sector salaries that high. $160,000 is the “market” rate paid by large firms in New York City, and these firms’ entering classes are largely populated by students from schools like Harvard, Yale, Columbia, NYU, Chicago, etc. I cannot find the graphs that I’ve seen, but, with the exception of Yale, well over half the graduates of top schools go to work for these firms, and in some cases the numbers get as high as 80-90%*. The bimodality in salary distribution still exists for graduates of top schools, but I think 1) that generally more than 50% of graduates of top schools go to work at large firms, and 2) the lower half of the distribution is usually occupied by people in government and public interest positions, and top schools usually have good loan forgiveness programs for this kind of work. I don’t mean to seem Panglossian, as there have been plenty of graduates from top schools who have fallen upon hard times in the last couple years, but I’m not as suspicious of Harvard’s salary data as I am of the lower ranked schools that Segal refers to.

*I’m assuming that most people who clerk after law school go on to large firms afterward, which I believe is usually the case.

Posted by nuveen | Report as abusive

One aspect of the cost of legal education in the US that David Segal did not even comment on is the requirement that law school be a graduate degree which means that a law school entrant has already paid for four years of university as well as losing several potential earning years.

Most other countries provide for lawyers to be trained as undergrads. This reduces the total cost of obtaining a law degree substantially.

The medical profession has the same issue where many other countries have people go directly into medical school from high school or one or two years of college-level courses.

The US higher education system has gamed both of these professions to maximize income to the educational system without necessarily increasing the overall benefit to society. Other regulated professions (engineers, accounting, nursing etc.) in the US typically function very well with the primary licensing level occuring at the Bachelor’s or Professional Masters (1-2 yr programs)levels.

If the US wants to be competitive with the rest of the world, we need to start looking outside of our borders to see how other countries accomplish the same goals at less cost.

Posted by ErnieD | Report as abusive

Speaking as a recent law grad from a top tier (but not tippity top), I generally agree with the premise of the article, that there are too many law schools and too many graduates and the price of tuition is obscene given that most lawyers aren’t going to be in BigLaw, but the article was severely underreported. Segal tried to take two major and related problems, the job market for new lawyers and the rankings game, and gave short shrift to both while ignoring major points about affordability.

For the former, he completely missed the fact that the loss of legal positions spread far beyond biglaw and severely impacted midsize and small practitioners, government, and public interest jobs… the jobs that many people who go to lower tier schools take. The loss in biglaw positions also means that the people getting biglaw jobs (who generally have excellent grades and/or come from excellent schools) are part of the job pool for a shrinking set of jobs and thus force out people who in normal times would have been employed.

Added to the weak analysis of the legal jobs market is the failure to really explore the nature of most law student’s loans. Most students have the vast majority of their debt in federally backed Stafford and Grad Plus loans. These loans can now be consolidated under rules that caps payments at a certain percentage of AGI and forgives the whole amount after 25 years or 10 years of working for a government or 501(c)(3) organization regardless of the amount of principal and interest still owed. It’s a huge thing to ignore when writing a story about whether law school is worth it or not.

I’m not going to get into the ratings game, but suffice to say the alumni of my school screamed bloody murder when we dropped all of 2 spots in the rankings.

Posted by HipsterBatman | Report as abusive

This post misses the point. The actual, finite financial value of a law degree is not the issue. After all, there are many products that notoriously–and more or less unobjectionably–sell for more than they’re worth. Think Armani suits or Mont Blanc pens. And does anyone really think that a Columbia PhD in English Literature is going to show a profit as against what the same person could have made in a more lucrative line of work? Of course not. So the real issue here is not the value of the degree. The real issue is the lies; it’s the culture of deception cultivated by the law schools. In fact, deception is too innocuous a term. The only real description is fraud.

Take it from me. I went to law school for one reason: I believed the employment data that was distributed by my law school—and effectively ratified by US News & World Report. Now maybe the 33-year-old man I am today would have smelled a rat. But back then, I was just a 21-year-old kid whose grandfathers drove trucks and worked in steel mills. So when I went to law-school open houses and had bearded, bow-tied professors who went to Harvard Law School tell me that I’d be making X money in Manhattan in three years, well, I was inclined to believe it. And what’s more, I think I had every right to believe it.

I didn’t understand the academic-industrial complex. I didn’t understand that the professors and administrators who told me these ostensible facts were actually trying to secure their own financial futures at the expense of mine. And really, that’s another side of this. Law school has become a cushy landing spot for burned-out, incompetent, and otherwise-unemployable lawyers who attended fancy law schools and then washed out of their firms. They’ve come to realize that law-school “chairs” or professorships (or whatever the hell they’re called) are the best jobs in the law outside of biglaw equity partnerships. They make $150K+ for a 15-hour work week and get 16-20 weeks of vacation. Good work if you can get it! The problem, of course, is that those who have it want to keep it–and at ever-greater compensation. And that tendency leads to a circumstance in which the law school ceases to function as a place of higher education and becomes an enormous host body from which scores and scores of parasitic professors and administrators derive their sustenance. And with so many people depending on the law school to live well, there’s really no chance of honest, objective data.

Posted by Jimmyxx77 | Report as abusive

I read the article, and laughed out load at the deeply-indebted lawyer who justified his career decision by saying “. . . the riskier approach always has the bigger payoff.”

Um, no. There are two things wrong with that statement. First, the riskier approach has the potential fo the bigger payout, not the certainty. Second, the (appropriately modified) statement applies in the aggregate, and not to individual cases.

Is this how law schools teach people about critical thought?

Posted by Curmudgeon | Report as abusive

It should be noted that with a physically undemanding career such as law it is reasonable to have perhaps 40 working years ahead to try to make that degree pay off. And statistically the pay gap for the degreed remains large.

But if you want both a family and a law career it helps to be such a cool cat that you can get on with the business of having a family while underwater because for that you can’t wait 40 years!

Posted by DanHess | Report as abusive

If people knew just how horrendous the employment situation was at my law school, one of the top ten in the nation, they would not even think of going to a 3rd or 4th tier law school, i.e., outside the top 100.

Historically, among those who worked at law firms as summer associates, only 2-3% did not receive job offers — those who seriously screwed up. In contrast, two summers ago, the proportion of no-offers at my school was more like 1/3. Legal employers continue to assume that those who get no-offered are serious screw-ups and ignore their resumes. The no-offers I know are struggling to get any work whatsoever.

Among the fortunate law graduates with jobs, many had to resort to public-interest work that does not pay anywhere near enough to cover $180,000 loans. There is a loan assistance program for public interest and government jobs, but only if you commit to working 10 years outside the private sector. This is a serious problem for people who want to have kids and move out of their tiny apartments in dangerous, urban areas — which is all they can afford on public interest salaries. I especially feel sorry for those who graduated after age 30 or so, only to face the same salary prospects now as they did with bachelors degrees.

What does a ~32-year-old woman with a $180,000 debt and mediocre grades do? I suppose she works public interest for about $30-$40,000 and signs up for the loan assistance program — but good luck having kids on that income, while making even these reduced loan payments. And by the time the 10 years are up, it may be too late. I know people facing this dilemma.

Despite all this, my class caught the last “good year.” The firm where I work has eliminated about 80% of its summer associate positions over the last two years. That is not a typo — 80%, gone. Other firms eliminated their summer programs altogether. Basically, they’ve stopped hiring from law schools. Those who have been hired since the financial crisis have mostly been deferred, forced to wait a year or two before they begin working at their firms, until (hopefully) the economy has recovered. The pyramid model, where law firms hire droves of new associates every year and let them gradually trickle away, is dead.

Again, this is happening at a top ten law school, where, with a lot of luck, I have managed to land the job I wanted. If you can get into a top fourteen law school (fourteen has historically been the magic number), law school is probably still a gamble worth taking. A top-fifty, tier one school might also make sense if you can beat out 75-90% of your peers there. But whomever is thinking of going to a 3rd or 4th tier school, I would seriously advise to reconsider. You will struggle madly for three years, only to realize at graduation that you have just been digging your own financial grave.

If you want a reliable job with decent pay and hours, do yourself a favor and study something health or software related. That’s where the future is.

Posted by Volucre | Report as abusive
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