Is a law degree really worth $1M? Law prof says value overstated; study author defends stats
Posted Jul 24, 2013 04:03 pm CDT
The critics came out swinging after two professors published a study finding that a law grad will make, on average, $1 million more in a lifetime than a college grad.
After ABAJournal.com published this story on the findings, commenters suggested the study was “totally bogus” and “total bunk.” In a critique published Tuesday on TaxProf Blog, Washington University at St. Louis law professor Brian Tamanaha claimed the study was overstating the economic value of a law degree.
Tamanaha said the authors should have extended the study time period and should have lowered the $1 million figure to fully account for the fact that JDs would likely earn about 10 percent more even if they didn’t go to law school because of characteristics such as good grades.
Tamanaha, author of Failing Law Schools, acknowledges that the study “is far more sophisticated than my admittedly crude efforts. But as the old saying goes, it is far better to be approximately right than precisely wrong. Despite having the external trappings of precision and rigor, [the] study is faulty and misleading.”
One of the study authors, Seton Hall University law professor Michael Simkovic, responded in a blog post at Brian Leiter’s Law School Reports. “Tamanaha combines interesting critiques with some not very interesting errors and claims that are not supported by data,” Simkovic writes. He co-authored the study with Rutgers University economics and business professor Frank McIntyre.
The study, which can be downloaded here, found that the median increase in lifetime earnings for JDs is $610,000. The median value of a JD is $350,000 for those in the 25th percentile and $1.1 million in the 75th percentile. The figures are for pre-tax income and they don’t factor in tuition costs, though they are discussed elsewhere in the paper.
The study used data from the Census Bureau’s Survey of Income and Program Participation, which records whether individuals have law degrees, and the National Education Longitudinal Study. The data in the study covers four panels of graduates from 1996 through 2008 and looks at salaries through 2011. Future earnings are estimated based on historic data. About two-fifths of those with JDs in the sample studied were not employed as lawyers.
Tamanaha says the study time period should have been extended to 1992, a time when the legal job market suffered a severe recession. Nor does the study include the earnings of the graduating classes of 2009, 2010 and 2011, which had “devastatingly poor job results,” Tamanaha says. And the authors’ talk of “historic norms,” Tamanaha said, “is puffed up exaggeration: 16 years is neither ‘long’ nor remotely enough time to establish ‘historic norms.’ ”
Simkovic explains why the authors didn’t reach back to 1992 in this separate blog post at Brian Leiter’s Law School Reports. It wasn’t until 1996 that the census data was redesigned to increase sample size and improve data quality, Simkovic says. Combining the older and newer data “could have introduced methodological problems.”
The 16 years of data used in the study includes peaks and troughs, Simkovic says, and is a greater time period than used in similar studies, including ones Tamanaha cited in his book. And if the earnings premium for a JD was lower in 1992 through 1996, “that may suggest a long-term upward trend and could mean that our estimates of flat future earnings premiums are too conservative,” Simkovic says.
Simkovic adds that his study did control for some socioeconomic, academic and demographic characteristics, and “this substantially reduces our earnings premium estimates.” Any other boost in earnings that is due to the characteristics of law grads, Simkovic says, is likely offset by statistical issues that cut in the other direction. One of those issues: The census data used in the study is “topcoded,” meaning the government won’t report incomes higher than a certain maximum point.