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Law School Proves to be a Great Investment
Today the concept of law school is under fire. The decision to attend is under attack as critics, including alumni and professors, say that students are better of not going than to be an underemployed graduate with crushing amounts of debt. The sluggish economy, with monthly job losses in the thousands, is a tough environment for a new graduate to find a job. High overall unemployment rates also don’t help the situation.
The current state of the economy adds fuel to the fire. The return on investment from all kinds of higher education institutions is very low in this environment. After the 2008 financial crisis, starting salaries of law school graduates declined by 20 percent, according to the National Association for Law Placement. In 2012, only 56 percent of law school graduates had full-time, long-term legal jobs nine months after graduation, according to the American Bar Association. Prospective law applications dropped more than 15% in 2012. Law Schools across the country are also downsizing their professors, staff as well as class size.
A new report, “The Economic Value of a Law Degree,” was written by Seton Hall University School of Law associate law professor Michael Simkovic, and Rutgers University Business School assistant professor of finance and economics Frank McIntyre. It discusses how having a law degree in fact does make sense and does pay off even in light of diminishing ROIs. The professors analyzed long-term outcomes data from the United States Census Bureau’s Survey of Income and Program Participation and the National Education Longitudinal Study. They reported that post recession salaries for law students compared to only bachelors degree holders were a lot higher and that law graduates maintain their relative advantage. They considered the value of the degree as a cash flow of lifetime earnings. Also, the professors acknowledged that right now the situation isn’t great, but that one has to consider the recession and look at the entire context of the market.
The report rejects the claim that law degrees are priced above their value. The median value of lifetime earnings of a law graduate is 610K, exceeding typical net-tuition costs by hundreds of thousands of dollars, according to Inside Higher Ed.com. Net present values of future cash flows prove the point. Professor Simkovic made a final comment, “We’re not saying that everyone should go to law school. We’re really looking at the choice between going to law school and stopping at a bachelor’s degree.”