Why Now Is a Great Time to Go to Law School, Part 2

Commentary about business and finance.
June 30 2014 11:39 AM

Now Is a Great Time to Apply to Law School

We aren’t joking—promise.

Money.
Getting that J.D. is about to become a much more financially sound decision than it’s been in years.

Image courtesy of Shutterstock.

After several wretched post-recession years, the job market for new law school graduates may be on the verge of a recovery. So I recently published a post titled “Apply to Law School Now! We’re Serious.”

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate's senior business and economics correspondent.

A few writers, including the delightfully acidic folks of Above the Law, think I’m disastrously off base—that I have overestimated the strength of tomorrow’s legal labor market and misleadingly ignored the staggering cost of a law school education. So today, I want to explore in a little more depth the reasons why—despite the horrors of the past few years and the sky-high tuition rates that schools charge—now really is a good time to pick up an LSAT guide.

First, though, a disclaimer. Most people should not attend law school. Specifically, you shouldn’t attend law school unless: a) you have an overwhelming compulsion to actually become a lawyer and b) you understand exactly what becoming a lawyer entails. It’s certainly possible to go on to a career in finance or politics or the nonprofit world with a J.D., and if you have a very specific idea of how the degree will help you toward that goal, by all means go for it. But mostly, graduates end up practicing law. And practicing law is not for everybody. If you’re a somewhat type-A, risk-averse personality with an argumentative streak and a virtually endless capacity to wade through dry-as-jerky documents—perhaps under the thumb of a stern law firm partner or while earning a government worker bee’s salary—then you’ll survive the experience. If not, consider an MBA.1

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But let’s say you really do dream of sitting in on your first deposition. At most points in the past few years, law school still might have been a bad choice, or least an incredibly risky one. Even at top-tier programs, it wasn’t uncommon to find one-fifth of the graduating class jobless or underemployed nine months after commencement. The problem was twofold. First, law-firm hiring collapsed thanks to the recession. Second, even as career opportunities disappeared, law school enrollments climbed. Last year, a record 46,776 newly minted J.D.’s entered the job market. There simply wasn’t space for many of them.

As the economy healed and horror stories about jobless and indebted young law grads proliferated, however, something crucial happened: Applications tumbled to their lowest level in at least 30 years. In the fall of 2013, just 39,700 students entered their first year of law school. Given the typical dropout rate, that means we should expect no more than 36,000 to graduate, down about 23 percent from last year’s overstuffed total.

At the same time, it seems the legal job market has begun to stabilize. Last year, 32,775 graduates found full-time jobs lasting at least a year, including positions like judicial clerkships, up slightly from 2012. For such an enormous class of students, that total was woefully insufficient. But here’s the key bit: If the market produces the same number of jobs in 2016, when around 36,000 students are set to graduate, job hunting is going to become a relative cinch. Theoretically, 91 percent of the class could land long-term, full-time work—on par, if not better, than some of the legal industry’s best years.

That’s my basic reason for optimism. Right now, law school looks like a stock that crashed too far after a panic, and is suddenly a bit undervalued. It’s a good time to buy. But of course, not everyone agrees. So let’s go through some of the objections.

Objection No. 1: You don’t actually know how many jobs will be available to future grads.

At Above the Law, Joe Patrice thinks I’m overstating the number of jobs that will be around in two years’ time. Specifically, he calls my estimate “shady” and “better than the likely reality.” Like many law school skeptics, he prefers to cite the Bureau of Labor Statistics, which has projected that 19,650 jobs will open up for lawyers each year between 2012 and 2022. If that’s the case, Patrice writes, it “just means fewer people will graduate unemployed, which is hardly a reason to join their ranks.”

This argument is slightly bizarre. As the BLS itself has documented, its projections are frequently wrong. Sometimes, they’re epically wrong. That’s because they are just guesses. They might be sophisticated guesses involving econometric models and loads of data, but casting your eyes to the horizon and trying to pinpoint where the economy will be in two, five, or 10 years is inherently uncertain work.

In the meantime, the American Bar Association reports that last year, 26,377 law school graduates found long-term, full-time employment requiring bar passage—i.e., traditional lawyer jobs. Another 6,438 found long-term, full-time jobs in other industries, bringing the grand total to 32,775. Before then, the class of 2012 also managed to land more than 32,000 long-term, full-time positions. Those numbers are documented—on the books already. And even during the bad old days of 2009 through 2011, the tally didn’t drop too much further. Now, maybe the graduates of 2016 won’t be as lucky—it’s even possible we’ll plunge back into a recession. But it’s odd to automatically assume that the near future will look like a set of loose government predictions instead of like the recent past.

Objection No. 2: Whatever. Only Harvard graduates are going to benefit.

Much of the uptick in hiring over the past couple of years has happened at large law firms, which tend to recruit at elite universities. Therefore, Patrice’s Above the Law colleague Elie Mystal reasons that the only graduates who stand to benefit in the coming years are essentially students from fancy schools. Harvard, Yale, and Stanford J.D.s have it made, while everyone else can go on eating instant ramen while weeping over their loan balances.

Again, the reasoning here strikes me as odd. The big change in the job market isn’t that law firms are hiring much more. It’s that the total number of graduates will soon just about match the total number of long-term jobs that have been available. Now, perhaps employers will collectively look at the class of 2016 and decide there aren’t 32,000 lawyers worth hiring. Maybe they might decide to pass up new graduates and instead dip into the glut of underemployed law graduates who have graduated since 2008. But that brings me to the next question.

Objection No. 3: You’re not taking into account all those unemployed law graduates already searching for work.

In an ideal world, recruiters would notice shrinking law school classes and think: “Hey, aren’t there all these underemployed young J.D.’s desperate for work? We should hire some of them!” But firms—especially large firms—are creatures of habit, and one of those habits involves hiring candidates for entry-level positions straight out of law school; some government agencies work the same way. That means they’re likely to ignore the graduates who are already out there struggling.

Objection No. 4: So what if there might be enough jobs to go around—will they be good jobs?

That’s the key question Kyle McEntee, founder of the nonprofit Law School Transparency, posed when I talked to him. “I do expect that the employment rates are going to improve greatly,” he said. The issue is whether graduates will find the kinds of opportunities that are worth three years and more than $100,000 to pursue.

Even when they find work, today’s law grads have to deal with two unfortunate facts. First, salaries have fallen. Median pay out of school is down to about $62,000, from $72,000 in 2008. (Those famous $160,000 starting salaries for Big Law associates were always an exception, not the rule.) Adjusted for inflation, median earnings are actually lower than in 2000.

But while pay is down, debt is way up. The New America Foundation estimates that the median student who borrows for law school—and the vast majority do borrow—finishes with $128,000 in loans. At the 75th percentile, they finish more than $173,000 in the hole.

Yet even accounting for the cost of tuition and interest payments on debt, there’s evidence that law school might still be a financially sound decision over the long term. Last year, Seton Hall law professor Michael Simkovic and Rutgers economist Frank McIntyre released a controversial paper that compared the earnings of law graduates to academically and demographically similar workers who had only bachelor’s degrees. The paper was quickly panned by some, in part, because of its initial title, “The Million-Dollar Law Degree.” As a headline, that was misleading at best. The paper did find that the average, pre-tax value of a J.D. was about $1 million. But when it comes to lawyer salaries, averages are mostly useless, because attorneys at big firms make so much more than anybody else in the industry.

However, Simkovic and McIntyre’s study contained at least very important finding: It reported that for graduates at the 25th percentile of pay—think attorneys at small firms and public servants—law school was still a profitable investment, even if they spent $60,000 per year on tuition.2

Simkovic and McIntyre’s paper is controversial in part because it looks back at the glory days of the legal industry to predict what tomorrow’s grads might make. But the fact that even law graduates with low earnings made a solid return on their investment is a good sign for current students. And, as far as I know, nobody has managed to come up with a better set of numbers. (Beyond that, Simkovic and McIntyre don’t even bother to account for debt forgiveness programs, which help make graduate school a safer investment.)

Objection No. 5: Ok, but you haven’t talked about the absolute lowest earners. What is going to happen to them?

It’s true that there are almost certainly lawyers who will never make enough money to justify the cost of their legal education. Chances are, many of those unlucky souls come from unscrupulous, bottom-tier law schools that charge high tuition while placing students in low-paying jobs (if they place them at all). At the notorious Thomas M. Cooley Law School, just over half of all graduates found long-term employment of any kind last year, and fewer than one-third found jobs that required bar passage. Even though its enrollment has plummeted, the school raised tuition to $43,500 per year. That’s the luxury of catering to students who likely won’t get into law school anywhere else.

It’s not obvious that an improving job market will drastically help students at predatory institutions such as Cooley; they were likely in trouble well before the legal economy crashed. The hope is that resources like Law School Transparency, which provides detailed job statistics that schools have spent years trying to cover up, convince students to stay away from those sorts of J.D. mills, and possibly pick another career path if they can’t get admitted somewhere better.

Objection No. 6: None of this changes the fact that there are a ton of students who can’t get jobs as lawyers at all, which is the whole point of going to law school.

Over the past several years, a growing number of law students have taken refuge in jobs that are technically outside of the legal industry, but where their degree supposedly gives them a competitive edge with employers. The National Association for Law Placement, or NALP, calls these “J.D. advantage” positions, and some of them are obviously a letdown, both financially and personally. Paralegals, for instance, are included this category. Nobody goes to law school to become a paralegal.

140630_$BOX_LawSchoolChart

Source: American Bar Association. Chart by Jordan Weissman

When NALP polled the class of 2011, 46.8 percent of those in J.D.-advantage positions nine months out of school said they were already seeking new employment, compared with just 16 percent of those in work that required bar passage. That’s one strong sign that many of these jobs aren’t great. Derek Muller, a professor at Pepperdine University School of Law, has noted that graduates from less prestigious programs disproportionately end up in J.D.-advantage occupations—another poor sign about their desirability.

Nonetheless, most long-term, full-time J.D.-advantage jobs aren’t paralegal spots and the like. The majority are professional opportunities in business, government, and the nonprofit world with pay that’s on par with much of the legal sector. Their growth is a bit worrisome, since as I said, most people shouldn’t be going to law school unless they have a strong desire to be a lawyer. But J.D.s do go into banking, sports management, consulting, and politics. And we shouldn’t write their successes out of the picture.  

Wow, that was long. Can we review?

TL;DR version: There’s a good chance that at least 32,000 full-time, long-term jobs will be available to the law school class of 2016, which shouldn’t graduate more than 36,000 students. That would likely lead to some of the highest employment rates in recent memory. Their salaries won’t be as high as during the bubble era, and their student loan debts might be considerably higher. But the evidence suggests that financially, their three years in school will still pay off in most cases, at least as long as they don’t attend a bottom-tier, predatory school. Law school isn’t a risk-free proposition. But it’s about to become orders of magnitude less risky than it has been for the past several years.

Of course, all this could change if students start flooding back into law school, and class sizes balloon to their old proportions. But that’s exactly why anybody who’s genuinely interested in law school is better off applying now, rather than waiting until later when news reports about rising employment rates start to bubble up. By then, it might be too late.

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Footnote 1: You might be asking, “Why is this Web monkey writing as if he’s actually worked in the law?” I haven’t, but I’ve spent a lot of time on its periphery. Aside from starting my journalism career at a legal trade pub, I killed a couple of years working on the business side of large firm while figuring out that I didn’t belong in law school. My fiancée is also a prosecutor in New York City. (Return.)

Footnote 2: Some people have gone after the study for not including taxes in most of its calculations. However, it did find that for a law degree holder at the 25th percentile of earnings, law school was profitable post-tax if they paid $30,000 a year in tuition. (Return.)

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