Is it even worth it to go to law school? The thought came before law school, and it wriggles into those moments when all that work and stress and money pile up. It could come any time: at 4 AM when you are trying to finish that last chapter; out for drinks with friends in the workforce who blithely pay for happy hour drinks without wincing at thoughts of crushing student loans; or when you discover that you didn’t get your first pick for a ‘big law’ summer associate position. Myths and misconceptions have swirled amongst the legal community and the general public, as law professors, students, and others question the value of a law degree, leading in part to plummeting application numbers for law schools around the country.
On Thursday, September 12, 2013, Berkeley Law hosted Seton Hall University business law Professor Michael Simkovic in the first event in a lunchtime series sponsored by the Berkeley Center for Law, Business and the Economy and the Berkeley Business Law Journal. Mr. Simkovic was previously an attorney at Davis Polk & Wardwell in New York concentrating in bankruptcy litigation as well as a strategy consultant at McKinsey & Company, where he specialized in legal, regulatory and business issues affecting financial services companies. Professor Simkovic persuasively presents a different (and thankfully more positive) outlook for those considering whether to pursue a law degree.
At the outset, Professor Simkovic tackled empirical claims that law school offers a poor return on investment. He pointed out serious flaws in data sets being presented by those who claim that investing in a law degree is a low-value investment proposition. For example, earnings in early years are not necessarily strong predictors of subsequent earnings because law degree holders—as opposed to those holding a bachelor’s degree—see steep growth in salary over a short period of time during their first few years of work. It is also important not to conflate the recent dip in the general market with a dip solely in law. In other words, while things may look worse in the legal market than they did ten years ago, it is important contextualize with broader market conditions.
In contrast, Simkovic’s approach to data collection and analysis set strict parameters in order to accurately reflect the real value of the degree. He relied on empirical data from the U.S. Census Bureau Survey of Income and Program Participation (SIPP) used to estimate earnings for bachelors- versus law degree-holders. SIPP tracks graduates over 3-4 years, and is therefore more useful than one year of earnings. Simkovic combined the SIPP data with the National Education Longitudinal Survey, which tracks employees somewhat earlier in their lives, to insert additional statistical controls in his study. Finally, he applied Ordinary Least Squares, Quantile regression, and Propensity Score Matching to the raw data to give an accurate picture of the relative value of holding a law degree in America.
Simkovic found that a law degree increases earnings and wages dramatically, and he noted that the higher wage was not simply a product of greater number of hours worked. His findings combat the myth that law degree holders make more solely because they are working long and miserable hours; the data suggests that that increases in work hours for law degree holders are small and do not suggest overwork (on average, 4 hours per week above what bachelor’s degree holders log). The mean annual earnings premium is approximately $53,300 once data is statistically controlled; this means that the average law degree holder will make $53,300 more per year than they would have without the degree.
Professor Simkovic also addressed fears about automated or outsourced work replacing American lawyers and decreasing the use of a law degree. Simkovic’s historical data revealed that there have been only short term cyclical fluctuations in the earnings of holders of law degrees in decades without large dips due to changes in the work force such as the inclusion of women in the profession or technological developments like typewriters and internet databases. Further, while work that is rules-based, routine, algorithmic and easily broken down can often be automated or outsourced, legal professionals often have transferable creative skills such as problem solving, complex communication skills, and the ability to complete non-routine tasks. These nuanced skills are not readily convertible to automation or outsourcing, and will likely remain valuable commodities notwithstanding technological advancements to facilitate rote work.
The final take-away? If you have the chance and the inclination to pursue a law degree, Simkovic’s data indicates that the initial investment will prove to be worth it over your career. And for those already down the law school path, it is a relief to know that a law degree is going to be worth quite a bit more than the paper it is printed on.