Sunday, April 5, 2015

Compared to What? (Michael Simkovic)

The choice of whether or not to go to law school is always a choice between law school and the next best alternative.  College graduates do not vanish from the face of the earth if they choose not to go to law school.  They still must find work, continue their education, or find some other source of financial support. 

The question everyone who decides not to go to law school, and every critic of law schools, must answer is—what else out there is better?* 

To enable prospective students to compare law school to the next best alternative, we need standardized measurements that apply to both law school and alternatives to law school.

Professor Merritt objects to the standard definition of employment used by the United States government, which she believes is too loose, since it includes an individual as employed if the individual works just one hour during the week of the interview.  (This is also the international standard promulgated by the International Labor Organization and widely used around the world). 

Using the standard definition of employment and consistent survey and reporting methods reveals that law graduates are more likely to be employed than similar bachelor’s degree holders. 

The important thing is not the measurement itself, but rather the relative (causal) differences between law school and the next best alternative.  Only by using consistent measurements for law school and the alternatives to law school can we understand those differences.

A single measurement like employment status may not provide all of the information we want.  (As a discrete variable, employment status will contain less information than a continuous variable like earnings or hours of work).  The solution is to use several standard measurements consistently to compare two different populations.  For example, in addition to employment, we might consider work hours, the percent of individuals working “full-time” (i.e., more than 35 hours per week), earnings, or wages (earnings per hour).

In The Economic Value of a Law Degree, Frank McIntyre and I find that no matter which of these measurements we use, the results always point in the same direction.  Law graduates participate more actively in the work force and are much better paid than similar bachelor’s degree holders.

If what students really care about is whether law school is a good investment financially, then no isolated measurement taken 9 or 10 months after graduation will provide much insight.  (Especially since other educational programs and data collection agencies are not specifically collecting data 9 or 10 months after graduation).

To answer the investment question, we need estimates of the causal effect of education on the present value of lifetime earnings—what Frank and I try to do in The Economic Value of a Law Degree.

To the extent that measurements at or shortly after graduation are useful at all, it is only for purposes of comparison, and only then while being mindful of the differences between outcomes and causation.

Using non-standard definitions means that ABA data at best can facilitate comparisons between different law schools,** but cannot readily be used to compare law school to any alternative.

Professor Merritt argues that the American Bar Association should require law schools to use a uniquely stringent system of measuring employment. To demonstrate that the legal profession holds itself to a higher standard of ethics, law schools should report lower employment rates than everyone else by using less inclusive, non-standard definitions of employment.

I disagree with the premise that different definitions lead to higher standards.  Professor Merritt’s proposal would mean that law school statistics cannot be compared to any other employment statistics, and if history is any guide, will contribute greatly to student confusion and error. 

The right thing to do is to report standardized measurements so that law school statistics can be readily compared to statistics of other education programs, as well as used to compare law schools to each other.

 

* Another graduate degree might be better than law school for a particular individual, especially when preferences for certain kinds of education or work are taken into account along with differences in financial value added.  One of the frontiers of labor economics research is comparative analysis of the causal effects of different kinds of graduate education. 

** I have reservations about the extent to which ABA initial outcome data should be used to compare the value added by one law school to the value added by another.  There are large differences between the student bodies of different law schools along dimensions that predict earning potential—standardized test scores, GPA, college quality and college major, socioeconomic status, and demographics.   The differences between students matriculating to the highest and lowest ranked law schools appear to be much larger than the differences between the average college graduate and the average law student.   While law schools disclose information about their entering classes, they do not reveal information about their graduates. Entering characteristics could be different from graduating characteristics for schools that accept large numbers of transfer students or have unusually high attrition.  In addition, the average growth rate of earnings at different law schools might be different and comparing only initial earnings could lead to misleading results.

http://leiterlawschool.typepad.com/leiter/2015/04/compared-to-what-michael-simkovic.html

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