Sunday, April 5, 2015
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.
Two William Mitchell law professors file suit as planned merger with Hamline may result in abrogation of tenure
Thursday, April 2, 2015
Paul Campos of the University of Colorado is once again confused by my research with Frank McIntyre. This time, the source of Professor Campos’s confusion is not present value calculations, but rather grant funding.
The Economic Value of a Law Degree was not funded through grants. No disclosure of grant funding appears in that article because there was no funding to disclose.
Two follow up studies, Timing Law School and an upcoming study about differences in the law earnings premium by college major, race and gender, are funded through grants from Access Group, Inc., a non-profit that provides financial education to students and schools and aims to promote broad access to education, and the Law School Admission Council (LSAC), which is an important provider of data and research about law schools (see here and here).
The funding provided through these grants is used to buy out time so that Frank and I can spend more time on research. I do not receive the money for my teaching buyout—Seton Hall is paid so that it can find replacements to teach the classes I would have taught. The grants also provide funding for research assistants, software and equipment, summer stipends, and conferences. The payments are scheduled over a two to three year period.
Frank and I are interested in methodological rigor, not in particular results or outcomes, which in any case are unknowable until after we analyze the data. We believe in maximizing the transparency of the methods we use for our research so that it can be replicated or challenged by future empirical researchers. There has never been any effort by LSAC or Access Group to influence or censor our results.
Frank and I are proud of our success securing funding from such highly regarded organizations. We trumpet their support in the first footnote of Timing Law School, and announced it in our first blog post about Timing Law School. I also list the grants and dollar amounts of each on my CV and on my LinkedIn page.
Curiously, Professor Campos and his followers seem to think that the fact that highly regarded non-profit organizations believe our research is worthy of funding is some sort of dirty secret. We’ve practically been shouting it from the rooftops, so I suppose we should thank him for pointing it out.
Wednesday, April 1, 2015
Recently, two criticisms have been leveled against law schools. The first is an economic critique—law school is not worth it financially compared to a terminal bachelor’s degree. This critique is incorrect for the overwhelming majority of law school graduates.
The second is a moral critique—that law schools behaved unethically or even committed fraud (see here, here, and here) by presenting their employment statistics in a misleading way. (While at least one of the 200+ American Bar Association (ABA) approved law schools misreported LSAT scores and GPAs of incoming students, and a former career services employee at another alleges specific misreporting of unemployment data at that law school, I am focusing here not on the outliers, but on the critique against all law schools generally).
The moral critique against law schools comes down to this: The law schools used the same standard method of reporting data as the U.S. Government.
According to the critics’ line of reasoning, “employment” means only full-time permanent work as a lawyer. Anything else should count as either “unemployment” or some special category of pseudo-unemployment (i.e., underemployment) . (This is apparently based on an incorrect belief that law school only benefits the subset of graduates who practice law).
Employment and unemployment statistics are not meaningful in a vacuum. They only become useful when they can be compared across time, for different groups, or for a different set of choices. For example, prospective law students might want to know that law school graduates are generally less likely to be unemployed or disabled than similar bachelor’s degree holders. (Frank McIntyre and I combine the unemployment and disability rates whenever possible because of research showing that disability is often a mask for unemployment, although we’d generally get similar results for relative rates if we just used unemployment).
To avoid confusion and ensure that data are comparable, the standard definitions used by the U.S. Government should be used when reporting employment statistics, unless there is an indication that non-standard definitions are being used.
The standard government definitions of “employment” and “unemployment” are the way we all use these words in ordinary speech when we say things like “the unemployment rate went down this year.” These are not obscure definitions. Googling “unemployment definition” and checking the first few results—Investopedia , Wikipedia, About.com, and the U.S. Bureau of Labor Statistics (BLS) website —will get you to the right answer.
So how does the United States government define “employment”?
The most commonly reported and cited official government employment statistics include individuals as “employed” whether such individuals are employed full-time or part-time, whether in permanent or nonpermanent positions, whether in jobs that do or do not require the level of education they have obtained.*
In other words, the U.S. Government counts individuals as employed even if they are employed in part-time, temporary jobs that do not require their level of education. Indeed, individuals count as employed even if they are self-employed or worked without pay in a family-owned business.
When the government reports education-level-specific employment statistics** it uses the same definitions and does not restrict employment to those who are employed in jobs that require their education level. Employment includes any employment, whether full-time or part-time, whether temporary or permanent, whether in a job that requires a given level of education or not.
What about the standard definition of “unemployment”?
Unemployment is not the absence of employment. Instead, there are three categories—employed, not-in-labor-force, and unemployed. An individual only counts as “unemployed” if he or she “had no employment during the reference week”, was “available for work, except for temporary illness” and recently “made specific efforts to find employment.”
Those who are not working and are not actively seeking work for whatever reason—for example, caring for dependents, disability, pursuing additional education—are not counted as part of the labor force. Unemployed persons as defined by CPS are used to calculate the widely cited “unemployment rate.” The unemployment rate is defined as unemployed persons as a percent of the labor force--in other words, excluding those who are neither working nor seeking work.***
Some law school critics have claimed that anyone who fails to respond to a survey about their employment status should be assumed to be unemployed. The Census and BLS disagree, and instead weight the data to account for non-respondents.
In addition to top-level information about employment status, some data sources such as the CPS may also include fields with more detailed information about full- or part-time work-status, industry or sector, and occupation. Law schools have also historically provided a detailed breakdown of employment categories shortly after graduation in the ABA-LSAC Official Guide To ABA-Approved Law Schools. In the last few years, law schools have provided even more detail in ABA-required disclosures. (We’ve previously noted some of the problems with focusing on employment outcomes shortly after graduation rather than long-term value added; The ABA's new employment data protocols have additional problems with their definition of "unemployed" discussed below ****). The National Association for Law Placement (NALP) also provides high level data and a more detailed breakdown.
The inclusion or non-inclusion of more detailed information does not alter the meaning of top-level information about employment status: the meaning of “employed” is established and well understood by users of employment data. Commonly used and cited employment statistics have been reported by the BLS from 1948 through the present, and are widely understood by users of employment data.
Indeed, the BLS has noted for decades in its Occupational Outlook Handbook that many law school graduates do not work as lawyers. Law schools and bar examiners publish bar passage rate statistics which clearly show that many recent law school graduates cannot legally be working as lawyers (unless everyone who failed a bar exam in one state passed a bar exam in another).
Comparing apples to apples using standard definitions reveals that law school graduates are doing relatively well compared to similar bachelor’s degree holders. By contrast, critics of law schools and plaintiffs lawyers have used non-standard definitions and compared apples to oranges.
It is not surprising that the courts have dismissed the lawsuits against law schools. If only the New York Times and the Wall Street Journal were as fair and judicious.
* The primary source of labor force statistics for the population of the United States is the Current Population Survey (CPS), sponsored jointly by the United States Department of Labor, Bureau of Labor Statistics and the United States Census Bureau (Census). CPS is the source of numerous high-profile economic statistics, including the national unemployment rate. CPS defines "Employed persons"* to broadly include anyone who has done any paid work during the week when it is measured, who worked for themselves or a family member, or who was temporarily absent from work.
“Employed persons”* as defined by CPS are used to calculate the “Employment-population ratio”. The Employment Population Ratio resembles the “Percent Employed” statistics reported by law schools.
“Employed Persons” includes:
- 16 years and over
- in the
- noninstitutional population
- who, during the reference week,
- did any work at all (at least 1 hour) as paid employees;
- worked in their own business, profession, or on their own farm,
- worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family;
- all those who were not working
- but who had jobs or businesses
- from which they were temporarily absent
- because of
- bad weather,
- childcare problems,
- maternity or paternity leave,
- labor-management dispute,
- job training,
- other family or personal reasons,
- whether or not they were paid for the time off or were seeking other jobs. . . . “
** The BLS also reports Employment Population Ratios for specific education levels and age groups such as bachelor’s degree holders and above ages 25 to 34. These statistics are also reported by the United States Department of Education, National Center for Education Statistics. (To the extent economists have tried to define and measure “underemployment” (see here and here ), it appears to be as or more common among bachelor’s degree holders compared to similar law degree holders).
*** The “labor force” as defined by CPS consists only of persons who are either “employed” or “unemployed” under CPS definitions.
**** The ABA’s new data protocol counts individuals as “Unemployed” who would instead be considered “Not-in-labor-force” by the U.S. government. The ABA subcategory, “Unemployed—Seeking” is probably the closest to the standard definition of unemployment. This misalignment between ABA definitions and standard government definitions of unemployment could lead individuals comparing ABA data to standard and widely used government employment data to erroneously conclude that unemployment for law school graduates is higher relative to other groups than it really is.
Tuesday, March 31, 2015
The Absence of Evidence for Structural Change: Growth in Lawyer Employment and Earnings (Michael Simkovic)
There have been a lot of doom-and-gloom reports about layoffs and collapsing job opportunities for lawyers. As we’ve noted before, the relevant question for valuing legal education is the boost to earnings from the law degree across occupations, not the more specific question of what is happening to lawyers, or even more specifically, big law firms.
But for the sake of argument, focusing more narrowly on the under-inclusive category of lawyers only, what does the data actually show about lawyer employment? Are doom-and-gloom predictions justified for lawyers even if not for law degree holders? According to many of the proponents of the structural change hypothesis, signs of structural change were showing up as early as 2010, or perhaps even as early as 2008. We now have several years of historical data beyond that point to consider whether their predictions, thus far, have proven correct.
Lawyer employment is growing. This is true both in absolute numbers, and also relative to overall employment. In other words, lawyers are becoming a larger share of the U.S. workforce.
The data in the chart above is from the U.S. Department of Labor, Bureau of Labor Statistics (BLS), Occupation Employment Statistics (OES), which is a survey of establishments (employers). The blue columns scaled to the left axis represents the absolute number of lawyers, while the red line scaled to the right axis represents lawyers as a percentage of the total labor force. As can be seen from the above chart, both numbers are trending upward.
One limitations of BLS OES is that it focuses on employees, not owners, and therefore excludes law firm partners and solo practitioners. Another leading source of data, the U.S. Census Bureau’s Current Population Survey (CPS), is a survey of households, and includes solos and law firm partners.
CPS shows much the same trend as BLS OES. Lawyer employment is increasing, both in absolute terms and as a share of total employment. The charts below show CPS data.
The leading government data sources show the same thing—growth in employment of lawyers is faster than (or at least as fast as) overall employment growth.
The practice of law is also becoming more lucrative, at least over the long term. According to a recent draft paper by Richard Sander and E. Douglass Williams, after controlling for changes in the demographic composition of the legal profession, Sander and Williams find long-term growth in real (inflation-adjusted) lawyer earnings. (Sander and Williams use IPUMS-CPS data, and focus on white males, since historical data is not as readily available for women and minorities who have joined the legal profession in large numbers only in recent years; To understand the importance of controlling for demographic changes in the profession, consider Simpson’s Paradox).
Data from the Sander and Williams study is provided in the chart below.
After 2010, the picture for lawyer earnings is more mixed. BLS OES data suggests modest declines in real earnings of lawyers of around 6 percent by 2014. By contrast, the CPS suggests modest real growth in lawyer incomes of around 3 percent by 2014. Overall, it’s likely that real lawyer earnings have been close to flat. Flat earnings are consistent with what has been happening elsewhere in the labor market (see here and here). Given lawyers’ highly advantageous starting position relative to most other occupations, flat earnings or even modest declines suggest that lawyers have maintained a large relative advantage even as they have grown in relative numbers. (It’s possible that incomes for lawyers may have become more dispersed over time, notwithstanding the averages—indeed, it would be surprising if that were not the case, given the general trend toward widening income dispersion across the economy).
As noted previously, changes in entry level earnings and employment, though larger than those for the profession as a whole, are consistent with changes at the entry level for the rest of the labor market and established historical patterns. Young law graduates continue to earn substantially more than young bachelor’s degree holders post 2008.
Within a few years of graduation, about as large a proportion of employed young professional degree holders were working as lawyers after 2008 as before 2008.
Some critics of legal education have focused on “legal services” (mostly law firms). This is not a good measure of either the value of a law degree, or of the labor market for lawyers. Most employees in “legal services” are not lawyers, but rather support personnel such as secretaries, paralegals, and business and technology specialists. Many lawyers and law degree holders work outside law firms.
Changes taking place in “legal services” might be affecting the non-lawyers who work there rather than the lawyers. Changes in “legal services” affecting lawyers could be offset by changes affecting lawyers working in other industries. In other words, legal work could be moving out of the law firms and in house or into other professional service firms such as accounting firms.
BLS and CPS data for “lawyers” provides a much clearer picture of the legal employment market, while law earnings premiums across occupations are the most useful measure of the value of a law degree.
Growth in earnings and employment has been slower in recent years than in the past, to be sure, but that is generally true across the economy. The case for massive structural change in the legal profession eroding the value of a law degree is not well supported by the data.
Monday, March 30, 2015