Wednesday, March 25, 2015

Number of Law Graduates Does Not Predict Law Graduate Outcomes (Michael Simkovic)

Many legal educators believe that shrinking class sizes will help the students they do admit find higher paid work more easily and boost the value of legal education.  They reason that if the supply of law graduates shrinks, then the market price law graduates can command should increase. 

According to another hypothesis, now popular in the press, a decline in the number of law school applicants reflects the wisdom of the crowds.   Students now realize that a law degree simply isn’t worth it, and smaller class sizes reflect a consensus prediction of worse outcomes for law graduates in the future. 

Frank McIntyre and I investigated whether changes in law cohort size predict earnings premiums.  Historically, they have not.  Not for recent graduates, and not for law graduates overall.  Nor have changes in cohort size predicted much of anything about the entry-level measures used by the National Association for Law Placement (NALP)—starting salary, initial employment, initial law firm employment.

How can both of these theories be wrong?  One possibility is that they are both right, but the two effects offset each other.  This seems unlikely however.  If neither macroeconomic data  nor Bureau of Labor Statistics (BLS) employment projections can predict law employment conditions at graduation, then how likely is it that recent college graduates with less information and less expertise could make a better prediction?

A more likely possibility is that there are other factors at play that prevent any strong predictions about the relationship between cohort size and outcomes / value added.  For example, law schools may become less selective as cohort size shrinks and more selective as it increases.   In addition, the resources available to law schools, and therefore the quality of education and training they are able to provide, may also change with cohort size.  Since physical facilities expenses are not particularly variable in the ordinary course, most budgetary adjustments at law schools presumably take place with respect to personnel.

Anecdotally, many law schools appear to be managing the recent decline in enrollments by shrinking their faculties and administrations and using remaining personnel to teach classes and perform functions outside of their areas of expertise.  Reduced specialization and a lack of economies of scale could affect the quality of service provided to students, offsetting any benefits to students from less competition at graduation.

Previous research in labor economics has found that resources per student are an important predictor of value added by college education, and that the use of adjuncts can lead to worse outcomes for students. (See here for a review)

Much of this is speculative—we do not yet understand why changes in cohort size do not predict law graduate outcomes, only that they do not predict outcomes.  Given the historical data, it is probably not advisable to read too much into what the decline in law school enrollment means for students who will graduate over the next few years.

Instead, we should focus on the long-term historical data and the value of a law degree across economic cycles and enrollment levels.

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