“The study blends the winners and losers, to come up with its $1,000,000, earnings figure, but that misses the point of my book: which is that getting a law degree outside of top law school – and especially at bottom law schools –is a risky proposition . . . Nothing in the article refutes this point.”
Professor Tamanaha is correct that the $1 million figure is an average, but we didn’t write a 70 page article with only one number in it.
The Economic Value of a Law Degree not only reports the mean or average—it reports percentiles, or different points in the distribution. At the 75th percentile, the pre-tax lifetime value is $1.1 million – $100,000 more than at the mean. At the 50th percentile, the value is $600,000. At the 25th percentile, the value is $350,000. These points in the earnings distribution do better than breaking out returns by school—they allow that even some people at good schools have bad outcomes (and vice versa). Thus we capture, and at length, exactly the concern Tamanaha expresses.
As we discuss in the article, for technical reasons related to regression of earnings to the median, our 75th and 25th percentile values are probably too extreme. The “75th percentile” value is likely closer to the 80th or 85th percentile for lifetime earnings, and the “25th percentile” is likely closer to the 20th or 15th percentile.
In other words, roughly the top 15 to 20 percent of law school graduates obtain a lifetime earnings premium worth more than $1.1 million as of the start of law school. Roughly the next 30 to 35 percent obtain an earnings premium between $1.1 million and $600,000. In the lower half of the distribution, roughly the first 30 to 35 percent obtain an earnings premium between $350,000 and $600,000. Roughly the bottom 15 to 20 percent obtain an earnings premium below $350,000. These numbers are pre-tax and pre-tuition.
Even toward the bottom of the distribution, even after taxes, and even after tuition, a law degree is a profitable investment. And that is before income based repayment, which can substantially reduce the risk at the bottom of the distribution.
We also present student loan default rates for 25 standalone law schools, most of which are low ranked institutions, and all of which have student loan default rates that are below the average for bachelor’s and graduate degree programs. The average law school default rate is approximately one third of the average default rate for bachelor’s and graduate programs.
People with law degrees are not immune from risk. No one is. But the law degree reduces the risk of financial hardship. Law degree holders face significantly less risk of low earnings than those with bachelor’s degrees, and also face lower risk of unemployment. Increased earnings and reduced risk appear to more than offset the cost of the law degree for the overwhelming majority of law students.
Frank McIntyre and I did not miss the point of Brian Tamanaha’s Failing Law Schools. Rather, we disagree with his conclusions about the riskiness of a law degree because data on law degree holders does not support his conclusions. We discuss Tamanaha’s analysis on pages 20 to 24 of The Economic Value of a Law Degree.
We believe that Professor Tamanaha’s views deserve more attention than we could give them in the Economic Value of a Law Degree. Because of this, last Spring, we also wrote a book review of Failing Law Schools, pointing out both the strengths and weaknesses of his analysis. We will make the book review available on SSRN soon.
If Professor Tamanaha disagrees with our estimates of the value of a law degree at the low end, we’re happy to hear it. But he should not say that we ignored the issue. We look forward to a productive exchange with him, on the merits.