On the Value of a Law Degree

In the NYT‘s Dealbook column, Ohio State’s Steven Davidoff discusses a new study, “The Economic Value of a Law Degree,” by Michael Simkovic and Frank McIntyre. This study purports to show that a law degree remains a good investment for many people. Here is the study’s abstract:

Legal academics and journalists have marshaled statistics purporting to show that enrolling in law school is irrational. We investigate the economic value of a law degree and find the opposite: given current tuition levels, the median and even 25th percentile annual earnings premiums justify enrollment. For most law school graduates, the net present value of a law degree typically exceeds its cost by hundreds of thousands of dollars.

We improve upon previous studies by tracking lifetime earnings of a large sample of law degree holders. Previous studies focused on starting salaries, generic professional degree holders, or the subset of law degree holders who practice law. We also include unemployment and disability risk rather than assume continuous full time employment.

After controlling for observable ability sorting, we find that a law degree is associated with a 60 percent median increase in monthly earnings and 50 percent increase in median hourly wages. The mean annual earnings premium of a law degree is approximately $53,300 in 2012 dollars. The law degree earnings premium is cyclical and recent years are within historic norms.

We estimate the mean pre-tax lifetime value of a law degree as approximately $1,000,000.

A PowerPoint file highlighting the study’s findings is available here, and co-author Michael Simkovic is blogging about the study and the debate it has triggered at Concurring Opinions. Davidoff’s column also discusses what the study does and does not show.

A one might expect, this study has provoked quite a bit of response. ATL’s Elie Mystal calls it “garbage,” prompting a response from Simkovic. Paul Caron rounds up a range of other responses here and here.

UPDATE: Wonkblog’s Dylan Matthews evaluates the competing claims and Paul Caron rounds up more commentary.