At Leiter Law School Reports, Michael Simkovic offers a round-up of the various responses to his new study showing the value of a law degree. (I had posted about the article here.) Simkovic approvingly cites Stephen Diamond's calculation that the "median after-tax, after-tuition net present value of the law degree was approximately $330,000."
The article is an important development that presumably has re-set the framework for debate on this issue.
As I understand it, the study assumes that today's graduates will fare about as well as lawyers did in the years 1996-2011 -- which makes me wonder about how the porosity of the profession may make the future different than those 16 years were. (Deborah J. Merritt explores those questions at Law School Cafe.) Those years were precisely the years when the famous bi-modal distribution of first year salaries grew and peaked -- and then recently, dramatically thinned out. (See graphs below.) I can't imagine that the extreme bi-modal distribution of first year salaries will return.
Presumably, lots of graduates of the last couple of years are already well outside Simkovic's model and are unlikely to ever see the returns Simkovic predicts. But the Simkovic model is built for the long haul and assumes that the legal profession will have normal up-cycles and down-cycles moving forward. Simkovic says he will address this issue in an upcoming post at Leiter Law School Reports and I look forward to reading it.
UPDATE: Milan Markovic has a comment below that I appreciate. First, I may be wrong about this, but I don't think that for many the grads of 2010-11, they will get back on the traditional income track in the next year or two. My sense is that huge numbers of them are off the train for good. Second, I think Milan is correct when he says, "Also, I don't think that Simkovic & McIntyre are claiming 'today's graduates will fare about as well as lawyers did in the years 1996-2011.' Rather, the claim is that they are likely to enjoy roughly the same earnings premium over their non-JD peers as they did from 1996-2011." But given that refinement, it's still my sense that the recent grads who took on huge debt won't be earning the same premium of their non-JD peers as they did from 1996-2011.
UPDATE 2: Also, Simkovic posted a reply to this post, saying, "John Steele at Legal Ethics Forum reports that according to NALP, median full time starting salaries increased dramatically between 1996 to 2011. He forgets to take inflation into account. In real terms, median starting salaries exhibited a pattern of cyclicality." I'm going to go slowly here because I didn't think that was the point I was making. The point I was trying to make is that the era of 1996-2011 was different not in a cyclical way, but in a structural way that isn't coming back. The market place and the half of the market controlled by organizational clients has found a way to avoid paying lots of money to the top 25% of the lawyer market. So the point I was focusing on was the way that historically anamalous right modal distribution is thinning and disappearing. I didn't think that I was trying to make a point about nominal wages (i.e., ignoring inflation). Perhaps it's best to see the next post from Simkovic, in which he will discuss whether his data are good for predicting returns in the future. In any case, if you're following this issue, I think the debate over the Simkovic/McIntyre study is the new playing field.