The Economic Value of a Law Degree

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 historical norms.

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

A powerpoint presentation version of this article is available at: http://ssrn.com/abstract=2270175.

A final version of this article has been published in The Journal of Legal Studies as Michael Simkovic & Frank McIntyre, The Economic Value of a Law Degree, 43 J. LEGAL STUD. 249 (2014). The final published version of the article can be accessed through Jstor or the JLS website.

Keywords: Economic Value of a Law Degree, Law School Crisis, Human Capital, Labor Economics, Valuation, Tamanaha, Schlunk, Empirical, Earnings, Wage, Work Hours

JEL Classification: C1, I2, J24, J31, J44, J6, J7, K4, L31