‘Liberal’ Law Grad Thinks Unemployed Law School Debtors Not Poor Enough to Matter

Not even a day after learning that David Graeber thinks there’s infinite demand for corporate lawyers, writer Matt Bruenig adds himself to the list of liberals who believe that lawyers are cheaters who get a free lunch while in the real world law graduates are joining the unemployment line. The kicker is that Bruenig himself just graduated from Boston University School of Law.

I’m uneasy criticizing a recent law grad—and I don’t think I’ve ever done it before—but Bruenig’s callousness toward the unlucky in his cohort utterly shocks me.

Responding in The Week to the recent Chemerinsky/Menkel-Meadow NYT op-ed, he writes:

In reality, reducing barriers to entering the legal profession would probably have very little effect on quality, while also blowing up one of the biggest upper class rackets in our society.

In 2012, the median income for lawyers in this country was around $113,000, more than triple the national median income for all occupations. Why such high pay? In significant part, it’s because we have made becoming a lawyer exceedingly difficult, which has the effect of driving up the prices lawyers can charge for their services.

The link is to, of all places, the Bureau of Labor Statistics’ Occupational Outlook Handbook, which says that competition for lawyer jobs will be “strong” due to too many law grads. This is a good indicator that legal services are traded under free market conditions. I’ve seen law professors blatantly (and probably self-servingly) miss that line—but never a law grad. As with other liberals who’ve made similar arguments, Bruenig obviously rejects marginal product theory, the possibility that “lawyers” is a very broad occupational category with wage variation among specialties (which even the BLS link says), or the hypothesis that demand for legal services is income and wealth elastic.

Equally disappointing are the neophyte factual errors he makes in the next paragraph about the prelegal education requirements for a law license.

To gain entry into the legal profession, you must acquire a four-year undergraduate degree, a three-year law degree, and then pass a state bar exam. These onerous credentialing requirements ostensibly act as a gatekeeper, filtering out lower-quality would-be attorneys until we are left with only a small pool of supposedly highly competent lawyers from which to hire. But by keeping this pool small in this way, lawyers are able to capture credential rents — surplus income far above what they might otherwise make. This is good for lawyers, but bad for everyone else.

Filtering out lower-quality would-be attorneys? Tell that to all the law schools that are accepting anyone with an LSAT score and a pulse to keep Moody’s from downgrading their bond ratings.

Contrary to Bruenig’s assertions, according to the Comprehensive Guide to Bar Admission Requirements (pdf), 30 states do not require would-be attorneys to have college degrees to sit for their bar exams, including Massachusetts where Bruenig received his JD. The ABA accreditation standards (Standard 502 (pdf)) do require law schools to admit students who’ve completed at least three-fourths of a bachelor’s degree (with exceptions allowed), but one can become a lawyer in Massachusetts without attending an ABA-accredited school, e.g. the Massachusetts School of Law. (It’s possible that MSL requires students to have bachelor’s degrees but that’s a different issue.) I should also note that Wisconsin grants law grads from its two ABA schools diploma privilege in lieu of taking the bar, an idea Iowa is thinking of adopting. (Update: I forgot to mention that foreign law school grads are allowed to sit for the bar in Massachusetts under certain conditions. Pretty hard to engineer a shortage when that’s allowed.)

Despite being a deregulated market, Massachusetts lawyers don’t earn substantially less than lawyers do nationally.

Median Annual Lawyer Salary (2013 $)(Source: BLS Occupational Employment Statistics, which excludes self-employed lawyers, but I dare you to include them and see if it falsifies my point)

Simply put, if someone really wants to become a lawyer without the expensive, extraordinary signaling power Boston University provides, it can be done, just not necessarily in every state, but even then some states will allow reciprocity anyway.

Citing Erwin Chemerinsky’s $350,000 salary, Bruenig then argues that the legal profession is such a scam that the rents spill over into the legal academy. (Amusingly, even Chemerinsky and Menkel-Meadow in their op-ed acknowledged that rising faculty salaries are a problem.) More likely than legal profession rents, legal academia is in student-debt-fueled bubble that’s deflating. Take away the federal loans and Chemerinsky (or at least law professors generally) will have to take a pay cut. Lawyers would be unaffected.

Bruenig then has the chutzpah to write: “The big scandal in all of this is not that law students are somehow getting a raw deal because of the debt they undertake in their arduous path through the credential gate. It’s that the whole system wastes a ton of money that could be spent on more useful things than lining the pockets of lawyers and law professors.”

Tell that to the 5,229 class of 2013 graduates who reported being “somehow” unemployed as of last February. Many of these people are unlikely to be collecting rents from anyone in their lifetimes.

Bruenig’s proposal, though, is partly correct: Yes, needless lawyer licensing requirements should be reduced, but no, legal services won’t be any cheaper.

I thought about letting up on Bruenig a little given that he pretty much bit his thumb at his chosen profession and his own law school within months of leaving it. Then I read some of the comments where some people challenged him on his errors, and his responses (they appear to be under his name and are consistent with his article, but you can never be sure with the Internet) are flat-out contradictory and simply breathtaking:

TheWeekComments1

TheWeekComments2

TheWeekComments3

WOW!

I really hope someone was impersonating Bruenig in that comment thread because if he really wrote them—and my intuition says he did—it proves my point. It’s not the million-dollar-law-degree profs or conservatives who think law students should be held to higher intellectual standards than the After the JD researchers. It’s the liberals who are willing to throw law school debtors under the bus to prove their loyalty to the poor they consider deserving. If you go to law school and it goes south, mainstream liberals will not defend you because your poverty credentials won’t be good enough.

You will be alone.

David Graeber Thinks ‘Anybody Who Can Get a Law Degree Will Get a Job’

Anthropologist David Graeber is probably best known for writing the 2011 book Debt: The First 5,000 Years. Last summer he penned a thought-provoking (in a good way) article titled, “On the Phenomenon of Bullshit Jobs,” which posited as a general rule that “the more obviously one’s work benefits other people, the less one is likely to be paid for it.” Jobs like nurses, cooks, and fight-clubbers-who-guard-you-while-you-sleep-so-do-not-fuck-with-us are good, bond traders, not so much. “Bullshit Jobs” was attacked by every neoclassically trained economist for rejecting marginal product theory, and rightly so. The problem isn’t marginal product theory but what John Bates Clark did to it: tear land out of the factor distribution because he was a shill for robber barons who hated Henry George and his land-taxing followers. The result is a tax system that rewards unproductive activities like land ownership while punishing work and investment.

Graeber sat for an interview with PBS and discussed why he favored giving everyone a basic income instead of government welfare benefits of various types, a proposal favored by a handful of conservatives, most notably Charles Murray. I’ll get to that proposal in a moment, but Graeber gave this fantastic line, which is worth a post:

In our society we have a very, very limited demand for brilliant poet-musicians, but we have an infinite demand for corporate lawyers; anybody who can get a law degree will get a job. Well, is that because most people think that corporate lawyers are better to have around than poet-musicians? No. Almost everybody, given the choice, would go for the poet-musicians, but people with lots of money like to have corporate lawyers, so that’s what the market actually ends up saying.

To his credit, Graeber recognizes that high-end lawyers’ incomes are often due to rich people’s and corporations’ willingness to pay them. Compare this with liberals who think the ABA creates an artificial shortage of lawyers.

However, in the real world, demand for corporate lawyers is finite and it is not true that “anybody who can get a law degree will get a job.” In fact, just two weeks ago, we learned that the unemployment rate for recent law school graduates was 11.2 percent, and only 55.3 percent were employed in full-time, long-term, bar-passage-required positions that weren’t funded by a law school. Another 15.6 percent were employed in the treacherous “business and industry” category.

And on and on. You get the idea.

My point is that like people who think the ABA engineers a lawyer shortage, Graeber is ignorant of the real crisis faced by law students and graduates. Instead, he thinks that there’s “infinite demand” for corporate lawyers when 5,229 law grads from last year beg to differ.

As for the actual topic of the interview, basic income instead of government services, there are a few problems. One, landowners will suck the benefits up, so without taxes on land rents, poverty won’t vanish. If all taxes come out of rent (ATCOR), then all subsidies flow to rent (ASFTR (wow, that doesn’t work at all)). Two, paying for a basic income out of the current tax system will distort incentives for higher-income taxpayers (to the extent their incomes aren’t rents). Three, government isn’t filled with bureaucrats who push paper. Okay those SEC guys who were watching porn all day not so much, but some people need more government services than the basic income check will provide. These are reasons to shift taxes off of labor and capital and onto land before implementing basic income schemes.

CBO Projects Additional $1.3 Trillion in Student Loan Debt by 2024

…And that’s just the government loans.

Forget Erwin Chemerinsky’s and Carrie Menkel-Meadow’s NYT op-ed, the real news is the Congressional Budget Office’s baseline projection of the federal student loan program for FY 2014-2024. Notably, it thinks that over the next 11 years the government will lend out another $1.3 trillion in direct loans and that it’ll even make $1.10 per dollar lent. $115 billion of that will be Grad PLUS loans (9 percent).

Federal law requires the CBO to account for student loans by comparing the net present value of federal loans to investing in government debt. It doesn’t make a lick of sense, and the CBO would rather use fair-value accounting to evaluate the loan risk, so its hands are tied behind its back.

…But that doesn’t mean we can’t laugh at its absurd projections for Grad PLUS loans, about 30 percent of which go to ABA law school law students.

For one, the CBO believes that the government will make more than $1.30 on the dollar from Grad PLUS loans.

2014 Student Loan Baseline Projections (2)

(Click to Enlarge)

In the real world, most people who take out large balances of Grad PLUS loans will use IBR and then cancel their loans after 20 years. I’d be very surprised if non-law graduate and professional students counterbalance the losses the government will take on these loans. Another prediction I don’t think will pan out is the increase in the average amount borrowed and the number of borrowers.

The other fantasy is subtler: The CBO expects interest rates to spike over the next few years. By 2018, students will be borrowing at the maximum legal interest rates because either the economy will recover magnificently, or the bond vigilantes will finally come and stop lending the government money. (Then, of course, there would be a run on the dollar, export demand will spike, and we’ll return to full employment, but that’s off-topic.)

2014 Student Loan Baseline Projections (5)(Click to Enlarge)

If you do the math, on a 10-year repayment plan (which is used for calculating 20-year IBR monthly payments), law students entering today will pay a maximum additional 5.3 percent in interest for their 3L Grad PLUS loans over their 1L ones this fall. In other words, the CBO predicts law school’s costs will increase even as schools flatten or cut tuition.

I wonder if law professors writing op-eds agree.

After the JD Wave 0

Last month I wrote an article for the The Am Law Daily about the After the JD project, a longitudinal study that measures employment outcomes for people who passed the bar exam in 2000. I thought it might be interesting to offer, as an appendix, the Official Guide‘s employment outcomes for Y2K law grads (they’re in the ’03 edition). Obviously, this isn’t a perfect fit as some people who passed the bar in 2000 graduated earlier, but the overlap should be fairly significant.

Back in those days, though, the Official Guide wasn’t the treasure trove of knowledge that the ABA’s employment questionnaire reports are now, and it’s certainly not as detailed as the After the JD’s information is. However, for those interested in getting a sense of the legal market many of the After the JD cohort entered into by law school, look no further.

To conserve blog space, the tables will follow the jump.

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Class of 2013 Employment Report

[UPDATE: Emory's data are now included in this page.]

Okay, this’ll be short as I have work to do.

The ABA has released its employment data for the class of 2013, which is defined as everyone who graduated between September 1, 2012, and August 1, 2013. Employment data are outcomes as of February 15, 2014, irrespective of interim job changes. Savvy readers will notice that the most mediocre law school ever, Generic University School of Law, made an appearance again. They’ll also note that Emory’s data have been removed from the ABA’s site, which I’m sure will be corrected soon. For those who are truly curious, the ABA has even broken down the employment data for each of Cooley’s branch campuses. There are a few other traps for the unwary, e.g. schools that haven’t received even provisional ABA accreditation, like Lincoln Memorial. Even Peking China made the list. None of these schools have any useful data.

Generally, graduates fared little better this year than last year. 55.3 57 percent were employed full-time/long-term in bar-passage required jobs. This is up 0.2 0.8 percentage points from February 2013.

On the other hand, the graduate unemployment rate grew while the non-response rate declined.

Tables below the jump to conserve blog space.

Continue reading

What’s ‘Bold’ About Nominal Law School Tuition Cuts?

…Is the question readers of The New York Times asked themselves Saturday morning while reading, James B. Stewart’s, “A Bold Bid to Combat a Crisis in Legal Education.”

The article begins by promptly misleading readers into believing there is a “crisis” in legal education because five law schools have closed, even though apparently all five were non-ABA-accredited schools in California, which frequently enroll only a few students. The distinction is important because the article doesn’t investigate why those law schools closed (if they did—I suspect the NYT’s source is the Wikipedia, which isn’t always reliable for information on California law schools) and what commonalities their fiscal situations shared with Brooklyn Law School’s, the central character in the article.

Indeed, the NYT quotes Brooklyn’s dean, Nicholas Allard, saying that high law school debt burdens are a significant problem, yet students at most non-ABA schools are ineligible for the kind of easy federal student loans ABA schools are infamous for. In 2012-13, 49 percent of Brooklyn Law students took out an average $34,800 in Grad PLUS loans, which can cover the $29,500 gap between the annual Stafford Loan limit and full-time tuition—and also living expenses in cheap, cheap Brooklyn Heights.

As for Brooklyn’s “bold” move:

[Brooklyn] announced that it was taking some unusually bold steps to confront the crisis: The school is cutting tuition and abandoning what has become a widespread obsession with climbing the ladder of national law school rankings.

But the real question is, does Brooklyn Law have a choice? For instance, this year it accepted 47 percent of its full-time applicants, up 7 percent from 2012-13 and up 17 percent from 2011-12. In 2012-13, only 16 percent of its full-time students were paying full tuition. Sixty-three percent were paying $35,400 or less, which after cursory investigation makes Brooklyn the most “over-leveraged” law school in the New York City area in terms of merit aid. Even Seton Hall doesn’t subsidize that many full-time students by that much. Clearly, Brooklyn Law School was playing the scholarship game very, very hard.

And it still lost badly, hence the cuts.

Aside from the above criticisms, too much of the article relies on quotations rather than real reporting. Specifically, the last three paragraphs might as well have been written as an editorial by Dean Allard.

Mr. Allard argues passionately that the legal profession isn’t just for Supreme Court clerks and high-paid associates at elite firms. He noted that 94 percent of Brooklyn’s graduates passed the bar exam and 90 percent were currently employed in legal careers. Many meet the legal needs of underserved populations.

To my knowledge, the bar passage rate is right for last July, but the 90 percent employment in “legal careers” would be a miraculous turn of fortune for Brooklyn Law’s graduates. Fewer than half of its 2011 and 2012 grads were employed full-time, long-term in “bar passage required” positions, and less than 10 percent of both classes were in full-time, long-term “JD advantage” jobs. Did I mention that more than a quarter of these grads reported being either unemployed or didn’t respond to the survey?

Allard adds:

“Those who do manage to graduate from law school end up with excruciating debt. They feel compelled to take jobs with the highest paycheck to find some relief. They don’t feel free to work in jobs that fit their interests or that meet a critical demand.”

Tell that to the Brooklyn grads who never have an opportunity for such jobs.

Then he closes with the real howler:

[Allard] said he believed that law schools had an obligation to address the problem. “If we don’t get this right, we’ll create an acute shortage of lawyers, and law schools will price themselves out of business.”

An acute shortage of lawyers? In a state that allows foreign-trained graduates to take the state’s bar exam?

Yes, the nominal tuition cut and reduced merit scholarship gaming is a good thing. However, characterizing it as “bold” instead of “necessary”; comparing Brooklyn to tiny, non-ABA law schools that aren’t eligible for federal loans; and then handing the mic to the dean is not good reporting. The Times takes Allard at his word when he rhetorically asks, “If you increase quality and reduce cost, demand goes up. Why isn’t everybody doing this?” when it should be asking him why schools weren’t doing that before. Why can’t the Times ask what if anything law schools can do to reduce the signaling effect on law school costs?

Real coverage on the story would have involved asking whether the proposed tuition cut would in fact increase demand. Law degrees aren’t perfectly spherical widget cows from an econ textbook; they’re highly subsidized positional goods that have lost their popularity. How will Brooklyn Law communicate to prospective applicants that $45,000 annual tuition as opposed to $53,000 will make their degrees worth the risk of 20 percent unemployment nine months after graduation?

We’ll find out in a few years if the Times and Allard are right. If Brooklyn’s application and matriculant positions stabilize (it lost 700 full-time applicants this year), increase, or drop less than at nearby schools that don’t try cutting tuition, then we’ll know that its target consumers respond to price changes. However, history has shown that law school applicants weren’t sensitive to price increases in the past, so it stands to reason that they won’t be when prices fall.

If this is true, then Brooklyn Law will have to do more than cut nominal tuition.

The Official Guide is Dead, Long Live the Official Guide!

Deciding that paper is out, the ABA has moved the information that used to be published in the encyclopedic ABA-LSAC Official Guide to the ABA Law Schools to the Internet. I’m told that the ABA will release a spreadsheet full of the same data to make researchers’ lives easier.

Being a masochist, I went ahead and looked through the full-time tuition numbers anyway.

The biggest overall changes are one new private law school (Belmont), and Texas Wesleyan is now Texas A&M. It’s the first time since 1997 that a private law school has merged with a public university, but I think it will become more common going forward. For instance, South Carolinians were discussing buying up Charleston School of Law a few months ago. Same goes for the University of New Hampshire. In fact, just this weekend Vermont Law School was said to be in merger talks with the University of Vermont.

And yes, I have no idea why a public university would want to buy up a law school that’s losing money and students. Texas A&M, in fact, lost 33 students this year (~$770,000 netting out full-time and part-time students and assuming they’d pay full tuition). It’s like, they must be asking for a reorganization at some point down the road to say nothing of the fact that public law schools are obsolete.

As for tuition … it went up!

Full-Time Law School Tuition Dispersion (Excl. P.R., 2013 $)

(Clicking on this chart shall embiggen it.)

…As did the number of law schools that charge more than the $20,500 annual Stafford loan limit. Welcome to Grad PLUS country, travelers.

No. Law Schools With Tuition Exceeding Annual Stafford Loan Limit

Okay, we know at this point that a lot of people aren’t paying full price for legal education anymore, except if they lost their scholarships. Nevertheless, someone has to be paying for the merit aid, and despite the applicant crash, as of two years ago inflation-adjusted revenue from full-time students paying full tuition hadn’t stopped increasing. Even the median law school hauled in more money from full-time, full-paying students than before (~$7.8 million).

For tuition increases, though, the outlier of the year is Thomas M. Cooley Law School, which increased its full-time tuition by $6,400 (17 percent). Meanwhile, its full-time enrollment fell from 604 last year to 386 this year. The number of full-time matriculants this fall was 49, down from 115 last year (57 percent). Wow.

On the other side of the cost curve universe, Arizona’s resident tuition fell by 10 percent, a record low going back to … 2009, when you were listening to the soundtrack to Hannah Montana: The Movie.

I haven’t carefully combed the numbers for this year, but researchers should know that Southern University Law Center reported its semester tuition, not annual.

For private law schools, full-time tuition increases occurred on the more expensive end, but they’re slowing down in tandem, just not as quickly as the inflation rate.

Full-Time Private Law School Tuition Increases by Tuition Quintile (Current $)

That’s all I’ve got. Peace.

New America Foundation Discovers Law School Debt Disaster

Via Jordan Weissmann of Slate, the New America Foundation (NAF) issued a policy brief titled, “The Graduate Student Debt Review.” It opens with a suspiciously leading question, “Is America’s student debt problem due more to expensive graduate degrees than unaffordable undergraduate educations?” Like, why would it think graduate debt is a bigger problem than undergraduate debt? Hm … If I didn’t know any better I’d say the NAF has it in for Grad PLUS loans…

…Which I have no problem with. If the NAF wants to dress up in camos, put on war paint, and emerge from the lagoon with a machete clenched in its teeth as it hunts down the beast of unlimited student lending, I say have at it. I might even sneak into the theater to watch.

The obvious question, though, is what does the NAF mean by “America’s student debt problem”? I know what I think it means, but the NAF’s justifications appear to be different:

Students, families, and taxpayers invest significant resources in financing “college,” in large part because a bachelor’s or associate degree is a must for anyone who wants to secure a middle-class income. If students are taking on unmanageable debt to earn those credentials, then many would argue that the system isn’t working. We should not, however, draw the same conclusions from debt levels of students who attend graduate and professional school. While a graduate or professional degree boosts a student’s earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides. (2)

My eyes bleed reading such ideology.

So if someone goes to college, doesn’t take out a lot of debt, but ends up among the 20 percent of graduates who earn less than the median high school graduate in the same age bracket, then the higher education system is working? What about the average defaulted federal loan balance being less than $15,000? How is the system working if someone can borrow a lot of money and pay it off even if they learned their skills on the job?

If I were paranoid, I would suspect that the NAF’s goal is to cut off the worst abuses of the student loan program to save it from critics who think higher education is mostly a positional good. That, or it’s innocently confused on the theoretical debate (such as it is in Washington). Recall that the NAF advocated eliminating Grad PLUS loans while increasing the unsubsidized Stafford loan limit to restore students’ lost purchasing power. It reasoned that Grad PLUS loans can “discourage prudent pricing on the part of institutions,” but the mainstay Stafford certainly does not because education is necessary for the middle class and $30,000 of student debt isn’t so bad.

Okay, so the NAF is probably motivated by a (correctly) assumed conclusion, but what about its findings?

The point of the policy brief is to show that graduate and professional students are borrowing more than a few years ago and that their borrowing accounts for a large portion of total federal student loans (40 percent of the evil $1 trillion+ figure). Therefore, we should separate trends in college borrowing from post-college borrowing. As evidence, the NAF sampled a dataset of people who finished several types of graduate and professional programs in 2004, 2008, and 2012 and displayed their median, 75th percentile, and 90th percentile debt levels.

The tables the NAF provides are interesting for what they are, and along with data provided elsewhere they do show that typical grad students’ debt levels are growing more than undergrads’. However, the tables don’t really answer the questions the NAF is asking. If 40 percent of all student loans are owed by graduates and professionals, we’d want to know the distribution of that 40 percent aggregate by course of study. (How much of it went to med school students? Is it really as bad as those law school scambloggers say? Etc.) That way, we’d know if the growth seen in the tables is systemic as the NAF asserts or isolated to a handful of degree fields.

Instead, the NAF tells us median debt levels for graduates in all fields have gone up, but we knew this already because Grad PLUS loans can go to living expenses and relatively few 2008 grads used them. In a sense the NAF equivocated when it asked, “Is America’s student debt problem due more to expensive graduate degrees than unaffordable undergraduate educations?” Are graduate degrees expensive because tuition costs more or because people are borrowing from the government to leave near campus? We can’t tell, but in Weissmann’s post, the brief’s author, Jason Delisle, claimed Grad PLUS loans mightn’t responsible for the increasing medians but probably the increases at the 75th and 90th percentiles. I don’t believe him either, but that’s what happens when you deny the possibility that credentials are positional goods.

One big reason a distribution analysis would have been more useful is that median debt levels in most graduate degree fields grew by less than $10,000 between 2008 and 2012, and the overall median was only $6,854 higher. The median for “medicine and other health sciences” grew by $23,700, but law grads, as always, stole the show: $44,500 more debt in four years. Indeed, very savvy readers will note that at $128,000, the median 2012 law grad’s debt load was way higher than the weighted average grad’s debt (~$107,000 by looking at the number of graduates and U.S. News debt rankings).

If there’s anything to say about graduate students and debt from this policy brief, it’s that the NAF has discovered that legal education is a unique disaster in higher education.

Instead, it lectures:

Students pursuing [graduate and professional] degrees already have an undergraduate degree, and they should be far more informed consumers. Therefore, they shouldn’t need a lot of public support to finance their next credential, which is why there are no Pell Grants for master’s degrees.

I can’t tell if the gratuitous phrase, “should be far more informed consumers,” is a normative statement against the grad students, their undergraduate institutions for failing to educate them properly, or the grad programs for pitching degrees of dubious value. Chalk one more up to the strategic use of the passive voice, I guess. The worst-case scenario is that the NAF believes that everyone who goes to grad school knows about IBR’s loan cancelation feature, so they irresponsibly attend thinking they won’t have to repay their debts even though they make lots of money because they’re so amazingly educated.

If you think I’m being hard on the NAF—well, I am—but the point is that its policy brief is a bellwether. The Grad PLUS Loan Program is not long for this world, and that’s a very good thing. On the other hand, the NAF is not the ally to the working class—sorry, “middle class”—it fantasizes to be. It’s very much enthralled by human capital theory, and it won’t pay any price if people graduate from college and don’t collect any premium.

When Did the Law School Tipping Point Occur?

Answer: We’ll never really know (for reasons I’ll get into), but there are some good indicators that it was late 2009/early 2010. This isn’t widely acknowledged, but demonstrating it requires some careful calculating that’s worth showing.

The question is, when did people start not thinking about going to law school? (If that makes sense.)

Enrolling in law school is a multi-step process that I’ll reduce to two, taking the LSAT and applying. Looking at applicants is easy enough; looking at LSATs is not. Some people take the test more than once, and the LSAC is stingy about releasing data that break down LSATs by how many tests were first-time or repeat administrations. Worse, the previous release of the LSAC’s “Performance of Repeat Test Takers on the Law School Admission Test,” which publicizes this information, stopped at February 2010, tantalizing us with what was to come. Nor did it help that the February 2010 administration was a cliffhanger: There was an 11 percent drop in first-time takers over the previous year! Did the decline continue in June! Tune in next season, viewers!

Well, it’s been three years, so the LSAC has at last televised the resolution (pdf).

First-Time LSATs One-Year Moving Sum

It turns out that the number of first through third-plus LSATs do not add up to the total. I listed the discrepancy as “Canceled/Nonstandard.” I don’t know if that’s correct strictly speaking, but it tends to correlate with movements in first-time takers. I have no idea how many people take the LSAT under nonstandard conditions, but the data show a discrepancy, so there it is.

A few observations. One, by February 2013, there was a record low number of first-time LSATs going back to 1995 and certainly earlier. Two, the number of second-time LSATs has trended upward since 2006, which is attributable to the ABA’s decision to require law schools to report repeat takers’ highest LSAT scores and not their averages. This is one more reason to isolate first-time takers.

And what do they tell us? Although there was a substantial drop in February 2010 first-time test takers, the decline was modest the following June. Then it hit the fan in October.

Percent Change LSAT One-Year Moving Sums

You can also see that repeat takers resisted declines for a few more periods. All administration types only started falling together in June 2011. The real question is why did February 2010 fall more than June 2010? For that I have no answer. I’d need to know the typical demographics of the test takers in each cycle, so the February drop could be mostly an anomaly. The only thing I know is that first-time takers in that period tend to have lower scores, which indicates that they might be older, non-trad types—not because people’s LSAT abilities rapidly turn to mush as people age but because people who would naturally do well on the test either did so already or are employed in other fields. It’s a big ol’ case of selection bias.

All told, we can imagine the number of LSAT takers as a ball being pushed up a hill by multiple forces and resisted by others, e.g. unemployment versus the population of college-educated young people and informal voices telling them not to bother with law school. At some point the forces pushing the ball uphill were countered by other forces in late 2009/early 2010. Those were, I imagine, early scamblogs (Big Debt Small Law), Above the Law (Elie Mystal’s writings in particular), and Mark Greenbaum’s op-ed to the L.A. Times.

If you want a second opinion on the evidence, we can hypothesize that a “signature” of the tipping point would be an unusual number of people who took the LSAT once or twice but who decided not to retake it or apply after all. Mathematically, the LSAT year, June to February, corresponds best to the applicant cycle. We find that in 2007, 2008, and 2009, that on average there were 1.08 first-time LSAT takers per applicant in 2008, 2009, and 2010, respectively. In 2010, the ratio spiked to 1.17 and then fell a little in subsequent years. With 102,948 2009-2010 first-time LSAT takers, and assuming the 1.08 ratio, we get about 94,500 applicants for 2010. Instead, there were only 87,900, implying that about 6,500 people with a first-time LSAT score in hand in 2009-10 chose not to apply to law school. (It doesn’t matter that the ratio accounts for behaviors of repeat takers, it just needs to be measurable, correlative, and logically related.) Repeating the same process for all LSATs to find a ceiling that includes subsequent test takers who mayn’t’ve applied, we get 100,300 expected applicants, a shortfall of 12,400.

LSATs to Subsequent Applicants

So, sometime between receiving their scores for the June 2009 administration and the beginning of the fall 2010 application cycle, somewhere between 6,500 and 12,400 people dropped out between the LSAT cycle and the application cycle. Switching to a calendar year LSAT cycle (to align it better with the application cycle) raises the range to 8,800 and 14,400.

This, second analysis, suggests that the tipping point occurred in late 2009 but the impact on first-time LSATs wasn’t felt until 2010. It could mean more credit for the early scamblogs and Above the Law, and other sources than the Greenbaum op-ed.

Once the peak was reached, the countervailing forces overpowered the upward ones. Unemployment gave way to distrust in law school as a viable long-term career path. Certainly other sources contributed as well, e.g. The New York Times, but those articles were published a year after the Internet set things in motion. Now inertia is setting in and the trough is slowly being reached.

It’ll be another three years until the LSAC updates the number of first-time and repeat takers again. We may find out who contributed to the upswing in February LSATs in 2014.

Stay tuned…

Site Update: Lawyer Overproduction Page

You can find it here or in the “original research (updated)” menu above. It’s long overdue as I’ve received requests for its sources.

I also delisted the “law schools and law students per capita” page. It hadn’t been updated in around three years, and the lawyer overproduction page pretty much supersedes it. It’s a little sad because that was the first research project I started on this blog back in the summer of ’10. Maybe I’ll come up with a reason to put it back into the mix, but not now.

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