Breaking Even

Via Above The Law and, cleaned up some, Volokh Conspiracy, Northwestern Law School Dean David Van Zandt,at the PLI Law Firm Leadership and Management Institute, offered his thoughts on the future of legal education.  Included in his speech was this:

One of his most interesting tidbits was the starting salary that would constitute a “break-even point” for going to law school. In other words, what salary would you have to earn upon graduation in order to make going to law school an economically rational decision?

Van Zandt and some of his Northwestern colleagues did a study to determine the added value of a J.D. degree. They concluded that the break-even starting salary for a law school graduate is $65,000. Put another way, going to a law school with a median salary upon graduation that’s below $65,000 is not a wise investment.

Schools with median starting salaries under $65,000, which generally land somewhere in the 70s in the U.S. News & World Report rankings, are not good values. They need to either lower their cost to students and/or improve job opportunities for their graduates, according to Van Zandt.

Over at ATL, where most of the readers are, or more likely, want to be, Biglaw bench warmers, there was much quacking about the details.  David Lat questioned whether Van Zandt’s $65k was high enough, while others nipped at the edges of the number by noting that some schools charged more, others less. 

(A break-even point of $65K seems low to us, given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry. We’ve reached out to Dean Van Zandt to ask for more detail about the data he utilized and the assumptions he made in reaching his conclusion. Another academic, Herwig Schlunk of Vanderbilt Law, believes that the break-even point is much higher.)
While accuracy matters, it obscures the more important point, one that we seldom think much about if at all.  I can’t remember a would-be law student, asking my advice on entering the law, considered it from a cost-benefit standpoint.  It was assumed that becoming a lawyer meant that one would enjoy a financially comfortable life.  It was a given.

Dean Van Zandt’s raising the point, even if we quibble about the details, is important in that it puts the question squarely in issue.  If you are not going to come out of law school and fall into a job/practice where you earn somewhere in the neighborhood of $65,000, you’ve made a poor financial decision.

Of course, at ATL, no one considers the application of this issue to criminal law, the nasty niche far under the radar of students aspiring to engage in the practice of important areas law, like M&A.  Are there any prosecutorial or public defender offices that pay new hires $65,000 or more?  Not that I’m aware of, making lawyers who want to enter into criminal law financial failures.

When it comes to criminal defense, I suspect that most lawyers come to it with a desire to spend their days doing it.  It’s not a money issue, as opportunities for vast wealth are remarkably limited.  In that way, it can be considered more pure than more lucrative practice areas, attracting young lawyers for the right reasons rather than the money.  There’s not much money to be had, and nobody thinks otherwise.

On the other hand, if young lawyers gave much thought to the cost of their education versus the income they would anticipate deriving from it, one might suspect that they would think long and hard about whether their desire to practice criminal law was so strong that they would be willing to make a substantial financial sacrifice to do it.  I mean, it’s fun, but is it that much fun?

What’s notable about the break even point is that the job market for young lawyers tends to divide into the Biglaw jobs paying substantially more, and all other jobs paying substantially less.  There aren’t many jobs out there for new lawyers offering $65,000 a year.  Most of the jobs, obviously, fall well under the break even point.

So what to do about it.  One solution is to reduce the cost of a law school education, but that would result in lowering the barrier to entry and more people wanting to go to law school.  New law schools are opening as we speak, demonstrating that the ABA is of the view that we don’t have enough lawyers, as opposed to too many.  Perhaps everybody will be a lawyer someday.  The more lawyers, the greater the supply and lower the salaries.  And the all the other problems that come along with idle lawyer hands.

Another solution is to increase salaries, as if legal costs aren’t high enough already.  No doubt the public is saying, “darn, I should sue/defend more often since it’s such a good financial deal and will help that nice young lawyer earn a decent living.”

Dean Van Zandt suggests that changing the way law schools train lawyers, by turning the third year experiential, or even eliminating it altogether.  He notes that law schools are resistant to this change, although his school, Northwestern, has made some fundamental changes in its program.  To the extent that law schools fail to produce people capable of practicing law upon admission, Van Zandt leaves it up to law firms to provide the practical education young lawyers need to turn their law school experience into something remotely useful.

Nobody suggests, of course, that we stop producing more lawyers than society needs or can absorb.  And certainly nobody feels any qualms about the fact that our prosecutorial and public defender functions rely on overworked and underpaid young lawyers who, if they had an ounce of fiscal intelligence, would have put their money into gold and opened a shoe store.  Everybody needs shoes.

One thing is painfully clear.  If you’re looking for a decent investment, don’t go to law school.  And if you’ve already blown that choice, definitely don’t become a criminal lawyer.  It’s like flushing your money down the toilet.  Unless you happen to really want to do this for the rest of your life.

4 thoughts on “Breaking Even

  1. Dan

    This post is 100% on target. Yet, for some reason, the period of my career when I was fully immersed in criminal law, making well below the break even point, with law school debt and all, was without a doubt the happiest so far.

  2. SHG

    I think back to the days when my bookcases were made of cinder blocks and milk crates, and everything I owned would fit into the back seat of my ’69 VW beetle.  Those were very happy days.

  3. Lee

    PDs and DAs offices in the bigger counties out west start at over 70K (some, like SF or Santa Clara, start in the 90s) and when you factor in our benefits and pension, it narrows the gap between government service and private practice even more.

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