NALP Salary Data for 2012 Law Grads

The Bell Curve 

and 

The Spike

First, forgive the look of this blog posting.  I have reproduced the chart from the NALP website, and this blogging platform makes me keep the original formatting (in this instance).

Now, I saw this chart for the first time at the conference of the Midwest Association of Pre-Law Advisors (MAPLA).  LSAC General Counsel, Joan Van Tol, included it in her slides along with data on applications to law school. 

She explained that the chart showed two salary patterns.  The bell curve on the left hand side of the chart shows the starting salary for most (reportng) law school graduates 9-months after graduation.  Most of the jobs held by new grads pay $40,000 to $65,000.  

The second pattern appears on the right side of the chart and reflects starting salaries of graduates who land jobs with BigLaw.  Van Toll called this part of the chart "the spike."  The spike moved away from the bell curve during the dot.com era (as I recall her saying) and has been durable even through the recession, even if fewer graduates landed jobs in BigLaw.  The webpage shows charts for salary data going back to 2006.  

The Adjusted Mean and Mean tell another story.  Yes, they represent the average of all salaries for new law grads (who reported salaries to NALP), but relatively few jobs actually pay these salaries.   Instead, "the spike" pulls the average away from the bell curve towards the salary level represented by the spike.

Salary Distribution Curve

Class of 2012

For more information on the Class of 2012 salary distribution curve, see The NALP Salary Curve for the Class of 2012

Distribution of Reported Full-Time Salaries — Class of 2012

[NALP] Note: Graph is based on 20,709 salaries reported for full-time jobs lasting a year or more. A few salaries above $205,000 are excluded from the graph for clarity, but not from the percentage calculations. The left-hand peaks of the graph reflect salaries of $40,000 to $65,000, which collectively accounted for about 51% of reported salaries. The right-hand peak shows that salaries of $160,000 accounted for about 16% of reported salaries. However, more complete salary coverage for jobs at large law firms heightens this peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by about 7%. Nonetheless, as both the arithmetic mean and the adjusted mean show, relatively few salaries are close to either mean. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.

The scambloggers are correct in criticizing marketing that suggests that most new law graduates will earn six-figure salaries straight out of law school.  Only the very large law firms pay this premium salary.

NALP reported that BigLaw firms (500 plus) hired 3,600 new associates in 2012, down from 5,100 in 2009, but up from hirings in 2011. Employment opportunities at BigLaw rose 27 percent over the last two years.   

Here is the employment trend at these BigLaw firms. For a graphic depiction of the partner to associate ratio in BigLaw, see here. 

In pre-recession 2007:

• 4,745 (23%) of new law grads joined BigLaw (501+).

In 2008, 

• 5,193 (25.3%) joined BigLaw (501+).

In 2009:

• 5,156 (25.6%) joined BigLaw (501+).

In 2010:

• 3,750 (20%) joined BigLaw (501+). 

In 2011:

• 2,856 (16.2%) joined BigLaw (501+). 

In 2012 (based on preliminary data):

• 3,600 (19.1%) joined BigLaw (501+).  

So, prospective law students must keep this possible salary range in mind as they choose law schools, negotiate tuition and scholarship packages, and consider published employment data for each school to which they plan to apply.

Dec. 19 Update:  Just found this on the ABA webpage.  It's an excerpt from the November 2013 report from NALP:

NALP Issues Press Release on Associate Salary Findings 

Starting associate salaries at large law firms have remained essentially flat since 2007, despite some erosion of the prevalence of $160,000 as the norm. "The story is really one of no change, or at least not much change," noted James Leipold, NALP's Executive Director, in a press release issued recently by NALP on the findings of the 2013 Associate Salary Survey. "Compared to the period of 2006 through 2009, when associate salaries were rising year on year at a steady clip, in the period since the recession we have seen associate salaries remain more or less static," he added. "At the largest firms in the largest markets, a starting salary of $160,000 remains the norm, though its prevalence has ebbed and flowed a bit over the last several years." Read the full press release at http://www.nalp.org/associate_salaries_sept2013.

Interesting that NALP talks about the spike, even suggesting it is the norm, without talking about the bell curve.   

Are Law School Success Stories Really that Rare?

Law School Success Stories

Elie Mystal, of Above the Law, which I would characterize as one of the leading "scambloggers,"  made a posting yesterday entitled:  The Lack of Law School Transparency Claims Another Victim.

Here is the lead in paragraph:

Some guy on Twitter was complaining that Above the Law focuses too much on the negative side of going to law school. Apparently this person mistakes us for a law school admissions office — people who ignore facts when they don’t fit their happy-clappy narrative. We do bring you some law school success stories when we hear of good ones. Do you know why those stories are “news”? Because law schools are so effective at leading people down a path of career frustration and financial ruin that when somebody beats the odds, it’s mildly noteworthy.

This blog tends to focus on graduates from top-ranked schools who had expected to join BigLaw. They routinely paid $40,000-$50,000 per year in tuition at the top schools.

As some of my posts here, here and here have indicated, the largest percentage of job loss during the recession came in large law firms of 500+ lawyers. Hiring at smaller firms (2 to 10 lawyers), to which most of ASL's graduates head, has increased, even if salaries at these firms fall in the bell curve described here, with most new graduates earning between $40,000 to $65,000 to start.

So, I am putting these questions out there to our ASL alums:

• Are you some of the law school success stories?  
• If so, how and why?  
• Are you happy you made the decision to attend law school?   
• If you had not attended law school, what would you have otherwise done with your college education?  

I expect our unhappy graduates to respond first. But, I would like as many points of view as possible.

I am especially curious about this issue because I have now profiled twelve ASL graduates working in lower paying public service jobs in postings beginning here.  I have two more profiles in draft.  Based on my conversations with these alumni, admittedly about 10 percent of our graduates, they all seem happy in their careers and with the personal and professional opportunities their law degrees opened for them.

I am certain that their expectations about law practice have changed from the expectations they held as incoming 1Ls.  But, would they call a "do-over" and not attend law school?  Would you attend another graduate school even though the bubble may be bursting for graduates of vet, dental, pharmacy, and optometry schools -- and even some practice areas of medicine?

Who Should Go To Law School Today?

Who Should Go to Law School Today?

At the MAPLA conference in late October, which I have covered in several postings, Washington University School of Law Dean Kent Syverud described three things:

• Who should go to law school today;
• Who should not go to law school today; and
• Which school a student should pick. 

Who Should go to Law School Today?

You should still go to law school, despite the debt-to-annual income ratio, if you:

• Care passionately about obtaining the skills needed to change the world;
• Will make sacrifices to earn the J.D. degree;
• Will be astute at figuring out how to get an affordable education;
• Will be flexible and adaptable to the changing career landscape; and, 
• Will be adaptable to obtaining new skills as that landscape changes.

Who Should not Go to Law School Today?

Dean Syverud also advised that you should not go to law school if:

• You don't know what else to do;
• It only helps college or university career office statistics; or
• You plan to make a lot of money. 

On this last point, data assembled from Illinois and Missouri lawyers about a decade ago shows that the average lawyer makes an income of about $110,000.  That number may have changed a bit, but I suspect it is reasonably accurate even today.  I'll provide the links when I get back from my trip this coming week.






Which School is the Best Fit for Today's Student?

Finally, Dean Syverud identified the best school for today's prospective law student. It should:

• Have utmost integrity and deliver on its promises;
• Deliver key skills in a quality way;
• Have every member of its administration, faculty, and staff helping graduates find jobs in this tough job market; and,
• Offer an affordable education for that student.

Using Pre-Law Advisors:

In this difficult time of transition, Dean Syverud suggests that the role of the pre-law advisor is coming back. He said 70 percent of students have not talked with a pre-law advisor about whether to attend law school, which school to choose, and how to keep the cost affordable.  Instead, prospective students rely on:

• Websites;
• Blogs;
• U.S. News rankings; and 
• Law school publicity. 

Several of my postings have looked at the cost of law school, the job market, the value of a law degree, and whether I'd go to law school today.  As I have noted earlier, I believe deeply in informed decision-making. After my experience with the midwest pre-law advisors,  I agree that pre-law advisors should play an important role in the decision-making of prospective law students.

Dec. 14, 2013 Update:  LSAC data on law school applicants for 2010 to 2014.  In light of it, law schools will compete even more heavily on price.

The Economic Value of a Law Degree: Last Posting in the Debate

I've enjoyed the blog-based debate about the new report -- The Economic Value of a Law Degree -- which I summarized here.  Michael Simkovic and Frank McIntyre, its authors, have explained their methodology, which to my untrained eye, appears robust.  They have successfully responded over the last several weeks to the points made by Brian Tamanaha, author of Failing Law Schools.

Simkovic's last blog post appears here.  It goes into further detail about the methodology used to compare the two populations -- first, law school grads and second, bachelor degree earners most like law school grads.

I am curious why this report has generated this type of debate.  Are we so accustomed to hearing bad news about law school that some good news seems automatically suspect?  Have the scambloggers so occupied the field for so long that we cannot easily make a shift in how we view the value of a law degree in today's market?

Yes, getting a legal education continues to be a huge investment in yourself.  And, what are we comparing it to?  As the report notes, most students who attend law school obtained bachelor degrees in areas not rewarded in the job market -- history, political science, and other humanities.

Typically, law graduates have not gotten degrees in science, math, engineering, or technology (SMET), which might offer a much different career path, and which might be rewarded with jobs straight out of college.  Then again, the SMET college graduates may also need to attend graduate school to see a significant impact on future earnings?  I have no idea what those additional degrees might cost these days.

If the students with a humanities degree do not attend law school, what else will they do?  How much money can they expect to make over a career with their humanities degree?  Will they find that career intellectually stimulating and an on-going source of personal and professional growth?

Attending Law School, Even in this Tough Market, is a Very Good Life-Time Investment

This past week, a number of news outlets and bloggers reported on a new economic analysis of the value of a law degree.  The authors make a persuasive, well-researched argument that a law degree confers measurable life-time advantages on law graduates compared to persons who get only a bachelor’s degree.

The report:  Micahel Simkovic and Frank McIntyre, The Economic Value of a Law Degree (unpublished manuscript 2013) is found here.    

Simkovic, an Associate Professor of Law at Seton Hall University School of Law, and McIntyre, an Associate Professor of Finance and Economic at Rutgers Business School answered the following questions: 

• Does a law degree typically increase the earnings of law graduates compared to what such individuals would likely have earned with only a bachelor’s degree?
• How does the law school earnings premium vary by gender and at different points in the distribution of outcomes?
• How much of the increase in earnings is higher hourly wages, and how much is longer work hours?
• Have declines in recent law graduate earnings eroded the law degree earnings premium?
• Or, have parallel declines in earnings for similar bachelor’s degrees left the relative advantage of a law degree intact?
• Is the increase in lifetime earnings enough to justify the cost of attending law school for most law students?

The authors conclude: “[A]ttending law school is generally a better financial decision than terminating one’s education with a bachelor’s degree . . . . [E]ven for relatively low earners, a law degree will typically more than pay for itself over the course of a lifetime.”

The authors use multiple sources of publicly available data through 2011, run advanced statistical analyses, make appropriate adjustments, disclose their underlying assumptions, and make the following conclusions:

• The mean pre-tax lifetime value of a law degree is approximately $1,000,000 (actually $990,000).  In other words, if someone who has earned a bachelor’s degree goes on to earn a law degree, he or she will earn $1,000,000 more in lifetime earnings because of that decision.    Lifetime earnings are based on historical data from 1996 to 2011. 
• The law degree “earnings premium” for 25^th percentile earners is $350,000.
• The law degree “earnings premium” for 75^th percentile earners is $1.1 million.
• The mean value of nearly $1 million translates into an 80 percent earnings premium for law graduates compared to the general population of bachelor’s degree holders.  
• Lifetime medianvalue of the earnings premium is $610,000 (with half of law grads earning above that amount and half earning below that amount).
• The law degree “is associated with dramatically higher monthly earnings” – an increase in median monthly earnings of 60 percent over a bachelor’s degree.
• The law degree increases median hourly wages by 50 percent over a bachelor’s degree.  This number reflects the greater number of hours law graduates work at higher hourly rates.  Law degree holders work 3.9 hours more per week or about 45 minutes more per day than less educated peers. 
• Women law grads work 4.2 hours more per week than women with bachelor’s degrees. 
• Men law grads work about 3.3 hours more than men without law degrees.  
• But men law graduates work longer hours than women law graduates.  More about that later. 
• The mean annual earnings premium of a law degree (over a bachelor’s degree) is about $53,300 in 2012 dollars. 
• Men get a larger premium of $56,800 because they work longer hours. 
• Women law grads see a smaller earnings premium of $43,300 per year (compared to women without a law degree). 
• Full-time workers see a premium of $57,600 more than full-time persons with a bachelor’s degree.
• The median annual earnings premium for all law degree holders is $32,300 per year.   
• Thus, less capable students, graduating from less prestigious schools (25^thpercentile earners) still earn the premium.
• Women with a law degree see a much smaller life-time earnings premium of $820,000 vs. $1.03 million for men.  Interestingly, the premium is higher for women in the first two decades of their careers, but higher for men in the last two decades of their careers.  Table 8 to the report shows these differences, and it is fascinating. 
• The authors found that married women work fewer hours, while married men work more hours. 
• Even at the 25^th percentile, women will see a life-time earnings premium of $350,00, which makes a law degree a good investment for most women. 
• After-tax mean earnings premium is $720,000 for men and $570,000 for women. 
• Of roughly 800 occupations tracked by the U.S. Department of Labor Statistics, only doctors, dentists, podiatrists, and chief executives routinely have higher mean earnings than lawyers.  Lawyers earn more than teachers, accountants, auditors, managers, nurses, and clergy.
• In a less robust 2009 study, one of the authors found that law outperformed business degrees by $10,000 per year; liberal arts degrees by $35,000; and social science degrees by $40,000 per year. 
• Students who choose to attend law school are disproportionately drawn from college majors – humanities and social sciences -- associated with relatively low earnings and a low likelihood of obtaining employment at college graduation.   
• Law degree holders start at higher earnings levels and tend to see their earnings increase at a much faster rate over a longer period of time than do holders of bachelor degrees.  Figure 4 to the report illustrates this reality in a dramatic way. 
• “[E]ducation has become more valuable after controlling for work experience.”
• Data suggests that even law graduates who work in non-lawyer occupations do substantially better than bachelor degree holders. 
• The law degree pays for itself several times over during the course of the graduate’s career.
• Yes, starting salaries declined 20 percent between 2009 and 2012.
• Yes, the percent of graduates employed 9 months after graduation declined 4 percent in that same period.
• Law degree holders are not immune to economic downturns.  But, relative to graduates with a bachelor’s degree, law graduates did better in this recessionary economy.  
• In fact, the law degree earnings premium “may have increased as law graduates weathered the recession better than most” laborers.
• In a recession, entry-level wages, employment opportunities, and law school enrollments are more variable than in the legal occupation as a whole.  “[I]t is easier for employers to refrain from hiring new employees or to offer lower starting salaries than to terminate or reduced pay of experienced workers.
• The legal occupation has seen cyclical peaks in 2011 and 2007 and troughs in 1999 and 2002.
•  “Although the earnings premium has declined from its 2007 peak in recent years, the earnings premium remains close to (and slightly above) the long-term historic average.  Indeed, the premium was lower in the late 1990s and early 2000s than in the last three years, and the premium today is about the same as it was in 1996.” 
• From 2008 to 2012, employment for lawyers was more robust than for the overall economy.  Gross revenue and profits per partner increased at the largest 200 firms every year from 2010 to 2012. 
• First year earnings of new law graduates represent a small fraction of lifetime earnings – only 2 to 3 percent. 
• The earnings premium was not significantly influenced by test scores, grades, internal motivation, college quality, and parental socio-economic status.  These factors may account for 5 percent of the earnings premium for law grads.
• The law degree also apparently confers other benefits: higher participation in the workforce; more full-time employment; less unemployment; less unemployment related to disability; and higher life expectancies.
• The authors assumed an annual net-tuition (tuition net scholarships and grants) of $30,000, or a total three-year cost of $90,000.  The assumption reflects ABA data on typical law school costs.   They also assumed the costs of living during law school were similar to the costs of living while working full-time.
• Government coffers benefit significantly from those people who earn law degrees.  Tax revenue is approximately $370,000 on average over a law grad’s lifetime.  Government backed educational loans earn higher rates of interest, but law grads default on student loans at a rate of no more than 3.3 percent.
• In comparison, people with master’s, doctor’s, or other professional degrees default on loans at a rate of 10.4 percent and the overall default rate across educational institutions is 13.4 percent.
• Accordingly, the U.S. government could encourage more students to attend law school by offering Income Based Repayment plans with debt forgiveness, reducing tax rates on labor, directly subsidizing higher education, or making educational expenditures more fully tax deductible.  “[T]he government is therefore well situated to absorb and spread risks of investment in higher education.” 

I have quoted many parts of the report without using quotations.  

I said just about the same thing without relying on this data in the blog postings found here and here.

Nov. 29, 2013 Update:  Associate Professor Daniel Katz of Michigan State University College of Law called this study "wrong" without elaboration in his interview posted here. He teaches several innovative law courses, including Legal Information Technology, Economics of the Legal Profession, Legal Project Management, Entrepreneurial Lawyering, Legal Analytics, Quantitative Methods for Lawyers, Law as a Complex Adaptive System, Legal Process Engineering, and Artificial Intelligence & Law.

Today's Supply-Demand Gap in Legal Jobs: Understanding the Reported Numbers

Yesterday, I posted about the supply and demand for legal services some time in the future as more Baby Boomers retire.  Today, I want to explore the supply-demand gap existing today.

Just recently, the ABA released data on employment rates for law school grads nine months after graduation for all ABA-approved law schools.  On average, for 2012 grads, 56.2 percent of grads found long-term, full-time positions that required bar passage.  These jobs include solo practitioners, law firm positions, business and industry positions, government jobs, public interest jobs, clerkships, and jobs in legal education.

In 2011, fewer grads found that type of employment -- just 54.9 percent.  Grads who reported they still sought employment increased a bit from 9.2 percent in 2011 to 10.6 percent in 2012. ABA 2012 Law Graduate Employment Data -- All Schools

This measure of employment success is narrow, but admittedly reflects the aspirations of most students seeking a law degree.  It does not consider the other options that might exist for new grads, including:

• Employed -- J.D. Advantage
• Employed -- Professional Position
• Employed -- Non-Professional Position
• Employed -- Undetermined
• Pursuing Graduate Degree Full Time
• Unemployed -- Start Date Deferred
• Unemployed -- Not Seeking
• Employment Status Unknown

The employment number is tricky in another way.  It took me a while to understand the various numbers floating about in the media.  So, here is my understanding of the source of the different employment percentage rates reported by the press. This discussion is my own and should not be considered a statement from my law school.  Are we clear about that?!

The raw data yields at least three different numbers depending on the numerators and denominators used to calculate any employment percentage.

The most reliable number comes from the responses to the survey distributed through the Association for Legal Career Professionals.  See here for more information about NALP.  This very detailed survey captures far more information than does the ABA report most widely available in the press.  ABA Employment Summary for 2012 Graduates by School  The NALP survey report calculates employment rates using a numerator consisting of all categories of employed grads and a denominator consisting only of the number of grads responding to the survey.

Accordingly, for ASL 2011 grads, 75.3 percent were employed, reflecting 55 employed grads out of 73 reporting.  Nineteen ASL grads, or almost 21 percent of our total grads (92) that year failed to respond to the NALP employment survey despite the strenuous efforts of our Career Services Office.

Why does that matter?  Because the ABA then requires law schools to condense the NALP data into its own ABA report.  But, that ABA report does not disclose the number of grads who failed to respond to the NALP survey.  Thus, anyone using this much more ubiquitous report will likely put the number of employed grads as a numerator over a denominator consisting of all grads in that class.  In doing so, it treats the students who failed to reply to the survey as unemployed, whether true or not.

As a result, the employment number for ASL for 2011 falls from 75.3 percent to about 57 percent.  This drop also reflects some differences in the numbers reported:  only 52 employed students and only 91 grads.  For 2012, the ASL number rose to 69 percent (63 employed students/91 grads in the class).

The third number that most frequently circulates in the press, and the one mentioned in the first paragraph of this blog, takes a sub-set of the total grads employed -- specifically those in the "full-time, long-term, bar passage required" category -- and puts that subtotal over a denominator consisting of all grads in that graduating class, including those who did not return the NALP survey.  So again, grads who failed to report get treated as if they had not found any type of job.

For ASL 2011 grads, this approach drops the employment number from 75.3 percent to a fraction less than 31 percent.  For ASL 2012 grads, that number grows to 38.5 percent.  It reflects a 7.5 percent increase from 2011, but still falls 17.7 percent below the national average for all ABA-approved law schools for this specific category of employment.  Several law schools with student profiles similar to ASL's student profile reported lower (or equal) employment numbers, including Ave Maria, Barry, Charlotte, Florida Coastal, North Carolina Central, and Thomas Cooley.    

In short, ASL's employment numbers improved this last year.  Are we doing better in helping students find jobs in this economy?  Or, have more grads responded to the NALP survey so we have fewer non-reporters treated as unemployed in the calculations?  I know our Career Services Office has worked very hard this year on both aspects of this employment picture. 

Which of the three ways to calculate employment rates best represents the job market for law school grads?

ASL students, who must live 2.5 hours from the nearest metropolitan area, have fewer on-campus or pre-graduation opportunities to secure a job within nine months after graduation.  Does that explain the difference between our employment rate and the national average?  How would the employment rates compare 12 months after graduation when our students have settled into the city or town where they plan to practice, have studied for and taken the bar exam, and now have the undivided attention to look more actively for a job?  How would the averages compare after 18 months or two years?

Does a slow start to your law career necessarily counsel against pursuing a career in which attorneys average $100,000 per year in income?  For example, Missouri lawyers earned a median income of between $98,000 and $100,000 in 2010, with one half of responding lawyers reporting higher incomes. See here for the full report.  The Illinois Bar produced a similar report in 2004 showing that the median salary of responding lawyers was $110,000, with half of responding lawyers making more money than that each year.  See Virginia Grant, Highlights of the 2004 ISBA Law Firm Economic Benchmarking Survey, 92 Ill. Bar J. 624 (2004).

Thus, a lawyer, having a 40-year career, making on average a $100,000 year, would earn $4 million over a lifetime.  Women lawyers, unfortunately, average lower incomes than male lawyers, but could still expect to make $50,000 to $75,000 per year over a lifetime. See here for a report on the retention and promotion of women in law firms issued in October 2011.   

And how do law grad employment rates compare to the average employment rates of graduates from other professional and graduate schools in this recessionary market?  I don't know.  Clearly, prospective students need to consider whether they would make more money and be more satisfied with a life spent working in a profession other than law.

I have no regrets about the choice I made to attend law school in 1979.   But, then, I entered the profession during a very different economic time with a more predictable career path in front of me.  At the same time, less than 10 percent of lawyers were women when I graduated in 1982. More on that in a later posting.

October 2014 Update:  For an update and analysis of the date, see here.