Why a Law Degree Today is Worthless & Financial Insanity
Paul Campos is a law professor at the University of Colorado. Surprisingly, he is also the author of the book Don’t Go to Law School (Unless).
You might say Campos is the leading “doom and gloom prophet” of the legal profession. He has been warning people about the risk of attending law school since at least 2010.
In a lengthy interview with the Denver Post (published July 28, 2013), Campos said:
The perception that going to law school is a ticket to great wealth or at least very solidly upper middle-class status was always somewhat exaggerated, but over the past 15 years the disjunction between myth and reality has widened because the information technology revolution has hit the legal services market very hard. That has led to a sharp decline in the portion of GDP that goes to legal services, from about 2 percent 35 years ago to 1.37 percent in 2009 and probably more since then. That’s a decline of a third, which is an enormous relative decline.
Falling demand for legal services has created a dismal job market for people who’ve gotten law degrees. You’d think this would reduce the number of people who are seeking careers in law, but the supply continues to exceed demand.
What we do know is that there are about twice as many people of working age with law degrees as there are practicing attorneys. We also know that barely even half of all law graduates are getting real legal jobs within nine months after graduation.
Demand is down. Supply is up. And to add insult to injury, the cost of a law degree has outstripped inflation for decades.
For example, after adjusting for inflation, Harvard Law School cost just $5,000 a year in the 1950s. Today, you’d pay $53,000 — a 960% increase in roughly 60 years.
Campos also points out that people graduating from private law schools carry an average debt of $150,000.
This figure does not include the average debt incurred to acquire an undergraduate degree. College graduates now leave with an average $35,000 debt.
Add the two figures together and it would be a fair assumption that many private law school grads are carrying total educational debts in excess of $200,000 — the equivalent of a home mortgage in many states.
But what is that law degree worth? What kind of income can you expect to earn after investing so much time and money?
The answer will shock you. Campos says:
Median salary of people who graduated from law schools last year was around $45,000. There is absolutely no way it makes sense economically to incur $150,000 in debt and end up with a $45,000-a-year job. That’s what economists call negative net present value in terms of the value of the degree. That means the degree is not worthless, but worse than worthless.
So why do so many people continue to believe the myth that a legal profession is a guaranteed path to wealth?
Because society’s awareness tends to lag behind reality. Sometimes it takes decades for awareness to catch up. During the lag time, people continue to make decisions based on old and outdated information.
Which often leads to long-term financial pain.
So why do I bother bringing this up on a blog that’s supposed to talk about business?
#2 – I personally believe some of the highest ROI activity comes from learning how to start and grow your own business. Doesn’t matter whether it’s a service business or product business — you have the opportunity to make a better-than-average income as an entrepreneur.
-Ryan M. Healy