The Problem with Reporting Starting Salaries

In a recent post, The Depth and Breadth of  Misleading Employment Numbers by Law Schools (And How to Solve It), Brian Tamanaha (Washington, St. Louis) focused on what statisticians would call the selection bias in salary reporting. For most law schools, graduates who report employment status do not report their starting salaries. In general, students with high starting salaries are more likely to report salaries that students with low starting salaries. As a result, the reported salary ranges are higher than actual salary ranges. 

Prof. Tamanaha also posted a chart that showed that lower-tier law schools tend to have a smaller proportion of reporting graduates that supply salary information. That said, reporting rates vary widely, and the range of variation (variance) increases as law-school rank decreases. By the nature of proportion sampling, the variance is "heterogeneous"--it is not constant across the range of the other variable. As a numbers guy, I'd rather see a chart of proportion reporting by LSAT score of the law school's entering cohort that just graduated, with a logistic fit line.

Prof. Tamanaha suggest that lower-tier schools don't try to get better information, because they don't really want to know what salaries their graduates are actually getting. I don't that that is true.  At least at my own school (South Texas College of Law), the Career Resources office aggressively follows up with graduates who do not report employment status, or who don't give salaries. They even contact employers to try to get salary information.

But Prof. Tamanaha if correct in noting the disconnect. At my own school, South Texas, about 26% of the 2009 and 2010 graduates who reported employment status also reported salary. It would be helpful if schools also published the such proportions. It might also be useful to report the distribution of salary-reporting graduates by employment type.

But why not report the ranges of salaries by employment type? If, as we suspect, the problem is under-reporting by graduates in lower-salary employment types, the number reporting (the "sample") will be much lower-- the "N" would be low--so the reported salaries would be less reliable.

What to do about that? Prof. Tamanaha noted an entry on the Forbes website, Law School Graduates Do Not Make $160,000, that discusses a report that Forbes commissioned (bought) from Payscale on the salaries of graduates of 98 law schools that were in Payscale's database.  The Forbes article includes the median salaries for the 98 schools.

The NALP conducts an annual survey of law firms asking for information about associate base salaries. The annual NALP Associate Salary Surveys are available for purchase from NALP, but most law-school Career Resources office probably have a copy.

According to the 2011 Associate Survey (press release), the national median starting salaries by firm size, and the number of reporting offices, are as follows:

NALP 2011 Associate Salary Survey Median Starting Salaries by Firm Size
Firm Size	Salary ($)	N	%
2-25	073,000	29	07%
26-50	086,000	25	06%
51-100	091,000	48	11%
101-250	110,000	64	15%
251-500	125,000	85	19%
501-700	120,000	119	27%
701 or more	160,000	70	16%
All Firms	115,000	440

 Even the NALP survey show a selection bias, with larger offices making up a disproportionate part of the survey;  62% of the reporting offices are offices with 251 or more lawyers. 

In addition to the national data, the NALP surveys break out salaries by firm size for metropolitan areas with populations in three ranges:  (i) 1.5 million or smaller; (ii) from 1.5 to 5.0;  and above 5.0 million.  That data shows the number of reporting offices for each category.

The NALP survey also gives starting salaries for some 28 cities.  But, the survey only gives overall associate starting salaries for those cities, together with the number of reporting offices, which often are small--for example Baltimore, 2010, 5 offices.

Robert Half Legal also has a free 2012 Legal and Professional Salary Guide. with ranges for starting salaries by size of firm:

Robert Half Legal Starting Salary Range by Firm Size
Firm Size	Salary Range ($)
below 10	47,000-64,000
10-35	56,750-80,250
35-75	66,750-97,750
75-plus	82,500-134,250

The Salary Guide then includes index scores for a number of cities, with 100 being 100% of the national salaries, to let you calculate salary ranges for those cities.

Robert Half Legal Selected City Index Numbers>
City	Index
Chicago	122.7
Houston	104.0
Los Angeles	124.5
New York	141.0

Thus, for Houston (multiplier of 1.04) and New York (multiplier of 1.41), the putative salary ranges for large (75+) law firms would be $85,800 to $139,620 (Houston) and $116,325 to $189, 294 (New York).

What about the ABA? The ABA has decided to start direct electronic reporting of comprehensive placement data for each responding graduate, beginning with the Class of 2011 9-month data in February 2012.  If that information includes both starting salaries and location, the ABA should be able to compile overall salary information by employment type and firm s size, both nationally and by region or by metropolitan area.  Aggregating salary reported for graduates of all law schools will not eliminate selection bias, but it should raise the number reporting salaries by employment type or by size of firm.

Comments

[Brian Tamanaha]

It is not obvious that what you suggest will be an improvement over relying on law schools to get the information. As you say, it will not eliminate the selection bias. The NALP figures are wildly unrepresentative. Their own study for 2010 found that 64 percent of graduates got jobs as lawyers, with a median salary of $63,000. The job market for 2011 has shown no improvement. Yet ALL of the numbers in the NALP chart you post are significantly above this median.

Many law schools would be happy to substitute their own numbers for the ones you post because they are much higher than the actual numbers--indeed lots of schools (the honest and realistic ones) already list numbers that look worse than the ones you list.

There is no easy fix. I recognize that law schools have a hard time getting graduates who are disappointed with their salaries to disclose them. But that is no excuse for law schools to report their numbers in a grossly misleading manner.

[Ben Barros]

I understand the basic data problems that Gary and Brian are talking about, and I'm all for better and more robust reporting. What I don't understand, in this context and in the broader discussion of whether law school is worth it, is the fixation on starting salaries. Law school is a long-term investment, and it may be more helpful to students considering law school to have some idea of how lawyers' salaries progress throughout their careers. More broadly, the financial realities of the return on law school tuition depend on a lot of different things, including career choices and local cost of living. For one of my students in Harrisburg, PA, a job that pays $60,000 per year would be a lot more comfortable than for a student living in NYC.

[Gary]

Brian: The Associate Salary Survey is a based on reports by law firms, rather than on reports by graduates. Also, those results are only for law firms of at least two lawyers. Law-firm results would not include salaries reported by graduates "employed" as solo practitioners, or employed outside law firms. Another reason for the importance of the database the ABA will gain from electronic reporting by graduate is that it will let the ABA aggregate reports from all the ABA law schools. It could then generate both national, regional and metropolitan starting salaries by employment type and by size of firm (for those in private practice).

Ben: You are right, income earned over a career is the real issue. From an investment perspective, the question is the net present value of going to law school. NPV would compare the cost, in current dollars, of law school against the differential in JD vs. non-JD employment. First, that data is harder to get at. Second, many law students do not know the distribution of starting salaries, and how it varies, and think that all JDs start out with high salaries. As I discussed in Reported Salaries by Law School, a recent issue of the National Jurist ranked law schools by adjusted salary medians that accounted for both cost-of-living and debt load.