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Is “Steve Diamond” a mole for the law school reform movement?

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diamonds

This hypothesis would explain why he keeps putting forth defenses of the legal academic status quo that are so laughably wrongheaded that they can only serve to nudge fence-sitters toward the shining path.

The alternative explanation is that he’s both delusional and none too bright.

In his latest missive, Diamond claims that lawyers and law students are doing great, in fact better than ever:

BLS data show that legal employment and incomes have comfortably recovered from the decline that set in after the crisis. In fact, nationally incomes and jobs for lawyers have increased steadily for at least two decades.

[L]aw students today are better off than those of a generation ago.

Let’s go to the numbers. Diamond cites Bureau of Labor Statistics occupational employment stats for his claim that incomes for lawyers “have increased steadily for at least two decades.” That’s a very misleading statement, for two reasons, one relatively minor, and the other not minor at all. The relatively minor reason is that, adjusted for inflation, median salaries (a crucial term, as we’ll see shortly) for lawyers have been essentially flat since the mid-1990s, which is as far back as the BLS stats go: adjusted for inflation, the median salary for lawyers has increased by less than 5%, from $110,000 to $115,00. That’s approximately half the wage growth experienced by the average American worker over the past two decades — which, needless to say, have hardly compromised a banner era for American workers in general.

But, misleading as that part of Diamond’s statement is in context, that’s a minor point in comparison to another one, which is that the BLS wage statistics Diamond cites don’t include self-employed workers. How important is this omission when calculating the actual compensation of lawyers? (Let alone law school graduates, which is a very different category).

Consider that 75% of American lawyers are in private practice, and the large majority of those people are self-employed, either as individuals or in partnerships, meaning that they’re not salaried or hourly workers, and thus not included in the BLS wage stats. Diamond is aware of this, and thinks it means lawyers are making even more money than the BLS stats suggest:

Now, these numbers are “employed” lawyers so they do not include solo practitioners or partners who qualify as employers. But the first number is relatively small, approximately 4% on average of all practicing lawyers over that time period. And the second number is likely to skew income higher not lower, so excluding that number does not help the critics case that much. Arguably solos do less well financially (though we don’t know for sure based on the BLS data) so perhaps they cancel each other out.

Factor in higher paid partners and [it’s] likely they [lawyers] have stayed comfortably ahead of inflation.

Steve Diamond, a man who pontificates regularly on the economic status of lawyers, thinks that 4% of practicing lawyers are in solo practice. He produces this estimate by citing NALP data on the employment status of law graduates nine months after graduation. But many lawyers — perhaps most — graduated from law school more than nine months ago. How many of them are in solo practice? According to the ABA, the answer is roughly two out of every five, i.e., approximately ten times as many as the learned professor estimated. And what’s happened to their wages?

Fortunately, we don’t have to guess: the mean earnings (the median is certainly much lower) of solo practitioners have declined by 30% in real terms over the past 25 years, from $71,000 to $49,000 per year, inflation-adjusted.

In other words, if we combine the BLS data on median lawyer salaries with tax data on the earnings of self-employed lawyers, we find that the median real compensation for lawyers – again, not law school graduates, but actual employed lawyers — is surely a good deal lower than it was a generation ago (Of course a small minority of lawyers — those who are equity partners at large firms — have seen their incomes soar, but this fact has no relevance to the average lawyer). Meanwhile, private law school tuition has nearly tripled in real terms over that time, while resident tuition at public law schools has increased by a factor of five, which makes the claim that law students today are better off than those of a generation ago somewhat problematic.

And again, we’re talking about lawyers here, not law school graduates. The gist of Noam Scheiber’s Times article that set Diamond off was that, at law schools such as Valparaiso, a very large percentage of graduates will never actually be lawyers, if being a lawyer means having some sort of sustained career in the legal profession.

Law School Transparency provides a simple way to compare the employment outcomes for graduates of ABA law schools, by compiling, respectively, employment and underemployment scores for each one. The employment score counts how many graduates have full-time bar passage required jobs, excluding putative solo practitioners. The underemployment score reflects the percentage of grads who don’t have full-time professional employment of any type, not merely those who fail to get jobs as lawyers.

These scores are not perfect metrics, since for example Yale’s and Harvard’s relatively low (84% and 89%) employment scores are a product of the fact that some graduates of hyper-elite law schools get unicorn-type non-law employment outcomes. Still, they are good rough and ready guides, especially at the extremes. Speaking of which:

Valparaiso, Class of 2015 ten months after graduation:

Employment Score: 38.2%

Underemployment Score: 37.4%

More than three out of every five Valpo graduates aren’t managing to get any legal job, even though this category includes such dubious employment as the eat what you kill arrangements described in the Times article (such grads are counted as being “employed” by firms, even though the firms don’t actually pay them anything). Valpo also features a catastrophically high under-employment figure, indicating that nearly 40% of the class is either flat-out unemployed, or working retail, like the unfortunate young woman profiled in the piece.

Those are horrendous statistics, but perhaps we shouldn’t expect Professor Diamond, working as he does at a much more exalted institution, to be aware of how badly graduates of schools like Valparaiso are struggling.

Santa Clara, Class of 2015 ten months after graduation:

Employment score: 38.8%

Underemployment score: 39.3%

Three-year loan-financed cost of attendance:

Valparaiso: $194,477

Santa Clara: $269,978

I think we’re done here.

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  • Amanda in the South Bay

    I noticed on SCU’s page for tuition expenses they estimate Room and Board as $16,112 a year, or $1342 a month. I wonder how SCU law students live exactly, what their living arrangements are-who they live with, and where they live.
    https://www.rentjungle.com/average-rent-in-santa-clara-rent-trends/

    Now if I was a student at Stanford Law with a shitload of loans taken out, I might grin and bear it, because if I’m really wanting to be a lawyer, you could do a lot worse than Stanford. I left the south bay because my (tech) job didn’t pay enough to live on for down there. Maybe you could live with your parents if you’re from there?

    EDIT: I think that unless you graduate at the top of the class, or can graduate with zero loans (maybe you’re going into the military and the government is paying for it?) you’d be better off getting a second BS in computer science from Santa Clara University than their law degree.

    • Snarki, child of Loki

      “$1342 a month”

      That’s a high-end cardboard box under the freeway overpass. With what their graduates are going to earn as lawyers, best to get them used to living the high-life.

    • Dave W.

      I expect a bunch of the students live in some kind of shared housing situation with other students, rather than renting a solo apartment, at least if they are single and have no dependents. That’s what I did in grad school.

    • Unemployed_Northeastern

      On a related note, Above the Law got a tip a few years ago that George Washington Law School spent a few years lowering its living expenses budget by roughly the same amount it raised its tuition. They shaved allowances for rent, allowances for books, lowered the transportation budget, axed the computer allowance, etc. And it’s not like DC rent was decreasing year-to-year at this time, either.

  • Derelict

    I think what’s going on with folks like Diamond et al. is a combination of playing the proper tunes for those who are paying them, and playing on the long-held (and deeply held) popular notion that all lawyers are rich. This works especially well on people who are not exposed to information sources such as LGM, or who don’t have a lawyer friend or relative to speak with.

    “How can a lawyer be unemployed!?!?! You just rent an office and hang out your shingle, right!?!?!”

  • MacK

    Most lawyers in law firm partnerships count as self-employed for tax and reporting purposes – I know I’m a senior lawyer in out firm, but for tax purposes I’m self employed – I don’t draw a salary but a share of revenue after expenses have been paid. I think that may be a common arrangement.

    If that is the case, a lot more lawyers are “self employed” than just the solos.

    • cpinva

      is every lawyer in your firm a partner? probably not. those who aren’t are employees, until/if they make partner, and get a W-2 at year’s end, not a 1099 for their earnings.

  • MacK

    One thing I’m really curious about – when was Diamond let off the leash again at Santa Clara? I have a very strong impression that he was muzzled by a law school administration weary of his ability to draw adverse attention to its disastrous performance and the crass and obnoxious idiocy of at least one of its professors. He had become for a while a little quiescent (he’s still complains bitterly that I sent his doxxing and offensive posts about my father to the Dean of his law school and the President of his University; the interview seems to have been painful.)

    The other thing that puzzles me is that Diamond seems to be engaging in the campaign to ingratiate himself with other law school deans – that somehow his unedifying performance will allow him to ascend from Santa Clara to – where Stanford? Seriously, he thinks that publicly making a jackass of himself will get him a better gig?

    • JCougar

      In the legal field, this often works. Just sayin’.

  • Crusty

    Something that I’m sure diamond is unaware of is that many people who at first may appear to have won, or at least not completely lost the law school game completely end up as solo practitioners and may or may not struggle. Recent graduates who end up in a local prosecutor’s office, public defender or small personal injury firm may appear to have done alright at first- at least better than people with no legal job at all. But the young prosecutors may leve, not necessarily to become rich as defense lawyers, but maybe because the da they worked for lost an election and the new guy cleans house. Maybe the public defender leaves because while 33k was ok at 26 and single, perhaps they’re looking for more at 30 with a family. And the job with a small personal injury lawyer isn’t so much a career path as it is a solution for the hiring lawyer who cannot be in two places at once and needs you to go to court in the Bronx while he goes to queens. But the job pays 40k no matter what. Now, there’s nothing that precludes these people from making a good living per se, but it I not likely.

  • Stan1

    Handsome Steve is the Trump of the law school reform movement. Not the Hero we want, but the Hero we deserve. Godspeed, brave soul.

  • Scott Lemieux

    I look forward to Steve Diamond’s forthcoming article, “50% of American Law School Graduates Make Six-Figure Salaries to Write Posts About Freddie deBoer on Mid-Tier Political Blog.”

    • West of the Cascades

      I thought the relevant percentage was always 30% when one was posting about Freddie.

  • West of the Cascades

    I have a question about how BLS identifies “salaries” — and I wonder if Paul is incorrect that “the large majorities of lawyers in private practice are self-employed.” For example, I am a solo practitioner, and my law firm is an LLC, but it is taxed as an S-Corp under federal law — meaning that my firm pays me a salary, and, if there are any profits, they pass to me as distributions, rather than salary.

    So, some years, my “income” is larger than my “salary.” I don’t know whether the BLS statistics capture that sort of dynamic at all.

    I know several other solo practitioners who use this structure, and also some who have LLCs or sole proprietorships that are NOT taxed as S-Corps (and therefore are “self employed” as far as the IRS is concerned). But I wonder how many small partnerships involve lawyers who are “self employed” — I would think that most of them are set up with the same structure I have as a solo, namely an LLC (or PLLC) but S-Corp tax treatment. Some partnerships/solos set up PCs, where you definitely have “salaries.”

    I guess I’m trying to figure out which apples can be compared to which apples in the figures Paul cites.

    • Crusty

      By way of anecdata the overwhelming majority of solo practitioners I know are just self-proprietors and the 2-3 man ships I know are General Partnerships.

  • Dr. Ronnie James, DO

    Hmmm…it *is* difficult to get a man to understand something, when his salary depends upon his not understanding it, isn’t it?

  • tdennis239

    I hate lawyers who mention their latest big settlement, but maybe the readers will take my story as instructive instead of boasting. Since there is a chance that Mr. Diamond will not only read what Prof. Campos writes, maybe he will read some comments as well. Maybe even this one.

    As some of you may know, I’m a personal injury lawyer who advertises in Chattanooga (yeah, one of those lawyers). Well, I just settled a case for $615,000 and since most of you can divide by three, you may, at first blush, think I must be rolling in it, right? Ha! From the 205k fee, I have to give one-third to the referring lawyer. Then, I need to pay that 45k lback to the bank for the loan I needed to cover advertising and overhead costs for my crappy year last year when two Alabama firms (unlicensed in TN and GA–but surely you don’t expect the Supreme Courts of these two states to sweat over what that influx does to, yuk, plaintiff lawyers) came in and started spending 50k a month on marketing, dwarfing my 18k a month spend. Next, comes the IRS’ minimal 25% estimated payment because while the TN Board of Professional Responsibility doesn’t mind out of state, unlicensed lawyers soliciting TN clients, few things get their attention as fast as an IRS lien. Then, there is the 20k in production costs that I will be spending next week on commercials that will look sufficiently “polished” to compete with the really big spenders in this mid-size market. By the way, they will stay fresh enough to run for six months then I get to spend the same amount again in December. Next, there is my now monthly advertising spend of 25k—every month—(that’s what monthly means, Mr. Diamond, because I’m not convinced you grasp such concepts)–so I can at least stay sufficiently competitive to stay in business. 25k a month! If you are a solo personal injury, bankruptcy, and increasingly divorce and criminal lawyer, that’s what it costs to compete in Chattanooga, by God Tennessee! Not Atlanta. Not Memphis. Not Nashville. Chattanooga–a city that most of you think of like you think of Boise or Dubuque (if you think of it at all). And,wait—we haven’t yet factored in my regular monthly overhead costs of about 12 to 14k a month. So, Mr. Diamond, you tell me, if you are at all able to add, does it sound like I’m doing better than ever? No, it does not. And, keep in mind, I graduated 30 years ago with very little debt so by your own proselytizing I should be clearing about 200k a year, consistently. Well, I’m not. And, I’m actually considered one of the more successful solos in my community. So, imagine one of the 50% or so of your unemployed students trying to compete with me much less those firms spending 50k a month. They can’t unless they have rich parents, and let’s face it, Mr. Diamond, if they had rich (connected) parents they won’t be attending your law school. In sum, you, Mr. Diamond, know nothing.

    By the way, why do you think I have to advertise? Thanks in part to you, Mr. Diamond—too many damn lawyers. And why do you think Alabama lawyers are invading Tennessee and Georgia? Tort reform. And what do you think allows legislators to so thoroughly screw their constituents by passing the ALEC agenda of tort reform? Because their constituents hate lawyers! And why do they hate lawyers? In large part because so many of us advertise! And why would we “ambulance chasers” do something that would ignite the general opprobrium of the public? Because, thanks to people like you, there are too many lawyers! Here endeth the lesson.

    • JCougar

      Gosh, this makes me glad I don’t do personal injury law. I’d never be able to compete.

    • LawDdaw

      Keep in mind that often times, law school profs have very little experience practicing law (a few years, tops), and they usually come from elite schools. Many have never tried a case, never closed a large deal in a senior-level, “I’m in charge” position. How could they know?

    • JM

      This is such a great post. It really shows the horrifying fixed capital costs and ad spend required to run a solo practice. One bad year (i.e. a first year) and you are likely out $50k in capital and may be forced to fold up shop.

      The average person would get so much better of a return on $200k by putting it in a stock market index at the age of 22 rather than going to law school. The Dow Jones has an estimated average annual return of 9% (appreciation + dividend). $200k invested at 9% per year (compounding) for 43 years gives that 22 year old $8.13 million at retirement.

      On the contrary, as demonstrated above, law school may only lead to a one year solo venture in which you lose an additional $50k or so trying to float an office and advertising.

      Of course many of these 22 year olds don’t have 200k to invest in stocks, that $$$ is only available for education, but if the money is from savings or parents, a lot of people would be wise to choose the stock market and just find any job they can (or one they love but with low pay) with the BA.

  • bernard

    On another thread there was a discussion of the generally poor quality of the economics in law and economics papers. One only mildly tangential issue is that many lawyers, not least faculty, have serious difficulties with research methods, statistics, understanding data, and so on.

    Is it possible that Diamond simply doesn’t grasp the many flaws in his argument, most glaringly that if you want to study the benefits of going to law school you have to look at the economic situation of all law school graduates, no matter what they are doing, rather than just those who end up with legal jobs?

    • Peterr

      Is it possible that Diamond simply doesn’t grasp the many flaws in his argument . . .

      Statistically speaking, I’d say it’s damn near a certainty.

      (For the model of a lawyer who understands economics, I direct you to Bill Black of the University of Missouri-Kansas City, who wrote the book The Best Way to Rob a Bank is to Own One describing the lessons he learned in chasing down the miscreants in the 1980s S&L scandals — lessons which the banksters of the Lesser Depression were continuing to follow, as Bill repeatedly pointed out to anyone who would listen. Amusingly, Bill once taught at Santa Clara himself.)

    • anonymous

      This is like asking a political hack if they grasp the many flaws in their arguments.

      The point of hackery is never to engage in an objective intellectual honest exercise. The point is to advance your cause with whatever arguments you can make and ignore all the holes and contradictions in it. The point of hackery is also to obfuscate and misdirect as well.

      So I just don’t buy that it is some kind of incompetence on his part. It is 100% hackery.

  • anonymous

    The simplest and most obvious explanation is that he says what he says because he is a “hack” in the sense of someone who advances a cause because his salary depends on it regardless of actual personal convictions.

    Diamonds musings remind me of the Obama “birthers” including those who aren’t explicit birthers but won’t outright renounce it. They know what they’re saying is rubbish. So it’s just pure hackery and intellectual dishonesty rather than ignorance and incompetence.

  • Marek

    Please Hammer Paul, don’t hurt ’em.

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