New Salary Data

July 7th, 2013 / By Deborah J. Merritt

Law school critics have pressed schools to produce better information about the salaries earned by their graduates. Existing sources, as we know, provide incomplete or biased information. The Bureau of Labor Statistics (BLS) gathers data about lawyers’ salaries, but those reports omit solo practitioners, law firm partners, and law graduates who don’t practice law. Nor can we break down the BLS data to identify earnings by new lawyers or by graduates of particular schools.

The salary information gathered by NALP, in contrast, focuses on new graduates, includes graduates in non-practice jobs, and can be tied to particular schools (if a school chooses to publish their data). But these figures suffer from significant selection bias; NALP warns that these salaries “are biased upwards.”

Better salary information, however, is on the way. Researchers in other fields have found a new way to gather salary data about graduates of degree programs. The method hinges on the fact that employers pay unemployment taxes for each individual they employ. These taxes fund the pools used to support unemployment compensation. The government wants to make sure that it gathers its fair share of taxes, so employers report the wages they pay each individual. State unemployment compensation agencies, therefore, possess databanks of social security numbers linked to wages.

Educational institutions, similarly, possess the social security numbers of their graduates. It is possible, therefore, to use SSNs to link graduates with their salaries. The researchers doing this, of course, don’t examine the salaries of individual graduates. Instead, this “linked-records” approach allows them to generate aggregate salary data about graduates by college, major, year of degree, and several other criteria. The method also allows researchers to track salaries over time, both to see how entry-level salaries change and to track income as graduates gain workplace experience. For a brief overview of the method, see this paper from Berkeley’s Center for Studies in Higher Education.

The linked-record approach has the potential to generate very nuanced information about the financial pay-off of different educational programs. Salary information, in fact, is already available for several law schools. Before we get to that, however, let’s look more closely at the method’s wider application and its current limits.

Applications

California has used this research method to generate an extensive database of salary outcomes for graduates of its community college programs. Using the online “salary surfer,” you can discover that the highest earning graduates from those programs are individuals who earn a certificate in electrical systems and power transmission. Those graduates average $93,410 two years after certification and $123,174 five years out.

If you’re not willing to climb utility poles or hang out with high voltage wires, a plumbing certificate also pays off reasonably well in California, generating an average salary of $65,080 two years after graduation. That certificate, however, doesn’t seem to add more value with time–at least not during the early years of a career. Average salary for certified plumbers rises to just $65,299 five years after graduation.

Community college degrees in health-related work also generate substantial salaries. Degrees in the humanities, fine and applied arts, cosmetology, and travel services, on the other hand, are poor bets financially. Paralegal training falls in the middle: A paralegal degree from a California school yields an average salary of $38,191 two years after graduation and $42,332 five years out. Paralegal certificates, notably, generate higher wages. Those paralegals average $41,546 two years after certification and $47,674 after five years. I suspect that premium occurs because the certificate earners already hold four-year college degrees; they combine the paralegal certificate with a BA to earn more in the workplace.

You can spend hours with the California database, exploring the many subjects that community colleges teach and the varied financial pay-offs for those degrees. Let’s move on, however, to a much broader database.

The research organization College Measures is working with several states to identify salary outcomes for all types of post-secondary degrees. This database, like the one for California community colleges, relies upon the linked-records data collection method described above. The College Measures site currently includes schools in Arkansas, Colorado, Tennessee, Texas, and Virginia–with Florida and Nevada coming soon. The database doesn’t include every school or degree program in these states, but coverage is growing. Here are just a few findings to illustrate the detail available on the site:

* Chicken farming is a staple of the Arkansas economy, and the University of Arkansas’s main campus offers a BA in poultry science. Those degree holders average $37,251 during their first year after college–a little more than accounting BA’s from the same campus can expect to earn ($36,681).

* Arkansas, however, teaches much more than poultry science and accounting. Some of the highest earning graduates major in chemical engineering ($56,655), physics ($48,820), computer engineering ($45,589), and economics ($43,739). If you want to maximize income after graduation, on the other hand, stay away from majors in audiology ($20,417), classics ($20,842), and drama ($22,629).

* Moving to the Texas portion of the site, you won’t be surprised to discover that the most remunerative BA offered by the University of Texas at Austin is in Petroleum Engineering. Those graduates average $115,777 during their first year out of school.

* The least financially rewarding BA’s from the UT-Austin campus, at least initially, are general music performance ($11,098), Arabic Language and Literature ($17,192), and General Visual and Performing Arts ($17,749).

You can find similar results for other majors and schools in these states, as well as for schools in Colorado, Tennessee, and Virginia. Before continuing, however, let’s examine several key limits on the currently available data.

Limits

1. One State at a Time. The linked-records databases currently operate only within a single state: they can only identify salaries for graduates who work in the same state where they attended school. The Colorado database, for example, includes both of the state’s ABA-accredited law schools–but it reports only salaries for graduates who worked in Colorado the year after graduation.

This constraint will understate salaries for law schools that send a large number of graduates to other states for high-paying jobs. If Connecticut creates a database, for example, Yale Law School will receive no credit for the salaries of graduates who work in Massachusetts, New York, the District of Columbia, and other states. The University of Texas’s law school, currently included in the College Measures database, receives credit for salaries earned at BigLaw firms in Dallas or Houston–but not for those earned in Chicago, Los Angeles, or New York.

Researchers are working to overcome this limit by linking databases nationally. I suspect that will happen within the next year or two, making the linked-records method much more comprehensive. Meanwhile, the “one state” limit casts doubt on salary results for schools with a large number of graduates who leave the state.

For many law schools, however, even single-state salary reports can yield useful information. Most law schools place the majority of their graduates in entry-level jobs within the same state. All of the Texas law schools place more than half of their graduates with Texas employers. The same is true for the Arkansas law schools, Colorado schools, and two of the three Tennessee schools. Among the states for which linked-records data are currently available, only the Virginia law schools send a majority of their graduates out of state.

For law schools that place a majority of their graduates in-state, the linked-record databases provide a welcome perspective on a wide range of salaries. These databases include jobs with small law firms, local government, and small businesses. They will also identify law graduates with jobs outside of law practice. That’s a much wider scope than the salaries reported to NALP, which disproportionately represent large law firm jobs. Even if some of a school’s graduates leave the state, this in-state salary slice is likely to give prospective students a realistic perspective on the range of salaries earned by a school’s graduates.

2. Rolling Five-Year Averages. The linked-records databases report five-year averages, rather than average salaries for a single graduating class. This feature preserves anonymity in small programs and makes the data less “noisy.” The technique, however, can also mask dramatic market shifts.

This is particularly problematic in law, because average salaries rose dramatically from 2005 through 2009, and then plunged just as precipitously. Most of the states included in the College Measures database report the average salary for students who graduated in 2006 through 2010. For law graduates, those years include at least three high-earning years (2007 through 2009) and just one post-recession year (2010). The outdated averages on the College Measures site almost certainly overstate the amounts earned by more recent law school classes.

This problem, in my opinion, makes the salaries currently reported for law schools unreliable as predictors of current salaries. On the other hand, the data could be useful for other purposes. It would be instructive, for example, to compare each school’s linked-record average with an average of the salaries that school reported to NALP over the same five years. That comparison might indicate the extent to which NALP-reported salaries skew high. Within a few years, meanwhile, the linked-records databases will offer more useful salary projections for students considering law school. They will also help us see the extent to which salaries for law graduates have shifted over time.

3. Un- and Under-Employed Graduates. The linked-records databases do not reveal how many graduates are unemployed. Graduates who are missing from a state’s records may be unemployed or they may be working in another state. Researchers currently have no way to distinguish those two statuses.

As the research becomes more sophisticated, and especially if researchers are able to link records nationally, this problem will decrease. For now, users of the database have to remember that salaries reflect averages for employed graduates. Users need to search separately for the number of a school’s unemployed graduates.

For law schools, those figures are relatively easy to obtain because they appear on each school’s ABA employment summary. By combining that resource with the College Measures information, prospective students and others can determine the percentage of a law school’s graduates who were employed nine months after graduation, as well as the average salaries earned by graduates who worked in the same state as the school.

Underemployed graduates, those working in part-time or temporary jobs, do appear in most of the linked-record databases. This is a major advantage of the linked-record method: the method calculates each graduate’s annual earnings, even if those wages came from part-time or temporary work. If a graduate worked at more than one job, the linked records will aggregate wages from each of those jobs. The results won’t reveal how hard graduates had to work to generate their income, but database users will be able to tell how much on average they earned.

4. Excluded Workers. In addition to the caveats discussed above, the linked-records databases omit two important categories of workers. Most lack information about federal employees, although some states have started adding that information. Within a year or two, federal salaries should be fully integrated with other wages. For law school graduates, meanwhile, salaries for the most common federal jobs are already well known.

More significant, the linked-record databases do not include information about the self-employed. This omission matters more in some fields than others. Utility companies employ the workers who repair high-voltage power lines; you won’t find many free-lancers climbing utility poles. Plumbers, on the other hand, are more likely to set up shop for themselves.

For recent law graduates, the picture is mixed. Relatively few of them open solo practices immediately after graduation, but a growing number may work as independent contractors. The latter group, notably, may include graduates who receive career exploration grants from their schools. Depending on how those grants are structured, the graduates may not count as “employees” of either the school or the organization where they work; instead, they may be independent contractors. If that’s the case, their wages will not appear in the linked-record databases.

As experience grows with linked-record databases, it will be possible to determine how many law graduates fall outside of those records. It should be possible, for example, to compare the number of graduates who report in-state jobs to their schools with the number of in-state salaries recorded in a linked-record database. The difference between the two numbers will represent graduates who work as solos or independent contractors. The researchers creating these databases may also find ways to incorporate earnings data about self-employed graduates.

What About Law Schools?

Tomorrow, I will discuss salary information reported for the fifteen law schools currently included in the College Measures database. If you’re impatient, just follow the links. Those specific results, however, matter less than the overall scope of this salary-tracking method. The linked-record method promises much more sophisticated salary information than educational institutions have ever gathered on their own. The salaries can be tied to specific schools and degree programs. We (as well as prospective students and policymakers) will be able to compare financial outcomes across fields, schools, and states. As the databases grow in size, we will also be able to track salaries five, ten, fifteen, or twenty years after graduation. That amount of information is breathtaking–and a little scary.

Data, Jobs, College Measures, Linked-Records, Starting Salaries