Individuals change jobs for a variety of reasons. According to the labor literature, job-to-job transitions can lead to higher compensation, increased job satisfaction, and skill development. For examples discussing the effects of job mobility on compensation, see Lopes de Melo (2015); Hakanson et al. (2015); Bagger and Lentz (2016); Law et al. (2016); Postel-Vinay and Robin (2002); Lise and Robin (2016); Bagger and Lentz (2016); Kantenga and Law (2016). See Alfonso Sousa-Poza & Andrés A. Sousa-Poza, “The Effect of Job Satisfaction on Labor Turnover by Gender: An Analysis for Switzerland,” 36 J. Socio-Economics 895–913 (2007). This article studies how student debt might affect lawyers’ job mobility and career paths.
Debt levels can affect recent graduates’ labor market decisions. For example, one study found that students who took larger loans to pay for their education “prefer income profiles with higher initial earnings, sacrificing future income growth, relative to those who did not take on large educational debt.” See Alexandra Minicozzi, “The Short Term Effect of Educational Debt on Job Decisions,” 24 Econ. of Educ. Rev. 417–30 (2005). Another study found that the response to debt can vary by gender, with female lawyers less likely to choose a nonprofit job as their first employment after law school if they graduate with higher debt levels, but no similar effect of debt on male lawyers’ choice to participate in the not-for-profit sector. See Richard Revesz & Lewis Kornhauser, “Legal Education and Entry into the Legal Profession: The Role of Race, Gender, and Educational Debt,” 70 N.Y.U. L. Rev. 829 (1995).
This article uses individual-level data from After the JD, a longitudinal study that follows a large national sample of lawyers admitted to the bar in 2000 over the first decade of their careers. See Bryant G. Garth, Joyce Sterling & Richard Sander, After the JD—Wave 1: A Longitudinal Study of Legal Careers in Transition Data Collection: May 2002–May 2003 (Aug. 13, 2013); Robert L. Nelson, Ronit, Dinovitzer, Joyce S. Sterling & Bryant G. Garth, After the JD 2: A Longitudinal Study of Careers in Transition, 2007–2008 (Aug. 14, 2012); and Robert Nelson, Ronit Dinovitzer, Gabriele Plickert, Joyce Sterling & Bryant G. Garth, After the JD, Wave 3: A Longitudinal Study of Careers in Transition, 2012–2013, (Nov. 25, 2014). (The data gathered in the three “waves” of the After the JD study may be accessed through the University of Michigan Inter-university Consortium for Political and Social Research, using the search term “After the JD,” https://www.icpsr.umich.edu/icpsrweb/.) Based on these data, we examine how debt levels affect occupational choices after graduation and job mobility throughout the career cycle. We then assess the impact of job mobility on wage profiles, studying the differences between men and women.
According to After the JD, 85 percent of lawyers admitted to the bar in 2000 graduated from law school with education-related debt. Of those lawyers, 45 percent owed $70,000 or more. Meanwhile, salary, before taxes and including bonuses, was below $73,000 for half of all lawyers entering the bar in 2000. See Ronit Dinovitzer, Bryant G. Garth, Richard Sander, Joyce Sterling & Gita Z. Wilder, After the JD: First Results of a National Study of Legal Careers (NALP Found. for Law Career Research & Education and Am. Bar Found. 2004).
Table 1: Share of Respondents by Educational Debt Bracket (see PDF for tables)
The data show that use of financial support for law school differs by gender. While the median outstanding loan amount after graduation is the same across genders—between $60,000 and $69,999, the relative contribution of loans to the total financing of law school expenses is higher for women. On average, women pay 53 percent of their legal education with loans while men rely on loans for 47 percent of their education costs.
Table 2: Summary of Sources of Financial Support for Law School by Gender (see PDF)
Furthermore, the ways through which men and women reduce their reliance on student loans is also different. For example, while loans are the most important financing source for both men and women, on average, summer employment represents a larger share of total financial support for men, while family represents a larger share for women. Summer employment is the second most important source of financing for 42 percent of men and 36 percent of women. Men use summer employment earnings to cover an average of 19 percent of their law school expenses compared with 14 percent for women. Family financial support (parents and spouses) covers 23 percent of women’s education costs and 17 percent of men’s.
These differences in the sourcing of financial support may reflect early differences in job market opportunities. Previous employment experience is the factor most frequently ranked as extremely important in obtaining the first job after graduation. Of all respondents, 35 percent consider having work experience before graduation as extremely important in helping them obtain their first job. (The figure refers to the weighted share of respondents who selected “Extremely important” for “Prior Work Experience” when asked “How important were each of the following in helping you obtain your first job (or your current job if this is your first job) after law school, excluding judicial clerkship(s) described above?” in After the JD, Wave 1.) In contrast, only 10 percent of all respondents indicate that connections through family members are an important factor in helping them obtain their first job, while 57 percent indicated family was not at all an important factor. (These two figures refer to, respectively, the weighted share of respondents who selected “Extremely important” for “Family Members” and the weighted share of respondents who selected “Not at all Important” or the minimum level of importance for “Family Members” when asked “How important were each of the following in helping you obtain your first job (or your current job if this is your first job) after law school, excluding judicial clerkship(s) described above?” in After the JD, Wave 1.)
Debt levels upon graduation can affect new lawyers’ ranking of different initial job offers. Data from After the JD show that individuals without debt are less likely to value “salary” as the most important job characteristic relative to their peers who graduated with debt levels above the median. Of lawyers who graduated without any outstanding student debt, 38 percent considered “office environment,” “location,” or “good match with the firm’s mission” as extremely important factors in choosing their first job, while 9 percent viewed “salary” as extremely important. On the other hand, 12 percent of lawyers with outstanding debt levels after graduation above the median considered “salary” the most important factor in choosing a job, while only 35 percent considered “office environment,” “location,” or “good match with the firm’s mission” as the most important factor.
Table 3: Share of Respondents in Each Debt Bracket by Choice of Extremely and Very Important Factors When Choosing First Job (see PDF)
Debt levels can affect employment trajectories beyond the first job decision in at least two ways. First, debt levels tend to persist through time—individuals who start with higher debt levels tend to take longer to pay off their loans and hence are likely to be in debt through a longer span of their professional career, including across episodes of job mobility. Second, even once their initial debt level is paid in full, higher initial outstanding loan amounts can persistently affect lawyers’ career paths indirectly through the impact on early career choices.
To empirically test whether employment trajectories correlate with student debt levels, we estimated a model of job mobility that controls for individuals’ skills (measured using lawyers’ class rank in law school), education quality (measured using the law schools’ ranking in US News and World Report), gender, and number of children. Equation (1), in the PDF, shows the model.
Table 4 shows the predicted probability of changing jobs for the average lawyer in the After the JD sample by outstanding debt after graduation estimated using equation (1). Both men and women with outstanding debt levels above the median bracket ($60,000–$69,999) are significantly more likely to have four or more jobs within the first decade after taking the bar, even after controlling for relevant individual and school-level characteristics. This pattern could be driven by a number of different underlying factors, including the following possibilities:
1. Graduates with more debt are more likely to prioritize initial salary over expected earnings’ growth when choosing their first job. As their career progresses and their outstanding debt decreases, they are more likely to switch positions in search of higher earnings growth.
2. Because salary takes on a higher priority relative to other intangible factors for individuals with higher levels of debt, individuals with higher debt may be more likely to leave a job that is otherwise rewarding for a higher salary elsewhere.
3. By prioritizing salary over more intangible factors such as long-term career progression and job satisfaction when choosing their first job, graduates with more initial debt have lower levels of attachment to their initial jobs and are more likely to change priorities as they pay off their debts.
Table 4: Share of Respondents in Each Debt Bracket by Predicted Number of Jobs (see PDF)
The data also show that changes in jobs or positions within the same firm tend to come with increased wages. Half of lawyers’ first five positions or job transitions implied an increase in wage brackets while 17 percent implied a decrease. However, this pattern is not uniform across debt levels. The share of job changes that lead to higher salaries tends to increase as educational debt increases, a pattern consistent across both genders. This suggests that graduates with more educational debt tend to switch to jobs that have higher pay, relative to their prior position, regardless of gender. However, it is worthwhile noting that, for all debt levels, the share of job transitions that lead to higher wages is larger for men than it is for women.
Table 5: Share of Job Changes in Each Debt Bracket That Led to an Increase in Wage Bracket (see PDF)
From these analyses, we conclude that education-related debt is correlated with lawyers’ labor market choices and outcomes. We find evidence of a correlation between debt levels and the factors that recent graduates take into account when choosing their first job. Both men and women with lower outstanding debt after graduation are more likely to value nonmonetary characteristics when choosing their first job. In addition, we find that lawyers who graduate with outstanding student debt above the median are more likely to have four or more jobs within the first decade of joining the bar than their counterparts with lower debt, even after controlling for their grades and law school’s ranking. Furthermore, we find evidence of a positive correlation between the share of job transitions that lead to an increase in wage bracket (relative to the previous job) and debt levels after graduation: Lawyers in higher debt brackets experience wage increases for a higher share of their job transitions than those who start their professional careers with lower outstanding loans. While this correlation exists for both genders, women’s job transitions lead to wage increases less often than men’s do.
Brenda Samaniego de la Parra is an assistant professor of economics at the University of California, Santa Cruz. Yuan Fei is a data scientist in San Francisco, California.
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