Why a joint JD/MBA degree may or may not be particularly valued during an economic downturn.
The JD/MBA Tradeoff
The basic tradeoff that must be understood before deciding to pursue a joint JD/MBA comes down to this: improved career prospects and flexibility in the long-term versus time, effort and money now. Every argument for and against the decision can be reduced to these first principles. Many personal factors (e.g. age, marital status, number of children, existing support networks, ambition, etc.) clearly play a role in tipping the above equation one way or the other. However, I find that when the decision is presented as this simple equation, the choice for many people becomes easier. At least, it became easier for me when I was in this process of evaluating the desirability of a joint JD/MBA.
Let us compare two scenarios: 1) a “No JD/MBA” scenario and 2) a “With JD/MBA” scenario. A net present value (NPV) calculation can show why it almost always makes sense to invest now for improved earnings later, i.e. why the “With JD/MBA” scenario is the superior option. Please note that the subsequent calculations are for illustrative purposes only, and assumptions will differ based on factors such as the university program attended, success in the program, success post-graduation, years of earning potential, etc.
For our “No JD/MBA” calculation, let’s assume a starting salary of $60K/year, a year-over-year salary growth rate of 5% and a discount rate of 8%. These are clearly very rough assumptions for purposes of simplifying the calculation, the results of which are below:1
For our “With JD/MBA” calculation, let’s assume a starting salary of $100K/year, a year-over-year growth rate of 6% and a discount rate of 8%. We should also make the additional assumption that the joint degree will cost $150K over the course of 4 years, with zero income earned during that time period. Again, these are rough assumptions for illustrative purposes, rather than the individualized calculations that should be performed before actually making this decision. Using the above assumptions, the NPV calculation gives the following results:2
Comparing the above equations, we can see that the NPV of future earnings with a JD/MBA are more than 4x the future earnings without a JD/MBA. Note that both equations ignore any reinvestment of future earnings, which can have a significant impact on total future income. These calculations also do not factor in many qualitative benefits of a joint JD/MBA, such as the expanded network or the improved career flexibility that comes with a dual degree.
One final consideration that may or may not be immediately obvious: these two degrees are not mutually exclusive. There is nothing stopping you from completing your law degree, practicing law, deciding you don’t enjoy legal practice and subsequently pursuing an MBA—except, of course, the time it took to figure that all out.
The Joint JD/MBA Application Process
The process of applying to a joint degree program is relatively straightforward but differs between universities—for the actual nuts and bolts of the process it would make more sense to refer to each particular university’s admissions website, rather than to provide a general overview here.
Flexibility in Tough Economic Times
In 2019, before COVID-19 paralyzed the global economy, the Citi Hildebrandt Client Advisory report, an annual survey of law firm fiscal performance that is seen as an industry bellwether, proclaimed that “the US law firm industry is enjoying its strongest growth in almost a decade”.3 It then ticks through a litany of rosy indices: 6.3% average revenue growth, 4.3% billing rate increase during the first nine-months of the year, a 3.3% increase in demand among the AmLaw 50 firms and gains among both large and small firms. In order to be prepared for an economic contraction, it makes sense to be in as secure a position as possible before the contraction occurs. However, the real benefit of a joint JD/MBA is not necessarily the improved career prospects during periods of economic growth, but the flexibility it provides during economic stagnation.
I was fortunate enough to land the job I wanted immediately after graduating, though preparing for a global economic downturn was not top-of-mind when making the decision to pursue a joint degree. However, having now experienced the beginning of what could potentially be an extended period of economic hardship,4 the practical benefits of higher education generally, and a joint degree in particular, have become more evident.
In difficult economic times, careers that demand higher education and skill generally command a premium over those that do not, with skills-intensive, technology-focused careers seemingly being the most resilient and the fastest to bounce back.5 Legal careers in particular are generally more resilient than other professions during economic downturns,6 for at least two reasons:
- Law firms tend to behave conservatively, holding more excess cash relative to debt: between 2012 and 2018, the largest law firms increased their capital by 34% and excess cash by 89%.7
- During boom and bust business cycles, the smallest mom-and-pop shops and the largest corporations face opportunities for growth in the first instance and the threat of bankruptcy in the other. Traditional business or consulting roles are in higher demand during periods of economic expansion when companies are pursuing growth opportunities, but demand understandably fades during downturns when companies are cutting costs and trying to remain viable. However, legal roles are necessary to keep the economic machine running smoothly, regardless of whether the economy is expanding or contracting. For example, during periods of economic expansion there are roles for lawyers that involve acquiring and/or selling companies (i.e. mergers & acquisitions) and raising debt and/or equity (i.e. capital markets). While these business objectives (and consequentially the legal support for each) typically wane during a recession, other business objectives become front and centre—bankruptcy and restructuring to name two prominent examples.
The specific nature of each economic downturn can also influence which careers will be resilient and which will not. The 2008 global financial crisis was just that: a financial crisis. The current economic crisis caused by COVID-19 has essentially nothing to do with a failure of the financial system, and more to do with an abrupt cessation of consumer demand (among other things). These different catalysts will no doubt affect which sectors thrive and which do not, and while it may be difficult to determine which is which, one thing is certain: career flexibility is an asset. Another benefit of a JD/MBA, and specifically an MBA, is the flexibility it provides to change career paths.
MBA graduates have a more generalized skill set than law school graduates, and, consequentially, the variety of potential career paths for an MBA graduate is typically much broader as well. After completing an MBA, graduates have the opportunity to work in finance, consulting, marketing, information technology—essentially most industries, in at least some capacity.
Choosing a career path can feel overwhelming. The fear of attending school for years only to eventually find out you are dissatisfied with your chosen career is a daunting prospect. The stability of a legal career combined with the flexibility an MBA provides is a powerful combination during the best of times and offers security and opportunity during times of uncertainty.
1 Assumes 25 years of future earning potential.
2 Again, assumes 25 years of future earning potential.
3 See https://www.privatebank.citibank.com/ivc/docs/2019CitiHildebrandtClientAdvisory.pdf
4 See https://www.brookings.edu/blog/the-avenue/2020/03/17/the-places-a-covid-19-recession-will-likely-hit-hardest/. Another interesting theory is that COVID-19 will instead be the catalyst that merely accelerates existing trends (see https://www.brookings.edu/research/how-covid-19-will-change-the-nations-long-term-economic-trends-brookings-metro/)
5 See https://www.nber.org/papers/w24373.pdf