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Unemployed Lawyers Sue Their Law Schools

This article was written by in Career and Work. 15 comments.

A group of fresh, unemployed lawyers have banded together to sue law schools. 73 alumni have filed at least fifteen class-action lawsuits, alleging the schools inflated employment figures and salary data to attract students and increase rankings. The real goal of the lawsuits seems to be to effect systemic change in the education industry and associations that accredit law schools, like the American Bar Association.

Schools are in the business of generating alumni, and to a great extent, use as many marketing tricks that any company uses in order to influence public opinion. It’s true that a 90% graduate employment rate looks better than a 75% rate on paper, and I’d be more inclined to choose a school with a higher employment rate, with all other factors being equal. But a 90% graduate employment rate doesn’t guarantee that I would receive the job I want after graduation, even if I were in the top 10% of the class.

Furthermore, I’ve come to the conclusion over the years that any statistic used for marketing purposes is subject to manipulation in an attempt to further the goals of marketing. Hard numbers give the impression of fact. From an early age, we’re trained to believe that one plus one equals two, in all circumstances, and numbers are truth. Statistics can be misleading in many ways, and are used more often to try to convince others of a point of view rather than quantify facts in reality.

Law school graduationThe group of lawyers probably can’t prove that the blame for their unemployment situation rests with the law schools. There are many factors that contribute to unemployment, including the overall economy, local job markets, and the effort, skills, and self-marketability of each alumnus. It doesn’t appear as if the former students are suing to have the schools compensate them for the lack of expected income from working, but they are suing to enlighten the public to the issue of misleading statistics throughout the educational industry.

Mutual funds must advertise that “past performance does not guarantee future results.” Even if a graduate employment rate were perfectly measured and accurately reflected exactly what a potential student understood the number to be, a good rate today is no indication that the rate will continue to be high by the time the school awards a degree or certification. If my index mutual fund returned 12% last year and lost 8% this year, I can’t sue the fund manager or the stock market for not providing the dividends I was hoping for. If fraud was involved, it might be a different situation. Perhaps misleading statistics like graduate employment rates are somewhat fraudulent, but I don’t see a parallel as schools do not typically promise that students will be employed at the level they’d like after graduation — and in the case of lawyers, after passing the bar exam.

There might be better ways of raising the issue of misleading statistics in the marketing endeavors in which institutes of education engage. Using the courts to make a point is only one tool that’s available to increase awareness of an issue. When you’re a hammer, though, everything looks like a nail.

Several years ago, while I was completing my Masters in Business Administration degree, I considered attending law school. Ultimately, I decided not to pursue a law degree and to focus my energy on my business instead. I think I made the right decision.

Photo: CubanRefugee
WNYC

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Are You Concerned About the Very Poor?

This article was written by in Society. 73 comments.

Whether you agree with it or not, the reason this country has supported programs like welfare, Social Security, the GI Bill, food stamps, Medicare, government-backed mortgages, FEMA insurance, and other social programs is because a modern society benefits when as many citizens as possible have opportunities to succeed financially. Social programs aren’t perfect and don’t always provide what they promise, and there’s always a small percentage who take advantage of the system.

The push-and-pull between the focus on the society and the focus on the individual existed even before the founding of the nation, and this particular Weeble that wobbles between left and right without falling down (yet) has allowed the United States to become the biggest economy in the world in a relatively short period of time, and that’s a good thing.

From an individual perspective, it might not be that intuitive that one needs to be concerned about the “very poor.” After all, with social safety nets, one might think that the “very poor” have little to worry about. Regardless of the existence of programs — both public and private — poverty is still an issue in this country, even if you don’t see it in your daily life as you shuffle in an office building from meeting to meeting or shuttle from city to city on business trips. It’s hard to be concerned about something if you aren’t faced with it every day.

If, however, you are concerned about the “very poor,” there are ways to help, even if you don’t believe that handouts are effective. The most popular rationalization for not caring about poverty is the idea that helping another individual teaches complacency rather than responsibility, interdependence rather than independence. The incorrect assumption is that families in destitute situations have no desire to work for their money like those who have built wealth for themselves and have earned the right to let their money do the work for them and receive income from dividends and interest rather than working in the middle-class and working-middle-class sense of the word.

The real problem is tied into that psychology 101 concept I turn to repeatedly, Maslow’s hierarchy of needs. If most waking minutes in your day are spent worrying about your shelter, your food, and having a safe place to sleep, “income mobility” is a fantasy. You’re a victim of “class warfare,” but in your reality, you don’t have time or energy for political arguments about class warfare.

If you are concerned about the very poor, there are options. Helping bring attention to poverty can form provide opportunities to those without them without much sacrifice from those with opportunities.

  • Give money directly to organizations that run programs focusing on providing opportunities. The top-rated charities focusing on poverty according to Charity Navigator are Direct Relief International (although International is in the name, they also work to eliminate domestic poverty, particularly in disaster-stricken areas), SOME (So Others Might Eat, focusing on the D.C. area), and the People’s Resource Center (based in Chicago). If you prefer to give a hand-up rather than a hand-out, focus on organizations that provide job training and placement, programs that expand the reach of educational opportunities, and programs that present positive financial role models.
  • Volunteer with the organizations that run these programs. Build houses. Build schools. Help at a food bank. When you are actively involved, you get to experience the results of your work much more closely than if you were to send a check every month. No, you won’t get a tax deduction for volunteer work, but that’s not the point.
  • Become a community leader. When people from poor communities manage to succeed financially, they often don’t return to be the role model their community needs. This is the reason financial illiteracy is a problem that will continue from generation to generation, keeping low socio-economic status communities from thriving.

Are you concerned about the very poor? Does paying your taxes and being satisfied with existing social safety nets relieve you from any other possible responsibilities for how the country fares as a whole? Do we even have any responsibilities to anyone other than ourselves and our families?

Related: Here’s how you might be able to avoid poverty for your family. Also, could you survive at the poverty line?

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Improve Your Child’s Cognitive Ability for Income Potential

This article was written by in Career and Work. 18 comments.

There’s a chance you could become a multi-millionaire after repeatedly slamming your head into other people and suffering through the resulting mini-concussions and minor brain damage, but not everyone can be a professional football player in the NFL. There’s a safer and less harmful path toward financial independence.

Cognitive ability is an important part of your human capital, and your human capital measures, among other things, how likely you’ll be able to support yourself financially, particularly through difficult economic times. Cognitive ability is important because many jobs requiring intricate skills and the best careers that offer opportunities for advancement require the ability to learn and adapt, and that’s the core of cognition.

The ability for the brain to process information changes throughout one’s lifetime, and without stimulation, cognitive ability can decline. When companies like Google or SAS ask puzzling interview questions, they’re testing, among other things, cognitive ability. To be hired as a software engineer, you would need to show that you have a strong command of whatever primary programming language is popular at the time, but in an industry that changes so quickly, strong cognitive ability will show that you can learn and adapt to the changing environment.

Rubik's CubeThe key is instilling cognitive ability in children at an early enough age. As we get older, we can continue to refine cognitive ability, but only to a small extent. These tactics may no longer work for me; the best adults can generally do to keep cognitive skills sharp is to get enough sleep and exercise, and eat nutritious food.

If you’re interested in helping your child prepare for a life full of challenges, there are some tactics you can employ.

Learning a new language

As a child, I enjoyed learning languages. I never became fluent in anything other than English, but I enjoyed the process of learning the rules. As a kid, I was fascinated by languages, and spent time learning a little bit of as many as possible. Like many kids, I learned a little Spanish from Sesame Street. I learned Hebrew and tried to teach myself Yiddish. I studied Latin in middle school, was taken out of usual classes to study Greek independently, and took five years of German. I learned programming languages like BASIC, Pascal, lisp, and C. And as a younger kid, I dabbled with creating my own languages and codes.

Music and mathematics have features in common with languages, as well. Music, particularly learning to play an instrument instead of just listening to Mozart, has been shown to improve cognitive ability.

As an adult, learning a new language or a musical instrument is a time-consuming task. There are programs that help frequent travelers learn languages quickly, but you could get a bigger cognitive benefit by learning a language through a more academic curriculum or through immersion. Rather than focusing on key phrases that help you get by in a foreign land, incorporating a new language into the way you think can help keep your brain active. On the other hand, young children, even those learning their first language or languages, can often learn multiple languages concurrently without being confused. Language skills not only improve cognitive ability, but they can make someone a more marketable employee around the world or increase the chance of international success in their own businesses.

Completing puzzles

Elementary school is a great time to focus on solving puzzles whose solutions require thinking “outside the box.” I seem to remember this being called “lateral thinking” when I was younger, but I don’t know if that term is widely used today. These are the types of puzzles that stymie job applicants at companies like Google. But puzzle solving as an adult won’t have the same impact as puzzle solving when the brain is at its most impressionable.

  • Logic puzzles are kind of like the game Clue. You often have two or more dimensions to work with, and the goal is to pair each of the dimensions together based on a limited number of clues. A grid helps eliminate incorrect pairings to discover what’s correct. The more dimensions included in the puzzle, the more brain power necessary to solve the puzzle.
  • For a child, a Rubik’s Cube can be an engaging puzzle. While the answer now comes packaged with the toy, and there are numerous Youtube videos describing how to solve the puzzle in about twenty moves, the cognitive challenge is in working to find patterns of movement that move closer to the result.
  • Text adventure games open up a child’s mind to being able to control their environment. Video games have changed since I was a kid, but I enjoyed the early text adventure computer games like Scott Adams’ Adventureland. (Classic game lovers can play Adventureland here.)

Reading and writing

Reading and writing help develop important cognitive skills focused on processing information the same way they’ll need to make sense of problems as adults. Writing, particularly creative writing, improves the command of language and can help children find clarity when expressing their ideas. Writing is a skill that will easily set someone apart from the competition, as might be necessary in tough job markets. I’ve personally seen atrocious written communication among co-workers throughout the many jobs I’ve had. I will never say I’m a great writer, but these skills are lacking in my former non-profit and corporate environments.

When I compose a well-worded communication, the supervisors shouldn’t be surprised. Every employee with a college education should be able to express himself or herself somewhat eloquently.

These cognitive skills nurtured at an early age can help prepare children for financial success in life. The best careers need smart and flexible employees to take on unforeseen challenges. People often predict what the hottest careers may be one generation from now, but the specific opportunities are irrelevant if children are prepared today to handle any problem that presents itself.

What did you do as a child to improve your cognitive ability? If you have children, how are you helping them prepare for the future?

Photo: Don Wright

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5 Reasons to Beware 401(k) Retirement Plans

This article was written by in Investing. 21 comments.

Financial planners just love promoting 401(k) retirement plans. They have quite a few benefits, notably a tax deduction for contributions as well as a tax deferral for contributions and earnings. They’re also one of the most popular vehicles for introducing the working middle class to the stock market, something that might not have been accessible to this group in the decades before the 401(k) plan was established.

In addition to financial planners, fund management firms and plan administrators love 401(k) plans, and their love knows no bounds. Companies pay significant fees to other companies that operate and manage 401(k) plans. More fees are embedded in the funds within the plans, benefiting each fund’s management team.

CubicleThe tax advantages, as well as a potential matching contribution if an employer offers one, offset some of the drawbacks of 401(k) plans.

1. Fees.

As already mentioned, most 401(k) plans are subject to fees, many of which are not immediately apparent to the investor. If you bother to read the prospectus associated with each fund you choose to invest in, you may find an expense ratio listed. If you do, there’s a good chance it’s higher than a comparable index fund. My former employer included investment choices that were annuity products disguised as mutual funds, and these didn’t have expense ratios listed. It was nearly impossible to determine how much of my investment I was losing to funds each year.

While fees are higher with 401(k) plans than with pensions, pensions offer a stable, predictable return. 401(k) performance depends on the investment choices and the associated markets. Pensions, when they are fully funded, tend to be more stable.

2. Employers are hands-off.

As the popularity of 401(k) plans grew, pension plans disappeared. A 401(k) is considered a “defined contribution” plan, while pensions are considered a “defined benefit” plan. That comes from the idea that the 401(k) balance is affected each payroll period by a contribution from the employee, while the pension balance increases at regular intervals by a contribution from the employer — a benefit of working at the company.

The value of a pension also tends to increase as the length of service at one company increases. As the popularity of pensions and other loyalty benefits decreased over the last couple of decades, employees had a decreasing incentive to stay at one company for their entire career. With pensions being a smaller part of most employers’ benefits, they do not need to worry as much about the solvency of these accounts. At the same time, it is up to the employee to make the right investment choices in a 401(k).

3. Automatic enrollment.

The advent of 401(k) programs brought on an increase of the nation’s wealth tied up in the stock market. That’s more income for money managers. It also creates a higher demand for investments, raising prices somewhat artificially. But there has also been a more recent increasing trend of employers automatically enrolling new employees into 401(k) plans once they are eligible. It’s a great idea to stimulate a better possible retirement outcome, considering many employees might not bother to elect to invest in a 401(k) immediately, even if they intend to.

Usually, any mechanism that automates your finances is a good thing. But too much automation can create complacency. It’s important to be aware and know what’s going on with your finances rather than blindly accepting what someone creates for you. You might be better off with an increased deferral rate than the default, or you may need to cancel your 401(k) contribution before it begins to improve your cash flow for necessary expenses.

4. Automatic allocation.

Like automatic investment, automatic allocation can be a trap. Some plans will, if the employee doesn’t elect specific investments, direct all contributions to a money market fund. Any investor could probably be better off in a high-yield savings account than a money market fund managed by a large investment house, even taking into the tax benefit of a 401(k) plan.

Furthermore, some plans will automatically invest your funds in a mix of stocks and bonds, with the percentages based on your age or your expected retirement date. This may or may not be appropriate for your situation, and importantly, it doesn’t take your outside investments into account. For example, if you plan on retiring 35 years from now, your 401(k) plan might recommend an investment of 90 percent stock funds and 10 percent bond funds, but if you already have a significant investment in stocks, your overall portfolio may be closer to 95 percent stocks and 5 percent bonds.

5. Loans.

With a 401(k) plan, you can loan yourself money. This sounds like it should be a benefit. In some cases it is, but often 401(k) loans end up being detrimental to someone’s finances. If there is an emergency and you cannot pay back the loan either on time or at all, you can face fees and penalties. If you lose your job with a loan outstanding, the entire remaining loan balance could become due immediately.

Overall, 401(k) plans can help the working middle class retire somewhat comfortably. And there is the possibility for investors to succeed financially significantly more than they might have with a comparable pension. The burden for performance has shifted from the employer to the employee, and that requires a little bit of financial education that might not have been as necessary (though still beneficial) in the heyday of pensions.

Photo: Yo Spiff

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Schwab Creates Low-Cost 401(k) Fund Choices

by Flexo

I used to work for a company in the financial services industry. Another branch of the corporation I worked for is involved with institutional money management. This department manages institutional investments like company retirement plans and pensions. This is a service they provided to other companies of various types, much like Fidelity and Schwab offer ... Continue reading this article…

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Good Debt and Bad Debt

by Flexo
See-saw

Misuse of credit can destroy a family’s financial life. A household can crumble under the weight of debt, whether it has increased from a poor house-purchasing decision, a drastic change in the real estate market, a shopping addiction, an unexpected medical bill, or the lack of preparedness for an emergency. It’s no surprise people consider ... Continue reading this article…

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Suze Orman’s New Prepaid Debit Card: The Approved Card

by Flexo
Suze Orman

As Ron Lieber reported in the New York Times, personal finance guru Suze Orman is launching her own debit card brand, the Approved Card, following in the footsteps of music mogul Russell Simmons and his Rush Cards. Suze Orman’s debit card will be a prepaid debit card, ensuring customers using the card can spend generally ... Continue reading this article…

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How Student Loans Affect Your Credit Scores

by Gerri Detweiler
Student loan debt

This is an article by Gerri Detweiler. For the past twenty years, Gerri has been an advocate helping consumers find reliable answers to their credit questions. Just as student loans can be “good debt” or “bad debt” depending on how they are used, they can be good or bad for your credit scores, depending on ... Continue reading this article…

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