Here are some things that are well-established:

  1. Being a PhD student is a (albeit, temporary) career-path with the poorest education-level/income ratio in the United States. It has been estimated that Post-Doc salary is comparable to junior librarian., and PhD salary is comparable to a waiter.

Note: Average salary of a waiter entry level positions start at $21,158 per year while most experienced workers make up to $39,585 per year. A junior librarian makes less than $50,000/yr.

  1. The opportunity cost is also stark compared to people who are similarly educated in STEM but left for industry early, with a popular estimate of around 1 million USD by the end of the PhD (5-6 years) (which might not include time-value of money, investments, and retirement savings).

  2. Despite academia as a whole being a multi-billion/trillion dollar industry, the administration refuses to raise the stipend for PhD student, leading it to stagnate on average 25,000-30,000 USD/yr for the last three decades if not more.

It is pretty clear to me that most (but not all) PhD programs are path to an enlightened poverty, with STEM PhD faring better than Humanities PhD, and industry-demanded STEM PhD faring better than say biology or pure math.

However, I wonder if this opportunity cost has gotten even even worse over the past few decades due to some factors such as,

  1. rising competitive (on the global scale),
  2. job/housing insecurity,
  3. a sizable aging but not retiring faculty,
  4. skill-based labor market heavily favored over degree-based,
  5. rising cost of living in almost every part of the globe.

Take a current example, due to Covid19 many industry stocks (say airline) are at their lowest point, however, most PhD students do not have the money to invest hence will not likely to reap the benefit. Another example is in software engineering: it is pretty well established salary was good about a decade ago but now the supply is high enough for the wage to fall, most PhD students also miss this "golden" period. Almost all major tech companies (such as Stackexchange, minus IBM, Microsoft, Apple) are founded/launched by people around 2000s, we can firmly say that period is over. Yet another is encroachment of industrial research on academic topics. Google, Twitter, Facebook and various other large tech conglomerates dominates all major AI references in 2020, which makes research on a PhD stipend look pointless

I sometimes take a look at these so-called industry-academia collaboration and wonder out-loud if this isn't just some scheme that seeks to exploit underpaid and highly motivated graduate students.

Objectively speaking, has the opportunity cost gotten higher over the years? If (or not) so why?


3 Answers 3


I think the answer is a relatively clear yes, at least if you compare to 30+ years ago.

First of all, the rise of software development, mathematical finance, and more recently data science, means that at least some STEM majors have much higher salaries in industry than was possible 30 years ago. I think this change is at least as important a part of the story as an changes within academia.

Second, academia has been in strong decline in terms of availability of good jobs for at least half of those 30 years. Universities were growing due to the baby boom and increases in the portion of students going to college, and has been in crisis since those trends stopped. Sometimes this crisis is more acute (the financial crisis, the end of the Soviet Union, covid) but it’s ongoing even during the less acute phases. As a result there’s fewer jobs in academia with tenure track lines replaced by insecure and poorly paying positions.

All that said, I think “enlightened poverty” is wildly overstating the situation, and could only be said by someone who has no idea what actual poverty is. If being extremely wealthy is important to you, then yes doing a PhD is a terrible idea. But even PhD wages are not poverty, and for many people the goal is to make enough money while having a job they enjoy. With that viewpoint the opportunity cost isn’t so important. If you have enough and are happy why waste time being jealous of people who have more? Even if you go into industry there’s always going to be some people who make even more, so constantly comparing yourself to the perfect sequence of financial decisions is not a productive way to look at life. Of course, if you do think you’d like both jobs it’s very justifiable not to do a PhD because you’d prefer more money, and I do think the changes over the last generation means that choice is right for more people than it was previously.

  • 1
    Hmmm. Thirty years ago the boomers were in their 40's. STEM was very big before we landed men on the moon. Then a crash. Big resurgence when the PC was invented. Then a crash. Rinse, Repeat.
    – Buffy
    Sep 14, 2021 at 11:14
  • 2
    It seems to me that you need to address the increased probability in getting a job in software development, mathematical finance etc with a Ph.D. versus with a BA. I did some research on this for a student about 10 years ago who was sure he wanted to work in finance and could plausibly graduate in 2 additional years. We came to the conclusion that the improved job options were worth more than the forgone income during those 2 years, but probably wouldn't have been worth more than the forgone income from never enrolling in the first place. Would love to have some better data on this. Sep 15, 2021 at 15:22

The opportunity cost could be calculated only ex-post. So if you take a 1000 PhD students and determine their total earnings 5 years after their education vis-a-vis the alternatives, says a software engineer. And do a statistical analysis, only then, could you come to a conclusion. Perhaps you can look for such data and do the analysis if you want to be rigorous.

But that might not really be highly useful because there will be outliers and most of the choices we make in life, assuming we are motivated to be successful, is to become an outlier. We make decisions to pursue higher degrees like PhD with varying goals.

Most of the PhD aspirants wish to find a career in education -universities and colleges - requiring to fulfil the eligibility criteria. In their case, there is no value in calculating the opportunity cost as that is the career path which suits them.

Another group of aspirants pursue a PhD with the hope of building something which can bootstrap their career in innovation and entrepreneurship. You build a very good idea in academia and launch it as a product. Google is one such example. Silicon Valley is filled with such instances. If successful, the opportunity cost is not high. If you fail in this goal and then get back to the industry there is a high opportunity cost-- with a good chance that your boss was your junior in high school.

There is another notable group of PhD aspirants who pursue a degree in the hope of migrating to a newly developed country with better living standards. The host country either runs the universities, more as a business, raking in billions of dollars in tuition fees and then letting these PhD students work in the industry -- where they do not really mind doing even jobs which have got little to do with what they did in their PhD. Again, in this case the opportunity cost is very low -- considering their objective.

Going deeper into your question, or rather now addressing your actual question, has the opportunity cost changed over time. The opportunity cost has, with time, reduced, imo. I have known students who extend their Master's thesis into PhD and finish the whole work in less than 4 years after their Bachelors. In Europe, the average PhD duration is increasingly tending to three years though it is still 7-8 years in the US. Naturally, the opportunity cost in the US is high but so are the opportunities.

You can see that the opportunity cost is not just a function of time but also the region of the world and the ability/goal of the PhD aspirant.

  • Why five years? The lifetime earnings would be a better standard. Of course, for freshly minted PhDs it would have to be an estimate.
    – henning
    Sep 14, 2021 at 7:14
  • That's much difficult to estimate. And money when young is more important than when old.
    – kosmos
    Sep 14, 2021 at 7:18
  • you'd have to discount the earnings, but yes, the estimation is tricky, yet extrapolating from the first five years probably understimates the effect a PhD has on earnings quite a bit.
    – henning
    Sep 14, 2021 at 7:31

In general one should not try to get PhD if they are not interested in an academic career. There are national differences but with globalizing practises, increasingly being a doctor is no longer what it used to be. A hundred years ago in Europe is relevant because the transition has been long. Not long time ago there were no Post Docs. And there used to be even Licentiate degrees between the Master and Doctor.

PhD used to be more about creating a master piece to showcase ones vast knowledge accumulated in tens of years of experience as a researcher. Nowadays it is just an extension to education. Now there has been about a generation of people for whom the latter is true. Comparing free education with salary against someone actually working makes no sense. Before getting into a tenure track you cannot compare the industry and academia one to one. Once one is in a tenure track is there a similar job agreement with administrative responsibilities.

But overall no one should compare relatively free academic pursuit of knowledge with resource constrained for-profit pursuit of corporate side. In academia you are meant to only explore and in the business world exploit and minimize the exploration. A novel idea is not valued if you cannot turn it into a product. Industry-academia collaboration is about common goals. The work they do is different so you cannot compare the opportunities. In business world you learn production skills. They are better for production. In academia you learn about the theory. Which allows you to build more theory. In academia you are more free to pursue what you are interested. In the industry you are given the task you need to do. Some people give value to that freedom. It is not all about salary.

  • Licentiate as a degree still exists in Finland, though mostly for medical doctors or as a failed PhD in other fields.
    – Tommi
    Aug 13, 2020 at 13:09
  • @Tommi Indeed, in Denmark the PhD replaced licentiate and there are these real doctors that are more like what they used to be. The globalized PhD system has been adopted differently between nations. Aug 13, 2020 at 13:14
  • Jeg vidste ikke at det var i brug i Danmark også.
    – Tommi
    Aug 13, 2020 at 14:21
  • On Academia SE I often read Statements as " a phd teaches you skills that are seeked after in industry"..
    – user111388
    Aug 13, 2020 at 14:44
  • Either and academic or academic-like (national lab, corporate R&D) - the national lab I work at has lots and lots of PhDs (~2000).
    – Jon Custer
    Aug 14, 2020 at 14:17

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