Does a PhD Pay Off?

Every week, I discuss with people who want to get a PhD. For years, I have been advising people not to pursue a PhD. It may come as a surprise to some.

You would expect people with a PhD to earn more money. Individuals who complete doctorates tend to have higher cognitive abilities and greater motivation. But smarter people tend to earn more, period.

So do people with a PhD earn more?

Historically, PhD holders earn more, but the bulk of the observed advantage is concentrated among those who get a professorship after the PhD. And there is no certain path from the PhD to a professorship. We have been producing many more PhDs than we have professorship, for decades. And the disparity is ever growing.

When I entered university at the beginning of the 1990s, about 0.5% of the Canadian population had a PhD. This has nearly tripled today, and it is fast increasing. Something of the order of one person out of 80 has a PhD. Comparatively, there is roughly one professor or university-level instructor per 900 people. With a fast aging population, we simply do not need many more professors and instructors than we already have.

There are specific fields where some jobs are difficult to get without a PhD. Machine learning is one such example. Many people in the industry have a PhD, and they tend to select those who also have a PhD. Further, there is a somewhat direct relationship between the work you might do during your PhD, if you are any good, and the actual work you might do later. It is much less clear in a lot of other disciplines.

The most significant economic cost of a PhD is not tuition but the years of delayed full-time earnings and career progression. In the tech industry, it is typical to award half a year of experience for each year spent on a PhD. This means that even though the individual starting with a PhD might earn more starting out, they are not necessarily getting a higher lifetime income. 


In fact, Benjamin et al. (2025) finds that early-career earnings for PhDs can be effectively zero:

> In the short run, pursuing a PhD entails substantial opportunity costs. Early-career earnings for PhD graduates are significantly lower than those of individuals with master’s or professional degrees, reflecting prolonged enrolment and delayed entry into the labour market. These costs are especially high for non-completers, particularly those who exit the program after several years without earning a credential. Over the lifecycle, earnings do eventually recover (and surpass those of bachelor’s and master’s graduates) but only under specific conditions. The most favourable long-run outcomes are concentrated among those who secure academic employment and remain in full-time work late into life. This “double premium,” combining higher earnings and longer careers, plays a central role in shaping the average return to a PhD. Outside academia, PhD holders resemble master’s graduates in both earnings and employment patterns.



Thus, the financial case for a PhD is narrower than people assume. 



*References*

- Altonji, J. G., & Zhu, Z. (2025). Returns to specific graduate degrees: Estimates using Texas administrative records (NBER Working Paper No. 33530). National Bureau of Economic Research. https://www.nber.org/papers/w33530
- Benjamin, D., Miloucheva, B., & Vigezzi, N. (2025). The opportunity cost of a PhD: Spending your twenties (Working Paper No. 802). University of Toronto, Department of Economics. https://www.economics.utoronto.ca/public/workingPapers/tecipa-802.pdf
- Cooper, P. Is grad school worth it? A comprehensive return on investment analysis. Foundation for Research on Equal Opportunity. https://freopp.org/whitepapers/is-grad-school-worth-it-a-comprehensive-return-on-investment-analysis/