A more competitive job market has sparked degree inflation. Not long ago, an undergraduate degree could secure a good job. Now ambitious young people feel they need master’s degrees to stand out. The value of a Ph.D., though, is still an open question. For all the hand-wringing about the lack of candidates in science, technology, engineering, and math (STEM) fields, Jordan Weissmann now reports that often STEM Ph.D.s can’t find good jobs after graduation.
But Ph.D. job outcomes right out of graduate school aren’t the right data point. It often takes time for Ph.D.s to find the right job. Ph.D.s are patient, risk averse people; their degrees take time to pay off. Even when they do, expected salary isn’t all that matters; we also place a high value on security. The better news for advanced degree holders is more education means a lower unemployment rate. It also means a much lower chance of unemployment.
Using data from the 2013 Current Population Survey, I looked at wages and salaries during prime earning years, age 35 to 50. To estimate how much more people with graduate degrees earn (the graduate school wage premium), I subtracted the median B.A.’s earnings from advanced degree holders at the 25th, 50th, and 75th percentiles. I compared master’s degrees (including MBAs), professional degrees (medical school, law school) and Ph.D.s.
Turns out a Ph.D.s do earn more than people with a masters degree (even accounting for those high-earning MBAs). Overall, an M.A. is risky. The expected difference in earnings is only about $10,000 a year, and there’s a good chance an M.A. will earn less than a B.A. And, unlike Ph.D. candidates, most master’s degree students pay for their degrees themselves, often taking on significant debt to do so. Loans for graduate school account for 40 percent of the $1 trillion in outstanding student debt, even though only 20 percent of college graduates go on for graduate degrees, according to the New America Foundation.
Speaking strictly economically, we’d all be better off with professional degrees. There’s huge upside potential. A decent chance exists that someone with a professional degree will earn $80,000 more per year than the average B.A.
Not all Ph.D.s are equal when it comes to earnings. A Ph.D. in engineering has different job opportunities, and different earnings prospects, than a Ph.D. in comparative literature. Weissmann is right in noting that the STEM acronym includes many different kinds of degrees that all have their own characteristics, but overall, jobs in STEM fields tend to pay more at all levels of education. They are also a popular destination for Ph.D.s. More than 20 percent of doctoral degree holders end up in a science-related occupation (contrary to stereotype, only about one-quarter of Ph.D.s end up in academia; the rest land in health care, or nonscience professional jobs). The chart below shows the wage premium for science and engineering occupations.
Turns out a STEM Ph.D. may pay off after all, at least relative to a master’s degree. There’s very little risk you’ll earn less than a B.A., but the upside potential exceeds $70,000.
Talented science, math, and engineering students must weigh all this against the opportunity cost of five to seven years out of the labor market. Like college, there’s no guarantee that graduate school will pay off, but if you get the right degree—and are open to more than one career path—it may be worth the risk.