PhD: Is It Profitable? Calculating the Return on Your Investment

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All doctors are rich, aren’t they?

You might think that a PhD tends to lead to higher salaries. You would be correct. According to, job postings requiring a bachelor’s degree offered an average nationwide salary of $64,000; that number rises to $67,000 for a master’s and $73,000 for a PhD. But does this tell the whole story?

To determine whether a PhD is profitable, we need more information just just average salaries. What we need to know is: over the rest of your working life, will you earn more or less if you decide to go on for a PhD vs stopping with a master’s degree? As we’ll see, there are several factors that we’ll need to consider.

Opportunity Cost

Opportunity cost refers to what you’re giving up by taking your first choice, rather than your second choice. In this case, the opportunity cost of pursuing a PhD is time you would otherwise have spent in the workforce, as well as the monetary costs of actually obtaining the PhD.

Let’s take a practical example. Suppose you earn your master’s degree at age 26 and have the choice of going into industry immediately or spending another four years working on your PhD at a cost of $20,000 per year. Afterwards, you will work until age 65.

Industry salary: $67,000 x 39 years = $2,613,000

PhD salary: $73,000 x 35 years = $2,555,000

The extra four years result in almost a $60,000 difference! But it gets worse…we still need to subtract the $80,000 you spent on the PhD (tuition, fees, books..although you can cancel out much of that by working as a TA). Now the you who went into industry is nearly $140,000 ahead. But wait, we’re not done yet - he also had 4 years more experience, so he’ll have gotten his first raise when you’re just starting, tilting things in his favor even more.

Jobs, jobs, jobs

Of course, earning a PhD is no guarantee of finding a job that requires one; it’s quite possible that, after another four years in school, you’ll end up in the same job you would have had without the additional education, minus four years’ pay. While PhDs are relatively rare - less than one percent of all Americans hold one - jobs that require a PhD are rarer still. One possible upside - having a PhD could lead to faster promotions, as the additional education could lead your employer to see you as being more valuable. Unfortunately, it’s hard to put a dollar value on this, but a few early raises could easily cancel out much of the cost of the PhD.

Of course, for many people, the money is less important than the fact that the job they most desire requires a PhD; university professor is the obvious example. For the type of person who is inspired to earn a PhD, the types of jobs it opens up are often the most interesting, rewarding positions available.

Is It Worth It?

Students looking to the PhD primarily as a means to increasing their earnings will mostly likely be sadly disappointed; as we’ve seen, the additional years out of the workforce actually lead to lower lifetime earnings. There are many reasons to earn a PhD, mostly related to wanting to explore a subject in depth or needing it for your dream job, but before you jump, you should carefully consider whether a PhD is right for you.