There are obvious intrinsic motivations to undertake postgraduate study. Although, in an increasingly precarious academic job market, the prospects of securing better employment as a result of education are considerable. Giulio Marini and Golo Henseke analyse a decade of UK Labour Force Survey data to assess the different liftetime economic benefits of Master’s and PhD degrees.

When contemplating a PhD, people might be drawn by various aspects, such as exploring a field of study in-depth, the autonomy to set an individual research agenda, solving complex problems, interacting with the academic community, or making significant contributions to knowledge. However, people might also consider prospects for career progression including potential earnings, industry destinations and access to a wider range of jobs. People undertake PhDs for a variety of reasons, although it is safe to say few do so solely for the money. This mindset, sometimes referred to as a “taste for science”, a strong preference for academic research, has a price in the labour markets. In other words, engaging in research may lead to comparatively lower economic returns.

Traditionally, outside of the medical field, the long-term gains of obtaining a PhD were perceived to be linked to becoming an academic. However, in the contemporary academy a PhD alone no longer guarantees a position in academia. Consequently, individuals may re-assess the purpose of pursuing a PhD, especially if there are potential labour market penalties for prioritising research and access to an academic career is far from certain. Thus, we ask: “Is a PhD worth more than a Master’s in the UK labour market?”

Despite extensive research on the labour market outcomes of PhD holders, including those outside of universities, we know surprisingly little about the relative payoff of a doctorate over Master’s degrees. This issue holds significance not only to an increasing number of post-graduates, but also for modern post-industrial societies that rely on the assumption that more education brings greater benefits.

This issue holds significance not only to an increasing number of post-graduates, but also for modern post-industrial societies that rely on the assumption that more education brings greater benefits.

We investigated whether the salaries of PhD holders were higher, if at all, compared to the most likely alternative for prospective PhD students—workers with Master’s qualifications. Notably, choosing not to pursue a PhD also means entering the workforce approximately four years earlier, providing an intriguing advantage in terms of working experience and career progression for those with only a Master’s degree. Utilising a decade worth of UK Labour Force Survey data, we combined information on employment, salaries, managerial/ supervisor position, and job destinations including the degree of specialisation and job autonomy with individual background to compare labour market outcomes between individuals with PhDs and those with Master’s degrees.

In summary, our findings indicate that pursuing a PhD is a favourable choice in economic terms, in addition to any potential personal gratifications and other positive externalities it offers. PhD holders earn approximately £1.60 to £3.10 per hour more than individuals with Master’s degrees. The pay premium is mostly driven by the capacity of PhD’s to secure managerial positions. A PhD holder in a managerial role may earn almost £5 per hour more than a peer without managerial responsibilities, all else being equal. A potential pitfall for PhD holders lies in becoming overly specialized without assuming leadership roles, rendering the concurrent earning’s advantage of a PhD nearly negligible on top of the initial loss of work experience and earnings during their years of training.

Fig.1: Gross income of PhDs against Masters in the UK Labour Market accounting for the opportunity costs of first three years of Master holders employment experience that PhDs spent in doctoral education, plus doctoral fee. Cumulative in gaining back in a life span of 36 years of working experience Source: own calculation from UK LFS [2010-2019].

Finally, from the estimates we compute a simple life-span, cost-benefit analysis, considering the time and fees associated with pursuing a PhD and the opportunity cost of foregone earnings. Fig.1 illustrates the results. Realistically, a PhD holder takes no less than 10 years (even more than 20 years for, say, those who studied STEM) to recover the costs incurred from the pursuit of a PhD. The ‘net’ economic benefits of a PhD title become positive only in the latter stages of one’s career, with potential implications for significant milestones of adult life such as starting a family or buying a house.

While the intellectual challenge and intrinsic pleasure of scientific exploration are compelling factors, our findings underscore that the economic implications of a PhD extend beyond personal satisfaction. Our study reveals that, economically speaking, pursuing a PhD can be a prudent choice. The data demonstrates that PhD holders, on average, earn more than their counterparts with Master’s degrees. However, the pivotal factor contributing to this pay advantage lies in PhDs ability to secure managerial positions. Without assuming leadership roles, the PhD pay advantage is negligible. However, for the average PhD holder it takes over a decade to recover the direct and indirect costs related to the pursuit of their doctorate. This delay prompts contemplation on the broader socio-economic implications, including for milestones such as home ownership and family planning. As societies continue to place a premium on higher education, our findings contribute valuable insights into the interplay between academic pursuits, career outcomes, and the lasting economic impact on individuals and society as a whole.

This post draws on the authors’ article, Is a PhD worth more than a Master’s in the UK labour market? The role of specialisation and managerial position, published in Studies in Higher Education.

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