I remember the day I opened my first paycheck as a postdoc. It was a cold day in mid-February and I had just finished a series of experiments in the lab. As soon as I cut the envelope open, I saw it. I cannot disclose the exact amount, but my biweekly pay was between $1000 and $1500. “There must be a mistake…” I remember thinking. I did not expect a huge paycheck, but I did just finish over 20 years of school and my hourly rate was less than what the babysitters in my neighborhood made. The dogwalkers earned even more ($20/hour) and walked up to 5 dogs at a time. Wow, $100 an hour for taking a walk!
Many dogwalkers also offered other services such as dog training classes, dog boarding, and sold dog training products at nice profit margins. Some of them also held “regular” jobs that they could do part-time or from home. So, while us PhDs were diligently working on our degrees just slightly above minimum hour wage 6-7 days a week, the dogwalkers in our neighborhoods were probably collecting bigger paychecks and had multiple of other sources of income.
Nearly 40% of PhDs Do Not Have Jobs When They Graduate
I actually consider myself one of the lucky ones. While I did not make a fortune as a postdoc, my fellowship prepared me very well for an industry career where I had a six-figure income. It took me over a year of job searching to get that offer, but I did get an industry position as a senior scientist. I believe that one of the reasons that that my job search was so long, was that nearly all positions required prior industry experience and I had none. Like many other eager students, I went straight from college to graduate school and I was penalized for it during the hiring process.
Nearly 40% of PhDs do not have a job when they graduate. The percentages have been increasing steadily since 2006 when less than 30% of new PhD were unemployed. I was unemployed when I graduated. I applied to several jobs during my last semester but I was repeatedly rejected because of lack of industrial experience. So I focused on finishing my thesis and then I decided to take a break after graduation. I found a postdoctoral fellowship fairly quickly, and life was good. However, when I started to think about my financial future, such as investing in a home, I did not see how I could save enough on a postdoctoral fellowship for a down payment in the Boston area.
PhDs are typically not millionaires. Most postdoctoral salaries are around 40K per year, academic positions earn between 60-70K, and the mean salaries in industry are around 100K. I knew I was very fortunate to get my job offer, but I did not realize how fortunate I was until I got to industry. Before I worked in industry I knew that many PhDs worked in industry as postdocs. I also knew that many people with Bachelor’s degrees took contractor-level position. It was considered good industry experience prior to entering graduate school or in preparation for other industry jobs.
However, I had not realized how many PhDs (with postdoctoral experience!) were entering the job market as contractors. In other words, after 20+ years of school and multiple years as a postdoc living just slightly above poverty level, these very intelligent people were working for an hourly wage. Some PhD-level contractors had families, but they worked at a job which offered no health benefits and no job security.
While contractor-level positions offer good experience, I believe that the reason that most PhDs settle for them is that they have few other options. Imagine being in your thirties (possibly married with children), with more letters after your name than you can count, but no financial security and limited employment opportunities. I remember applying to positions that only required Masters degrees, but I was rejected, because employers assume that if you are overqualified, you will probably continue looking for another job anyway.
PhDs Have Lower Lifetime Earnings than non-PhDs
Let’s assume the best case scenario, which is that you get a permanent position with great benefits. Depending on your field, your starting salary might be around 80K or maybe even as high as 100K.
How are you doing compared to your peers, who did not get a PhD? According to a salary analysis, PhDs are offered higher starting salaries than non-PhDs, but they are behind track. The non-PhDs started out with lower salaries (although probably higher than graduate student stipends), but during the 5-7 years that it takes to earn a PhD, the non-PhDs are climbing through the corporate ladder. As a result, some analysts suggest that the lifetime earnings of non-PhDs might be higher than those of PhDs.
Of course, these results are highly dependent on your field and career path and there are certain career paths where a PhD is a requirement. Nevertheless, if you look at these numbers it makes you wonder whether it is (or was) worth earning a PhD.
PhDs Are Behind Their Peers in Their Investment Plans
Most graduate students I know did not start retirement plans in school, because they simply did not have enough disposable income to invest (plus the sound of “retirement plan” makes you feel really old when you are surrounded by undergraduates, so you try to avoid thinking about it). Thus besides earning higher salaries than graduate students, many non-PhDs also start employer-matched retirement plans that can have tens of thousands of dollars by the time they reach 30.
Can you catch up financially with your non-PhD peers who already have an established career path by the time you get your PhD?
If you depend on your paycheck alone, it is tough to catch up financially with your non-PhD classmates who earned a salary and invested money while you were a student barely scraping by. Salary raises are approximately 3% a year (barely keeping up with inflation) and many PhD level positions have a salary cap.
Is there another way to catch up? There is, but you need to be creative.
It is Possible to Start a Business or Generate Additional Sources of Income As a PhD
I know many bright PhDs who want to transition to the business world, start their own company, or generate passive sources of income, but they just don’t know how to do it.
Many positions in sales, marketing, or management require that you have an MBA. After 20+ years of school, many PhDs are turned off by the idea of investing in another degree that will take a few years and put them deeper in debt. Also, some MBA programs require work experience, so you still need to find some type of employment before going the MBA route.
Other PhDs want to start their own businesses, either in or outside their fields, but they don’t know where to start. Unless you have a background in finance or business administration, you were probably not taught how to start a business.For those of you who want to start a business or generate a second (perhaps passive) source of income I highly recommend finding a mentor or community that can guide you through the process. The best way to learn something is to model other people who were successful.
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