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The PhD bubble: when production outstrips demand

Modern economies really need high level research scientists, but there are difficulties when it comes to proposing job openings to the PhDs. We have reached a point now where question has become: what is the real value attached to a doctoral degree, both for Society as a whole and for those who register for demanding studies at this level? Might we be faced with a glut of PhDs? The issue is on the table and when we reframe it, it opens up a new prospective.

January 2014
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Modern economies really need high level research scientists, but there are difficulties when it comes to proposing job openings to the PhDs. We have reached a point now where question has become: what is the real value attached to a doctoral degree, both for Society as a whole and for those who register for demanding studies at this level? Might we be faced with a glut of PhDs? The issue is on the table and when we reframe it, it opens up a new prospective.

What are the key (and priority) skills and strategies needed to ensure a country‘s competitiveness? The answer to this question varies as the development cycles of the countries. In major reconstruction phases, our economy mostly needs managers, engineers and technical support staff. In today’s post-industrial era, the most advanced countries are now aiming at attaining so-called knowledge-based economies (KE), where research and innovation are prime gateways to creation of wealth. Countries can count among their man-power resources those who have gained a PhD, i.e., the nec plus ultra of university education and training, who thus become decisive factors for success in world markets, this being largely true for those who chose competitive specialties for their doctorate.

Knowledge economy

OECD is taking the correlation between the number of PhDs in a country and the latter’s economic prosperity seriously. Statistics here speak for themselves: in the OECD member countries, 70% of all research is carried out in private enterprise. In 2009, these companies employed 2.7 million research scientists and engineers, i.e., 65% total compared with 25% in higher education, academic research. According to OECD, there is a circular, cumulative, strong interaction or positive feedback between knowledge, skills and innovative work. In a given environment, any increase in supply of skills leads to technical improvements, new technologies, which taken together lead to an acceleration of productivity gains for skilled workers. In an economy where knowledge is the source of creation of wealth, manpower resources become just as important as capital assets.


Highly qualified staff plays an important role in development of the capacity of companies to absorb technology. The PhDs serve as mast-head look-outs, monitoring the state and level of scientific knowledge outside the company sphere, identifying what can prove useful to corporate strategy and making this knowledge understandable to colleagues. This is primordial when the internal corporate base differs notably from external bases; this happens when changes occur in the market-place. It is therefore very important to be able to update and control one’s ‘knowledge of knowledge’ for the purpose of identifying useful information and data. A given company, thanks to the presence on its payroll of highly qualified personnel, the PhDs for example, can anticipate the coming on line of cutting edge, state-of-the-art progress. In parallel to achieving better innovative practice, their presence has considerable importance in the nation R&D efficiency figures. Consequently, increasing the number of PhDs in a company is decisive in terms of the efficiency factor ascribed to public investment in science and technology.

The OECD has regularly issued detailed recommendations along these lines. In 2005, the Organization suggested that Ireland should double its output of PhDs. At the time, the ratio of PhDs per million inhabitants was stagnating at 168, far behind the R&D intensive nations like Finland (356), Sweden (426) and Germany (280). This lag jeopardized the county’s ambitions to have a high level academic research system (in its universities) and consequently better and more efficient R&D for its industrial sectors. As of 2006, Ireland began registering the highest PhD growth rate for all OECD countries.

Generally speaking, the fate any nation reserves for PhDs says a lot about the county’s overall intellectual rank. In France, for example, the doctoral degree is in a particularly sensitive state, because of the pre-eminence of the “grandes écoles” (mainly comprising France’s major engineering schools) and the strong competition they exert on the universities. A recent report, issued early 2014 by the French High Council for Science and Technology (Haut Conseil de la Science et de la Technologie) recalls that “in the leading scientific countries, the PhDs are the principal driving forces for innovation in the higher bands of public servants and likewise in the main industrial companies. In France, only 9% of those who earn their engineering diploma pursue to a PhD at a university. The percentage is close to zero in the commercial business schools. This explains why barely 10% of higher management echelons have a PhD, compared with 30% in the USA. This lack of training in and through research work deprives these managers from assimilating a unique way to combine analytical powers in complex problem-areas, a culture based on reasonable doubt and confrontation of ideas, exploring unknown areas and seeking innovant solutions”.

At first sight, training PhDs should benefit to the country as a whole. Training highly skilled persons has the positive side-effect of improving everybody’s basic training level. On one hand, new knowledge is being produced and everyone can benefit and, on the other hand, the PhDs, intrinsically better than most of us when it comes to extracting the new and novel, transforming them into goods and services, are able to boost productivity of their employers. Consequently, they have a high visibility in their jobs and aims. If you bring together some world class research scientists and innovation–intensive companies, you occasionally see some truly remarkable success stories, as is the case in California’s Silicon Valley. Measuring the effects from this optimistic stance, the global, systemic and economic contribution of PhDs extends far beyond the sum of benefits that each PhD offers his company and himself/herself.

The PhD job fair

Circulation of knowledge lies at the heart of the ongoing debate. If we consider the investments made by the universities and parallel HE government agencies to finance and develop doctoral programmes, public authorities must answer a few questions, e.g., what is the real added value of a PhD? Is there any justification that Society should pay for such programmes? In other words, to what extent is a doctoral degree a public asset? An Australian study assessed in 2013 that the PhDs contribute to institutional strategies, as and when they develop knowledge that circulates among the doctoral graduates themselves, and, likewise, through exchanging with other actors in the innovation system. The doctoral students and the PhDs provide added value by improving the academic research environment as a whole, and this added value is a direct consequence of public financing of the PhD programmes.

Moreover, as is the case for any product or service, a question arises as to its relevance in the market-place. In 2012, the American Chemical Society produced a report that expressed serious doubts about this, stating: “Training for scientists at a doctoral level simply has not followed the rhythms of major trends in our economic environment since WWII, when the HE system we have today was devised and implemented”.

The drive for knowledge has led, as could readily be foreseen, to a saturated manpower market. In short, there are too many PhDs on the supply side. On a global scale, their numbers bear no relation to demand from the universities – the institution that “consumes” most PhDs, at least those in their early careers. In parallel, the private sector leaders, who could also hire them, are divided between two analyses. On one hand they complain often about their lack of high level skills for their labour forces. On the other, they are quick to suggest that the PhDs do not, in fact, possess the sort of knowledge really needed. Overabundance, we might even say a glut, of PhDs is no doubt the result of large-scale democratizing of the doctoral degree.

For a long time, gaining a university degree, even one of intermediate standing, was the privilege of only a few academic elite and indeed many professors did not have a doctorate. It was post-WWII that saw PhD populations take off. As and when HE demand grew, it was expected that the professors in charge should have the most prestigious diplomas possible. The Americans took this route first: whereas their universities registered slightly less than one third of the world’s student populations, they conferred one half of all scientific, engineering and technological PhDs.

Inflation was rife and noteworthy. Between 1998 and 2006, the number of PhD awards in the OECD countries reached 200 000, an increase of some 40% in 8 years, compared with the 22% rise in the USA, this bearing out the fact that the world was catching up on America. This growth trend is particularly noticeable in Mexico, Portugal, Italy and Slovakia. Even in Japan, where the fraction of the younger generations is decreasing sharply, there was a 46% growth of their PhD recipients. Part of the growth reflects the expansion of Higher Education outside America. Only some of the countries with rapidly growing economies are asserting that they lack PhDs, but the fact is that they are awarding doctoral degrees of often dubious quality when measured against Euro-American criteria.

Explaining the glut

Among the many causes leading to a PhD population glut, explains the The Economist , one can be less ‘admitted’ than others: the university institutions make the most of this category of particularly brilliant, highly motivated intellectuals, who are not demanding as to their pay level. Thus, for a highly competitive cost outlay, universities can carry out more research and deliver more teaching. This talented and cheap manpower resource is exploited – with the promise of hypothetical promotion – by the tenured professors themselves, to carry out publically funded research assignments. For economist Prof Paula Stephan, Georgia State University (more here) the system is comparable to a Ponzi pyramid scam. See, in biology, what it looks like:


In a large American university, a post-grad. assistant, on average, earns 5 times less than the tenured full professor. Sociologist Dr. Andrew Hacker exposes the process in detail: between 2005 and 2009, American universities hired 100 000 new PhDs compared with only 16 000 new professional appointments. This is a self-sustaining system; the more bachelor (BSc or BEng) level courses in US colleges are delivered by PhD students, the less the colleges offered tenured professorships. Even in Canada, which we see as a more reasonable country, there are approximately twice as many PhDs than tenured professorial chairs offered.

If we look at the research side of university activities, the same dynamics applies. Most academic research is carried out by the post-docs. In Canada, some non-official figures conclude that 80% of these post-grads earns less than 38 600 dollars before tax, and this is equivalent to the take-home pay of public works and building sector workers. Moreover, they are at the risk of scientific fashion and when the latter change, the same ultra-trained, cutting edge minds sometimes find themselves faced with a zero future in academic posts. Possible set-backs like these, when they are superimposed, may largely explain why PhD students in the USA and the United Kingdom are increasingly non-nationals and precisely for this reason ready to accept less favourable pay-rates and conditions.

Concerning those PhDs who decide to work in the private sector, i.e., in the research divisions of the private corporations, they are faced with other sorts of difficulty. Their career path is so specialized that it is an awesome task to fid another employer for their skills. An OECD analysis shows that 5 years after graduating, more than 60% of the Slovak PhDs, over 45% of whom are resident in Belgium, the Czech Republic, in Germany or Spain, have not secured a stable job. One third of Austrian PhDs hold jobs today that have no connection at all with the subject matter of their diplomas. And what may be worse: in Germany, 13% of all the PhDs now occupy low ranking jobs. The same goes for some 21% of the PhDs in the Netherlands.

Moving into the private sector also carries the inconvenience of revealing a low financial profitability for the high personal investment needed to successfully complete a doctoral course. Admittedly, the PhDs earn more than those with a Bachelor’s degree. In an article entitled “The economic contribution of PhDs” published in the Journal of Higher Education Policy and Management, Prof. Bernard Casey, University of Warwick demonstrated that holders of a Bachelor’s degree earned 14% more than those who could have, but who chose not to go to university. For a doctoral degree, the bonus stands at 26%, while that for a Master’s degree stands at 23%. In certain areas, the salary bonus for a PhD holder totally disappears. PhDs in mathematics, computer science, social sciences and language studies do not earn more than those with a Master’s degree. According to Prof. Casey’s calculations, that date back to 2009, the salary bonus for a PhD even drops below that for a PhD in engineering, technologies, architecture and education. Only PhDs in medicine, business studies and finance are effectively rewarded for their efforts in the private sector where their employers have designed shorter training courses over the years and with contents that prove more relevant and more rapidly useable in their sector. From this point of view, a PhD is rarely competitive.

Re-thinking the PhD track-record

The solution could lie in a radical shakeup of doctoral courses, tailor-making them to the “clients”’ needs. The doctorate too often has an extremely narrow focus, corresponding in fact to the needs of higher education and academic research, whereas the truth is that the future of PhDs no longer lies in the universities. A remarkable study published by the Royal Society (UK), entitled “The Scientific Century” declares that only 3.5% of PhDs in science become tenured staff in the universities and only 0.45 % reach the rank of full professor. In the long term, 80% pursue their career path outside scientific circles. Nature raises the question, under the heading “Education: The PhD factory. The world is producing more PhDs than ever before. Is it time to stop?” This magazine goes on to regret that very few countries have seriously taken this issue into consideration and re-aligned their doctoral courses to match the need for careers outside academia better.

Need we, notwithstanding, be tempted to strip today’s PhD of its main features? The straight answer is ‘not necessarily’. Germany is often cited for its ability to integrate PhDs into its industrial world, but has not sacrifice the high level intrinsic scientific content.

It is rather the environment that makes the difference. Part of the success here can be explained by cultural factors, given the prestige that is associated with the title of ‘Doctor’ (as in scientific/engineering PhDs). Connections between research and industry also constitute a major and decisive factor. Laboratories of high repute in Germany are directed by university professors who have gained recognition industrial spheres. Germany’s younger PhDs can be comforted by the fact that their superiors are professors who are human benchmarks both in the universities and in relevant industrial sectors.

France, in essence and for a long time now, has been the counter example, give that top management come mainly from the “grandes écoles” and that French PhDs who hail mostly from the universities have a hard time settling into an industrial work environment. However, since the mid-2000 decade, people have become aware of two simultaneous phenomena : on one hand, the engineering schools themselves are now committing themselves to accepting and implementing more research assignments and an increasing proportion of the engineers go on to complete the doctoral degree; on the other, every HE establishment that has a doctoral section is now far more concerned by the future employability of the PhDs they turn out.

A case in point here is the “Doctoral road-maps to the entrepreneurial world” launched by ParisTech which consists of an original programme to accompany the PhD students as they prepare to start their early professional career. This programme involved setting up partnerships with some 20 ‘majors’, identifying in-house corporate mentors, not only to critically monitor the programme (analysing the assessment criteria and practice, studying its impact on PhD employability, making proposals to enhance the training course catalogues) but also to promote this programme in their own company circles (notably with respect to the manpower management divisions).

One of the objectives assigned to the programme is to provide the doctoral students with keys to master their career paths, with better overviews and gaining in-depth familiarity to how enterprise operates. A 4 week, mini MBA (business administration) course called the Doctoral Course in Management, has even been set instated, addressing possible candidates among the doctoral students. Paying attention to how PhDs enter the entrepreneurial world is part of the answer to current difficulties. But it should be borne in mind that employability also applies to their entire career paths. A central issue here is to see how PhDs envisage their next moves after an initial posting, given that the specialist knowledge they acquired during the doctorate will have lost its market value to a large extent after only a few years. Under these conditions, they must be able to identify, cultivate, develop ‘transverse’ skills that they started acquiring during their doctoral training – for instance, working in a team configuration, being familiar with industrial laboratory protocols, being able to manage a project over say 3 years… which comprise talents that are needed and appreciated in enterprise and which can serve young scientists to bolster and value-add to their career paths.

To round up our thoughts at this point, it is patent now that the issue of employment prospects for PhDs is real but leaves little or no room for a simplistic, off the peg answer. The countries that will succeed will not stop producing PhDs but they will learn to make provisions for job opportunities and will be advised to encourage the doctors to ‘make their own bed’, i.e., carefully think and plan their career path.