Since the educational expansion in the 1960s, both the number of candidates pursuing a PhD and subsequently the number of doctoral training programmes have steadily increased, accompanied by a diversification of doctoral degrees (e.g., academic, collaborative, professional or industrial doctorates) and the changing purpose of doctoral education and the doctorate in general (Sarrico, 2022). Achieving a doctoral degree requires strenuous effort, as well as opportunity costs in the form of lost spare time and income. Vis-à-vis the ‘limits of growth‘ (Hirsch, 1976), including limited resources in the economy in particular and especially in the labour market, the question arises as to whether this investment pays off in the later course of an individual’s career or whether the returns are below their level of education. Folk wisdom and public discourses often include doubts, with the image of the ‘taxi driver with a PhD degree’ as an extreme simplification of the 1980s discussion that initiated research on returns on education (e.g., Engelage and Hadjar, 2008; Ponds et al., 2016). These uncertainties are also reflected in scientific debates on the precarity among researchers or ‘academic precariat’ (OECD, 2021; Sarrico, 2022). This relates to educational returns – from a monetary perspective, this is the income people receive due to their (higher) educational qualification, while in a broader sense this concerns education-related monetary and non-monetary life chances. Such educational returns are not constant across different countries. Institutional contexts such as educational and social systems with their distinct policies, as well as labour market conditions, which are influenced by multiple factors, shape educational returns (Müller and Shavit, 1998; Glauser, Becker and Zwahlen, 2016; Hanushek et al., 2017). Furthermore, they are also affected by the degree of educational expansion (Bernardi and Ballarino, 2014).

In this study, we will focus on the distinguishing characteristics of a PhD degree and the mismatch between the demand and supply of tertiary education in countries with a greater educational expansion and examine whether possession of a very high educational qualification is gaining importance in terms of differentiation to improve one’s own income chances, or whether it reduces them due to educational attainment inflation.

In theorising the research issue, we discuss three different aspects: firstly, the PhD degree-income link (PhD premium) relating to classical human capital theory (Becker, 1964) and its application in the Mincer earnings function (Mincer, 1974) as well as to signalling theory and labour queue model (Arrow, 1973; Spence, 1973; Thurow, 1975). Secondly, we theorise the effect of the higher education regime on the base of higher education (HE) system classifications (Pechar and Andres, 2011; Triventi, 2014), which systematise structures and are strongly related to welfare state classifications. Thirdly, the effect of the degree of educational expansion on the PhD premium is conceptualised relating to concepts that center on the idea of education as a positional good. Education functions increasingly as an instrument for distinction in status attainment and labour market careers (Bol, 2015; Hadjar and Becker, 2009), as, referring to prominent conceptual approaches employed in sociology to the issue of the PhD income premium such as the ‘labour queue model’ (Thurow, 1975) and signalling theory (Spence, 1973), a higher qualification is necessary in order to differentiate oneself from others. However, arguments of increasing inflation and thus lower income premiums even for high degrees would point into the opposite direction.

We empirically examine our hypothesis by studying the PhD income premiums across 12 European countries, each representing different education regimes. Our investigation is based on data from the Luxembourg Income Study (LIS), covering the years 2006 to 2020. Thus, the base of our multilevel analyses are 89 country-years. The LIS dataset provides information on individual labour income and detailed data on the proportions of people with higher education levels in certain countries and specific years surveyed in this study. These represent various education systems. As it is meaningful to compare PhD graduates to higher education graduates at one level below (namely MA graduates) rather than comparing them to all lower-level higher education graduates, we restrict our data to individuals holding a PhD or master’s degree. To obtain a more homogeneous sample, the sample is further limited to individuals within the working age range of 23 to 65 years, allowing us to encompass the youngest workers with a PhD. We exclude individuals who are still enrolled in education and those who are unemployed. Additionally, we confine our sample to individuals working more than 35 hours per week to exclude those engaged in low part-time employment with marginal participation in the labour market. The dependent variable is the gross annual labour income in the main job in euro. We utilise purchasing power parity (ppp) deflators with the reference year 2017. In our multivariate analyses, we additionally employ the natural logarithm of annual labour income. The key independent variable is whether individuals possess a PhD, with a master’s degree as the reference category. Regarding our conceptual arguments, we generate dummy variables for each education system, including the Anglo-Saxon, continental, Mediterranean, and eastern (post-communist) regimes, and we measure the extent of educational expansion by calculating the country-specific share of working-age individuals (aged 23 to 65) with tertiary education based on the LIS data.

Our analysis reveals that, on average, individuals holding a PhD benefit from an income premium. Considering country-specific factors, our results indicate that the financial benefit of a PhD degree varies depending on the education regime and the extent of educational expansion. The Anglo-Saxon education regime, categorised as inequality-prone, exhibits the highest PhD income premiums, while the eastern (post-communist) education regime shows no significant differences in incomes between master’s and PhD holders, indicating that PhD degrees may not yield financial benefits in these countries as they do in others. In countries of the Nordic (social-democratic) education regime, known for its low stratification and enhanced redistribution policies, our analyses reveal no significantly lower PhD premiums than in the more inequality-prone Anglo-Saxon and continental education regimes. In contrast, the continental regime, renowned for its strong stratification, is generally perceived as generating greater inequalities. Nevertheless, its countries show a relatively lower PhD income premium, which is significantly lower than in Anglo-Saxon education regime countries. One explanation for the relatively high Phd wage premium in Nordic countries is that due to the generally lower levels of income inequality below the Ph.D. level, the wage increase through a Ph.D. becomes relatively more pronounced. Regarding educational expansion, the results indicate that the rise in tertiary education levels erodes the unique value of PhD certificates as distinguishing criteria, as in countries with a greater degree of educational expansion (proportion of PhD graduates), the income premium of a PhD degree is comparably lower than in countries with a weaker educational expansion. Overall, obtaining a PhD degree is according to recent data and from an international perspective a signal of distinction and comes with income benefits in most countries, but this benefit varies with the proportion of tertiary-educated people and education regime.

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