A decrease in the number of students entering doctoral programs is viewed as one of the factors behind the serious decline in Japan's research capabilities. The government is working to improve the treatment of doctoral students and develop career paths for doctorate holders. The Basic Policy on Economic and Fiscal Management and Reform 2024 calls for raising doctorate holders as a percentage of Japan’s population to one of the highest levels in the world by promoting initiatives to improve the treatment of doctorate holders and create a wide range of opportunities for them to play active roles.
“The Get a PhD—Doctoral human resources action plan” by the Ministry of Education, Culture, Sports, Science, and Technology points out that the percentage of the population that holds doctorate degrees is significantly lower than in other major countries. The plan cites prospective students’ concerns about employment and wages after the completion of doctoral programs as major reasons for this disparity. There is a general impression that doctorate holders face unfavorable conditions in the labor market.
The government struggles to achieve real wage increases, that is, wage increases that exceed the inflation rate. Productivity must be improved to achieve such real wage increases. Higher education is linked to two sources of productivity growth: innovation and human capital investment. Consequently, it is necessary to confirm the actual situation for doctorate holders in the labor market based on statistical data.
Empirical studies in Europe and North America indicate that wages for doctorate holders are considerably higher than for master's degree holders. In Japan, until recently there were no large-scale statistics developed that distinguished between doctorate and master’s degree holders, leaving the actual situation unknown. Since 2022, however, the Employment Status Survey conducted every five years by the Ministry of Internal Affairs and Communications has begun distinguishing between them. This is an important improvement toward considering appropriate human capital investment based on evidence.
According to the survey, doctorate holders account for 0.7% of employment in Japan. The employment rate is higher for doctorate holders than for master’s or bachelor’s degree holders, especially among women. The average wage for doctorate holders is about 40% higher than for master's degree holders. The high probability of getting a high-paying occupation is a major contributor to the far higher wage for doctorate holders. The lifetime income for doctorate holders is 34% higher than for master’s degree holders among men and 56% higher among women. The return on investment in doctoral programs is roughly around 10% for both men and women, which is higher than returns on investments in financial assets.
Of course, there are low-income doctorate holders and anecdotal evidence of highly educated working poor. Given that some doctorate program students fail to complete their programs or take a long time to do so, there is no denying that investment in doctoral programs is risky. In this regard, recent initiatives to broaden career paths and reduce risks for doctorate holders are valuable. On average, however, entering doctoral programs represents effective human capital investment even in Japan. This fact itself may alleviate hesitation towards entering doctoral programs.
The figure here is the private return on investment for individuals. The social return, including the effects generated through innovation and educational activities, is potentially even higher than the benefits indicated here. Given such positive externality, policy support for such investment is justified. On the other hand, the support targets those with higher average incomes, meaning there is some room for debate on such support from the viewpoint of equity. However, policies to support students who cannot enter higher education due to financial constraints, such as the enhancement of scholarship programs and tuition reductions based on financial resources and academic achievements, are desirable from the perspective of both efficiency and equity.
>> Original text in Japanese
* Translated by RIETI.
July 26, 2024 - Published in Nihon Keizai Shimbun's "Economist 360° Perspective"
