Which PhD is Better for Salary and Job Prospects: Economics or Finance?

The choice between pursuing a PhD in Economics and one in Finance can significantly impact both your salary and job prospects. Both fields have distinct attributes, with finance being often perceived as more lucrative, but it can also come with a steeper learning curve. Economics, on the other hand, may open up more academic positions but could lead to a less competitive job market. This article delves into the nuances of both fields to help you make an informed decision.

Finance vs. Economics: A Comparison

One of the key distinctions between these two disciplines is the perception of the rigor and competitiveness within each field. Some may argue that the academic demands of a PhD in Finance and Economics with a specialized focus in Finance are essentially the same, as they share the same committees and dissertation processes. However, the financial rewards and opportunities often differ.

Financial Rewards in Academia

According to the heads of finance and economics departments, the financial rewards for PhDs in finance are often more generous. It's important to note that these differences were exaggerated, with estimates suggesting that finance PhD graduates earn around $50,000 more per year upon graduation. This implies that finance can provide a higher initial earning potential and a more competitive job market.

Another significant factor is the number of PhD students admitted into these programs. Many economics programs, particularly those in the arts and sciences, tend to be more lenient in their admissions, resulting in a larger pool of graduates, including drop-outs and unemployable candidates. This can lead to a more crowded job market, pushing down wages and opportunities.

By contrast, finance programs, especially those in business schools, can be more selective but also more rewarding. According to salary data, finance professors at public schools can earn 1.5 to 2 times the salary of economics professors. Therefore, if salary is a key factor in your decision, finance might be the better choice.

Academic Institution and Job Prospects

The emphasis on which program to pursue can vary greatly depending on the individual's academic background. One prominent professor suggested that while it might be challenging to secure a top finance program, the chances of acceptance in a top economics program are nearly guaranteed. This advice, however, turned out to be fortunate for the student, who ended up in finance.

Regardless of the program, the job prospects for a PhD in finance are generally more favorable in the private sector, particularly in the financial services industry. On the other hand, a PhD in economics is in high demand in civil services, especially in institutions like the Planning Commission, Central Banks, and regulatory bodies. Both fields are equally employable in the academic sector for teaching and research roles, but the private sector might offer more lucrative opportunities.

Specialization and Focus

Ultimately, the choice between a PhD in finance and economics also depends on your specialization and focus. If you are interested in more obscure or niche areas within economics, you might face more challenges in securing a job. Conversely, a PhD in finance with a strong focus on areas like monetary economics, financial econometrics, or financial services can greatly enhance your employability.

For fields that do not require specialized knowledge, such as freelance consulting or corporate training, a PhD in finance might be preferable. However, these roles can be highly competitive.

To summarize, before making your decision, consider the following factors:

Salaries: Finance typically offers higher starting salaries, especially in academia. Job Market: Economics may have a broader range of opportunities, including civil services, although the job market can be more competitive. Academic Emphasis: Both fields are academic disciplines but have different emphases. Understanding your long-term career goals is crucial. Individual Research Interests: Your personal interest and passion for the subject matter can drive your success and satisfaction.

With careful consideration and research, you can make an informed decision that aligns with your future goals and aspirations.