Well... As someone with a brand new physics Ph.D., I think you're wrong that the pay doesn't need to be competitive. Ph.D. programs are really coasting along on the ignorance of the Ph.D. candidates, and I'm not sure how much longer that will last.

Here's what I mean by that: The opportunity cost of a Ph.D. in physics, in terms of foregone salary, earnings on tax-advantaged savings accounts, stress, etc., is north of half a million dollars (and 5 to 8 of the best years of your life). Talking to people I know from my own department, and those I've met at conferences, and such, the lifetime value added to one's salary from having a Ph.D. is probably greater than the opportunity cost. But it's not obviously greater--a Ph.D. is a pretty good signal for "smart and gets things done."

In other words, it tells you "this person was probably going to do well anyway." You can't compare the mean or median salary of Ph.D.'s with those of, say, people with a Bachelor's in some STEM field. If you were to compare median STEM Ph.D. salaries with same-field top-quartile (or maybe top-decile) Bachelor's salaries, you'd find there is not much difference.

Am I just a bitter washed-out Ph.D.? Hell no! I did all sorts of fun things (like intermural sports and traveling) that I wouldn't have been able to do otherwise. I cherish those memories. But, if someone asked me "Should I go to grad school to improve my chances of earning a decent living?" my answer would be "Hell no!"

"I think you're wrong that the pay doesn't need to be competitive. " I would say the pay is competitive judging from the difficulty of gaining admission into these programs. Why do you think it isn't competitive?

"(and 5 to 8 of the best years of your life)" I'm not sure about a physics Ph.D. but most of my friends who are finishing up their Ph.Ds enjoyed their mid 20's more than the ones of us who decided to did the daily work grind.

Indeed, my friends who do postdocs at places like MIT never get more than $50k a year. That is definitely not competitive. You're getting compensation in a higher chance of your lottery ticket to getting a faculty job getting chosen, and people wouldn't accept such low salaries if there weren't some perceived trade-off value.

I'm currently a computer science PhD student (in Canada). I love my job (and the freedom and flexibility it gives me), and my funding is good enough that I have a comfortable living situation, but I (and most of my colleagues) could double our salaries by leaving school and getting a good job in industry. Even if I get an increasingly-rare tenure-track position when I'm done, I will never make up the wage gap with my friends from undergrad who went out and got more traditional jobs.

I love teaching, and I hate fighting with the computer (especially for dull line-of-business CRUD apps), so I don't particularly want an industry job, but the fact that I'm spending most of a decade (counting Master's) in grad school working well below the market wage for someone of my skillset still rankles. The fact that I'm going to spend 3/4 of my PhD taking no courses, but paying $12,000 a year in tuition grates too, as it's essentially a quarter of my salary clawed back for "job training", which in my case is a (very supportive) mentor and a desk in a windowless room - I may as well be a miner in a company town paying the company for pickaxes and head lamps (on the other hand, I also get all the same tax breaks I did in undergrad, so at least I'm not paying income tax).

When I describe my job to friends and family, I describe it as a sort of apprentice professor, because that's much closer to the truth than some sort of super-student. I'd rather be paid like an apprentice professor too, rather than a ramen-eating subsistence wage, as the original poster suggests.

To be maybe a bit clearer, I am not doing a purely financial analysis when I talk about how having a PhD is part of the reward. I would also never recommend grad school purely for the financial benefits! The point to me has always been that it gives more freedom (well, probably not for computer science PhDs) to direct the type of work that you do post-graduation. Instead of being a technician, you get to be much more independent in selecting projects, planning them, and potentially managing research groups whether in industry or academia. It means credibility as a consultant, it means credibility asking for more budget for a project you want to do.

And I am again, not talking about PhD's in computer science, which seem to be irrelevant in industry. I'm talking about things like physics or biology.

True. By "competitive" I didn't mean "same money", but "an equally good choice for enough people to fill the PhD ranks". Bad or non-existent wages are almost never an easy choice, no matter how much one wants to do research or become a professor (unless they already have money and can be self-funded during the PhD). Lack of funding can lead to part-time PhDs or extra day jobs, making it more taxing, lowering the quality of the research, and even leading to failure to complete the degree (in which case, the person just wasted their time).

A PhD student should get a "living wage" as you say -- enough compensation to be able to continue and finish. Industry wages and research wages are different: being paid to work on a product which has a financial plan behind it works differently from trying to improve the state of the art, which can lead to small contributions or even a mathematical proof that it cannot be done :-)

Fascinating, I've never been voted down before for an honest opinion. I didn't even know that was a thing! And f.t.r. I have a PhD too!