A few years ago, maybe till 2008-2009, the MBA degree self-endorsed itself because it was always identified with a fat paycheck. In recent times, this has not been the tale.
According to a report last month by the Graduate Management Admission Council, which publishes the GMAT B-school entrance test, median starting salaries have been more or less stuck at $90,000 since 2008.
Even if we leave aside the starting pay and rather start considering the value of an MBA over the course of an entire career, the results have been mostly stagnant. What’s more, while top-ranked programs continue to deliver the greatest returns on the b-school investment, the gap between them and the rest of the B-school pack is growing.
“The effects of the Great Recession on the labor market for MBAs can still be felt today, a full three years after the official end of the recession,” says Katie Bardaro, analytics manager at PayScale, which conducted the research. “Jobs are fewer and further between and wage growth is far below its pre-recession levels. The only MBAs who appear to be escaping these stagnant wages are graduates from top-ranked programs.”
PayScale, which collects salary data from individuals through online pay-comparison tools, determined the pay for graduates with pre- and post-MBA work experience of less than two years, five years, 10 years, 15 years, and 20 years.
Harvard Business School took the top spot in the ranking, with 20-year pay of $3,639,643, followed by the University of Pennsylvania’s Wharton School($3,460,707) and the Stanford Graduate School of Business ($3,432,013).
The interesting thing that came up through the research is that, on average, graduates of all 57 programs earned about $2.4 million over the two decades, or $122,513 a year. That amounts to a slight increase from last year, when annual pay for the group was $122,146. Graduates of the 10 programs with the highest earnings took home nearly $3.2 million apiece, or $159,122 a year, an increase of 3.6 percent. The remaining 47 schools averaged $2.3 million, or $114,724 a year, virtually no change from last year.
It was observed that institutions with the lowest starting salaries typically had the biggest increases. The University of Georgia’s Terry College of Business experienced the biggest gain—174 percent, to $139,000 at the 20-year mark. The Massachusetts Institute of Technology Sloan School of Management had the smallest, at 41 percent, to $169,000.
A key factor in determining how much an MBA degree pays out over time is the career path followed by graduates. Among the 10 schools with the highest career pay, about 28 percent of 2011 graduates went into consulting and 34 percent pursued finance—figures that have been fairly consistent for at least 10 years at schools, like Harvard, that publish historical data. At schools such as George Washington University, where nearly one of four MBA graduates ends up in government or nonprofit service, or Rice University’s Jones Graduate School of Business, where four-fifths get hired by regional employers at graduation, both starting salaries and career pay are far lower.
And the end of it all, it is extremely important to choose your career path well if you want the MBA degree to pay off. Otherwise, the numbers do not really make it seem worthy.