MBA Value Erodes In Past Ten Years

by John A. Byrne on

If you want proof that the immediate rewards of the MBA degree have declined, look no further than the past ten years. From 2001 to 2010, the costs of getting the degree have significantly outpaced starting pay at every one of the top 20 U.S. business schools.

An analysis by Poets&Quants of school recommended budgets to attend a two-year program and median salaries show that large amounts of value have eroded from certain programs. The assessments were made on the basis of a school’s recommended budget for students to attend their MBA program compared against the median starting base salaries of a school’s graduates. The analysis did not take into account the fellowship grants that would reduce the costs of getting a degree.

Whether this is merely a reflection of the overall economy which has led to widespread layoffs and stalled salaries among many white collar employees or a sign that the cachet of an MBA has declined is up in the air. But there’s no question that MBA candidates working toward the degree today will take a longer time to achieve a return on their investment than their predecessors did ten years ago.

Which schools saw the greatest depletion of value in the past decade?

The costs of attending Carnegie Mellon University’s Tepper School rose 12.8 times faster than its MBA starting salaries–more than any other top 20 school–while the University of Texas’ McCombs School of Business saw the cost of attending its MBA program jump 11.7 times its median salaries for graduates.

Which schools held the most value? The two at the top of the list: Stanford Graduate School of Business increased its budget recommendations to students by only 1.6 times its salary increases, and the costs of getting a Chicago Booth MBA rose only 2.2 times the salary of a Booth graduate. They were followed by MIT Sloan and New York University’s Stern School of Business, both of which saw costs rise 2.4 times median salary increases.

By and large, the top ten schools did significantly better than the bottom ten in the top 20. In the top ten schools, the costs of the degree rose three times the median salaries. But in the bottom ten of the top 20 schools the costs increased 6.5 times pay.

The single biggest increase in the cost of an MBA over the past ten years occurred at Texas-Austin where the recommended two-year budget for a student surged 140% to $127,444 from $53,034. Meantime, median base salaries went up only 12% to $95,000 for the Class of 2010 from $85,000 for the Class of 2001.

The smallest increase in base salary was at Emory University’s Goizueta School where pay increased by only 6% in the past ten years to $90,000 from $85,000. The cost of getting a Goizueta degree, however, jumped by 45% to $130,280 from $89,920.

Among the elite private schools, the greatest deterioration in the value equation was at Columbia Business School. The costs of getting the degree rose 8.9 times faster than the starting salaries in the past ten years. The recommended two-year budget at Columbia jumped 71% to $169,502 from $99,388, while median base pay increased by only 8% to $100,000 in 2010 from $93,000 in 2001.

 

School 2010 Median Pay 2001 Median Pay % 

Increase

2010 

Two-Year

Budget

2001 

Two-Year

Budget

% 

Increase

Harvard $110,000 $100,000 10% $158,000 $109,600 31%
Stanford $120,000 $100,000 20% $168,812 $128,000 32%
Wharton $110,000 $95,000 16% $168,000 $119,456 41%
Chicago $102,000 $85,000 20% $154,060 $107,722 43%
Kellogg $105,000 $90,000 17% $156,990 $105,066 49%
Columbia $100,000 $93,000 8% $169,502 $99,388 71%
Dartmouth $105,000 $95,750 10% $159,900 $95,750 67%
MIT Sloan $110,000 $92,500 19% $160,378 $110,620 45%
Berkeley $110,000 $90,000 22% $144,746 $76,320 90%
Duke $100,000 $85,000 18% $137,746 $82,948 66%
Virginia $100,000 $85,000 18% $142,000 $84,000 69%
NYU $100,000 $85,000 18% $157,622 $109,234 44%
Michigan $100,000 $90,000 11% $141,210 $91,100 55%
Yale $100,000 $85,000 18% $151,982 NA NA
Cornell $96,000 $87,500 10% $142,404 $86,610 64%
Carnegie-Mellon $95,000 $88,000 8% $149,400 $74,000 102%
UCLA $100,000 $85,000 18% $147,278 $62,664 135%
UNC $95,000 $85,000 12% $136,860 $82,650 66%
Emory $90,000 $85,000 6% $130,280 $89,920 45%
Texas $95,000 $85,000 12% $127,144 $53,034 140%

Source: School reports to BusinessWeek. For public institutions, out-of-state recommended budgets were used.

DON’T MISS: THE CLASS THE LOANS FELL ON or IS THE MBA STILL WORTH THE COST AND THE TIME?

 

  • http://studiobokeh.wordpress.com studiobokeh

    These recent MBA debt articles are really making me doubt whether i should be applying this fall (as they should be)…but still…it’s depressing…

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Studiobokeh,

    The MBA is still a valuable degree, but you need to be careful how much money you borrow and understand that today’s economic conditions have made at least the immediate returns look less good. Remember, too, that you are gaining a lot of knowledge and business knowhow in a program. You can’t measure that merely by starting base salary.

  • http://www.getmbaonline.net Michelle Carroll

    An MBA from a ranked school is still valuable, but like you said, John, watch out for those loans. The good news is that there are a lot of schools who offer scholarships– they might not be the Stanfords and Harvards of the world, but they’re working their tails off for better rankings and to do that they need to attract quality students. They’re also working hard on the career placement side. In the end, it’s not just where you go but how you apply what you learned from ANY MBA program.

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Michelle,

    That’s very right. In fact, I recently did an interview with Margaret Heffernan, an entrepreneur who teaches at Babson and is quoted in our story on the Wharton Class of 2013 which will rack up more than $100 million in loans and interest payments. Her take: “I have never believed that the true evaluation of any form of education is the money you can make afterwards. Why? Two reasons: 1) Cause and effect is impossible to prove. Did I make millions because I studied English and Philosophy at Cambridge? Would I have made more – or less – if I had studied something different? Unknowable. 2) The value of education lies in more than subsequent salary; its value is contained in illuminating choices and opportunity, enhancing the pleasure and satisfaction of work, providing the delight of intellectual stretch and companionship. These things have true value but can’t be costed.”

  • http://smallerworld.webs.com/ Smaller World

    The author is making a valid point here. But the bigger concern is what is going to happen to these rankings once the banking job-cuts bloodbath effect kicks in in 2012-2013.

    If you look at the table, the schools registering the highest salary gains are the ones best-known for supplying the IB sector (e.g. Wharton). I guess we are going to see negative salary changes once the 2012/2013 graduates start to accept jobs elsewhere just to repay their loans.

    If I could short an MBA some way, I would.

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