What Companies Are Paying MBAs This Year

The corporate recruiters who hire boatloads of MBAs expect to pay this year’s graduating class slightly less than they did last year. Median starting salaries for MBAs in the U.S. is expected to fall by $2,000 to $90,000, according to a study of corporate recruiters by the Graduate Management Admission Council (GMAC) published today (May 21).

GMAC said such slight declines are not uncommon in post-recession years, though it brings median salaries back to their 2008 level. Indeed, in four of of the five last years, median starting salary has been exactly $90,000.  Even so, GMAC said that salary data reported by full-time two-year MBA graduates in 2012 with job offers showed an 81% increase in salary in 2012 compared with their pre-degree jobs.

GMAC attempted to spin the decline in a positive light, noting that employers continue to offer MBA new hires a significantly higher median salary when compared with new hires with bachelor’s degrees. “This premium has remained in the $40,000 range for the last five years of available data, the study found.

These figures exclude signing and performance bonuses that companies offer in addition to base salaries. In the United States, where 46% of companies offer their starting MBA hires a signing bonus, the median signing bonus for those candidates is $15,000, which matches the signing bonus offered to MBA hires in 2011.

Expected Median Starting Salary for Newly Hired MBAs At U.S. Companies

In 2012, 48% of survey respondents plan to increase MBA starting salaries in comparison to last year; a closer look reveals some nuanced results, however. The 2012 Corporate Recruiters Survey asked respondents to estimate the direction of change in base salaries for recent business hires, taking inflation into account. Globally, 13 percent of companies plan to increase MBA starting salaries above the rate of inflation and 35 percent plan to increase pay at the rate of inflation. But half (50%) of participating companies plan to keep MBA starting salaries at 2011 levels without adjusting for inflation. Similar findings are seen across all degree types and geographic regions.

While these companies are not reducing the base salaries they offer new hires, the net result of stable salaries is slightly weakened purchasing power. These results are not surprising given the sluggish nature of the current economic recovery: Many countries, including Canada, the United Kingdom, and the United States, report that wages are struggling to keep up with inflation for most employees.

  • YourMom

    Where I live, there aren’t any MBA jobs–unless you went to high school here! I’m dead serious. All of the other MBA’s work as bank tellers, customer service representatives, retail clerks, janitors, and gas station cashiers. All that work and all of those sleepless nights for nothing!

  • Hari Ram

    hahahaha! well played.

  • Big Bird on PBS

    McDonalds and Wendys. Burger King has good bonuses.

  • CheezeDoodle

    John- can you tell us where these “new grad” MBA salaries of $90K + are? What companies are you drawing this data from? I live in a large metropolitan area and have been combing the job boards and applying for jobs and keep seeing MBA opening salaries in the $50-$60K range.

  • Cost of living in those countries is lower as well. Plus, keep in mind that the employer saves money too. Currently, the employer portion of social security and medicare is 7.65%, which the employer doesn’t have to pay in these Middle Eastern countries. Insurance/benefit costs are much lower as well.

  • The long-term trends don’t look good — or rather, they don’t look as rosy as they used to be.

    When you look at the starting comps by industry, it basically hasn’t changed in 10-15 years (not looking at the overall median since that includes all b-schools), give or take $10-15K (that’s before tax, which isn’t *that* much of a difference).

    What isn’t mentioned here are two things:

    (1) Tuition has doubled. When I was in school 10 years ago, tuition was around $20-25K per year. Now, tuition is at $40-50K. Also, living costs have gone up: rent, gas, food, entertainment, etc.

    (2) Pre-MBA salaries are much higher now. When I was in school 10 years ago, as a point of reference investment banking analysts were getting around $40K base + $20-40K bonus ($20K as 1st years, and $40 – $50K as 3rd years). And bankers had the highest total comp amongst the incoming students (even pre-MBA mgmt consultants were around $40-60K total back then). Now, those in financial services at a pre-MBA level make double that now. Consultants are at around $70-100K. It’s not uncommon for an engineer working in the US with 5 years of experience to be making $90-120K.

    So basically the total cost of going to b-school (tuition, forgone pre-MBA salary) has skyrocketed relative to the benefit (post-MBA comp which has been stagnant or hasn’t grown much at all, and no greater range of opportunities now than 10 years ago: basically the same employers and industries that are hiring).

    What has saved the applicant volumes for plummeting have been the influx of international (particularly Indian) applicants.

    This doesn’t mean that an MBA is useless or too expensive to be worth it — it’s just that it’s not the “no brainer” of a decision like it used to be because it’s much more expensive in terms of hard costs and in terms of what you’re giving up.

  • Guest

    Techincally right, but, a single person can claim exemption from US income tax on the first $95,100 of foreign earned income as long as they can demonstrate that they pass the “bona fide residence” or “physical presence” tests.

  • Abtdsh

    If the people in the Middle East are US citizens it is not tax free. The US still charges income tax on overseas income at the same rate as domestic income. They would still make about the same unless they renounce their citizenship

  • TA

    I’m not sure about industry companies but I have a buddy that graduated out of Harvard with a masters in statistics and he gotta gig at as an associate at  AT Kearney  Dubai’s office. They’re paying him the same they woulda paid him in say a New York or a Chicago. I know another guy who did a bachelors in electrical engineering at University of Illinois, Urbana and he’s working in Dubai for Moelis and he’s getting paid the same he was in New York . Only in this case its all tax free . So I’m assuming MBA’s would get paid the same because that seems to be the trend in consulting.

  • Afzal

    This does not look good. The career trajectory of an MBA grad depends a lot on his starting salary and his first job. Students who graduate in a recession are at a disadvantage anyway. This makes it a lot worse.

  • Said

    Hello John,
    When foreign companies specifically in the Middle East i.e. Dubai, Qatar, Abu Dhabi, etc. etc. hire MBA’s. Do they simply do the calculation that “Well you would have grossed 100K in the USA, and netted 70 since you’re single, so we’ll just give you 70K in our tax free countries” Or do they smack you with a tax free 100K, then watch you tap dance your way out to the elevator after accepting the offer?