Why The MBA Is Now The Most Popular Master’s

Source: Brookings Institution

The popularity of the MBA has also risen as far more people in the U.S. earn postgraduate degrees. The Department of Education statistics show that advanced degrees today are as common as bachelor’s degrees were in the 1960s. More than 16 million people in the U.S., roughly 8% of the country’s population, now has a master’s on his or her resume, a 43% increase since 2002. The investment people are making in higher education, and especially the MBA degree, is driven by the belief that it will pay off, despite the loans that often are taken out to finance the degree. A Brookings Institution report in 2011 found that higher education is a much better investment than almost any other alternative, even for the Class of the Great Recession in 2009 and 2010. A college degree dramatically boosts the odds of finding a job and making more money. On average, Brookings found, the benefits of a four-year college degree are equivalent to an investment that returns 15.2% per year. “This is more than double the average return to stock market investments since 1950, and more than five times the returns of corporate bonds, gold, long-term government bonds, or homeownership. From any investment perspective, college is a great deal,” according to Brookings.

THE MBA LEADS TO GREATER CAREER FLEXIBILITY, HIGHER PROSPECTS FOR SOCIAL MOBILITY

And that investment shows up in every paycheck. A recent study by the Urban Institute showed that the earnings premium for graduate degrees is sizable and growing. In 2002, average earnings for full-time workers ages 35-44 with master’s degrees were 8% higher than those for similar workers whose highest degree was a bachelor’s. By 2012, that difference was 21%. There are other less tangible benefits as well. Robert Bruner, dean of the University of Virginia’s Darden School of Business, notes that having an advanced degree leads to greater career flexibility, a higher quality of life, higher prospects for social mobility, and significantly reduces the odds of unemployment during a career. “Higher education simply prepares one to function more effectively in the face of life’s uncertainties,” believes Bruner. “Education provides a valuable hidden option that helps to act as a shock absorber, like an insurance policy, against the episodic employment shocks that business cycles impose. The higher-educated are out of work less often.”

The MBA degree also has helped many transition into careers that allowed them to follow their passions. “An advanced business degree can be transformative for career changers, and as we see more returning veterans, for example, who need to learn the language of business, the MBA, especially one that focuses on experiential learning, can facilitate these transitions,” says Zaheer of the Carlson School.

“Even those who are not primarily drawn to business as a career are seeing the value of the skills they acquire in an MBA program — the leadership skills, the knowledge of finance and accounting and global supply chains and the people and team management skills — as valuable no matter what they want to accomplish — whether it is heading up a symphony orchestra or running a non-profit in Africa or a hospital (all of which our alumni are doing)!  We are seeing more ‘off-roaders’ – students looking to be entrepreneurs or for non-traditional careers like these, in our programs, and this might be contributing to the increase in masters in business as well.”

SURVEYS OF MBA ALUMNI CONSISTENTLY SHOW HIGH LEVELS OF SATISFACTION WITH THE DEGREE

Of course, there are no guarantees that an advanced degree, even an MBA, can work magic on everyone. Harvard and Wharton MBAs can and do lose their jobs. Stanford MBAs can create entrepreneurial ventures that go bust. And the payback from the degree, while still high, has fallen from the glory days of the degree in the 1980s and 1990s. But in general, all the research shows that the degree is well worth it, that people who go to business school are more than satisfied with the experience, and that the naysayers are few and far between.

Surveys of alumni, for example, consistently reaffirm the value of the degree, helping to explain why the MBA is the most popular master’s degree. The latest look at MBA alumni by the Graduate Management Admission Council shows that nine in 10 (91%) recent business school alumni from 2010–2013 consider their graduate management education a good to outstanding value. Sixty-six percent of alumni agree their education was financially rewarding. And a quarter (26%) of alumni report their expectations for recouping their financial investment were exceeded while 53% say their expectations for return on their investment (ROI) were met.