The Most Lucrative Seven-Figure MBA Degrees

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by John A. Byrne on

Harvard Business School MBAs earn the most over a 20-year career

Harvard Business School MBAs earn the most over a 20-year career

What’s an MBA degree really worth? And how much more money does an MBA from Harvard, Stanford or Wharton get you over a career than one from Texas A&M, Ohio State, or the University of Iowa?

Those are questions that perplex and confound many who are deciding whether to get the degree and, if so, where to get it from. Not everyone can get into the most highly selective business schools. So many candidates have to face the question over whether it’s worth getting the MBA from a second- or even third-tier school.

A new analysis done exclusively for Poets&Quants by PayScale, which collects salary data from individuals through online pay comparison tools, shows that the MBA–even from schools that lack global or national caché–delivers hefty seven-figure income over a 20-year period. PayScale used its database of MBA graduates at the top 50 U.S. schools to calculate an estimate of median pay and bonus over the entire 20-year span.

The numbers are conservative. They do not include stock-based compensation of any kind, the cash value of retirements benefits, or other non-cash benefits, such as health care. The estimates are for base salary, cash bonuses and profit sharing in today’s dollars over a 20-year period from from 1994 to 2014. They are not a projection of future earnings. But the estimates show that the MBA degree–despite all the second-guessing over its value since the Great Recession–is one of the surest paths to a lucrative career.

SOME SCHOOLS ARE PUNCHING WELL ABOVE THEIR WEIGHT CLASS, OR RANKING

For the most part, the results are exactly what you would expect: The highly ranked, big brand schools tend to deliver the highest earnings over a 20-year period. Harvard Business School’s MBAs come out on top, with median income of $3.233,000. Stanford MBA holders are next with $3,011,000, and Wharton comes in third with $2,989,000. Harvard MBAs, in fact, earned nearly twice as much as MBAs from Texas A&M’s Mays Business School who pull in $1,781,820 over 20 years.

“It is not surprising that where you get your MBA has a strong association with your income potential,” says Robert Bruner, dean of the University of Virginia’s Darden School. “There is a winners-take-all self-reinforcing cycle in higher education: certain schools attract excellent student talent, which in turn attracts intense recruiter activity and high-salary offers. The employment results make it easier for those schools to attract excellent student talent…and the cycle continues.”

Still, the analysis yielded several surprises, including schools that clearly punched above their weight class, or ranking. MBAs from Boston University, for example, earned enough money–$2,329,000–to put them 19th on the list, even though BU’s full-time MBA program is ranked 40th by Poets&Quants.

‘THE RETURN ON INVESTMENT FOR THE BEST FULL-TIME PROGRAMS IS VERY HIGH’

Even more surprising, perhaps, MBAs from UC-Irvine’s Merage Business School are estimated to rack up $2,319,932 over the 20 years, a sum that puts Merage alums at 21st, though the school’s MBA program is ranked 47th. Other schools with better-than-expected numbers include UC-Berkeley’s Haas School and the University of Virginia’s Darden School of Business. Haas alums were fourth on the list, with median 20-year pay of $2,858,000, while Darden MBAs came in at $2,705,000, placing the school’s alumni seventh.

Of course, one of the long-standing selling points of leading business schools is the unrivaled access they provide to lucrative, highly selective careers. Students have long gone to business school to gain entry to high-paying jobs in consulting, investment banking, private equity, venture capital, and hedge funds. So it is hardly surprising that the MBA has been the ticket to some of the best money-making careers in business.

“The return on investment for the best full-time programs is very high and I predict that trend continuing for the foreseeable future,” says Paul Danos, dean of Dartmouth College’s Tuck School of Business. “Often when people talk about the value of the MBA they fail to recognize that there are many different types of MBA programs. While two-year full-time programs such as Tuck, Harvard, Stanford, Wharton, etc., require a significant investment in time and money, that investment pays off in both career options and compensation. The top programs are able to recruit the best qualified students, provide a truly excellent educational experience, and therefore attract top recruiters who recognize the value of that experience.”

HIGHER EDUCATION PAYS & HIGHEST RANKED SCHOOLS PAY MOST

 

Degree Estimate of 20-year median cash compensation
All Bachelor’s Degrees $1,301,000
All MBA Degrees $1,771,000
Top 50 MBA Degrees $2,266,000
Top 10 MBA Degrees $2,759,500
Top 3 MBA Degrees $3,011,000

Source: PayScale for Poets&Quants

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Air Time - Comments
  • MBA Aspirant

    Hello Prof.,

    I have been admitted to Rotman and Georgetown McDonough. I am torn between the pros and cons of both programs. Are they around the same in terms of rankings? How would you rate the international reputation of both programs, and post-MBA career opportunities within their respective countries for management consulting?

    I would really appreciate your feedback. Thank you!

  • C. Taylor

    Wow. I actually found it for the class of 1996.

    US:
    forbes (dot) com/forbes/2001/1015/090s01tab.html
    International:
    forbes (dot) com/forbes/2001/1015/090s02tab.html

    Forbes also surveyed the class of 1994 . . .

  • C. Taylor

    Roughly, yes (on a broad scale). But results will likely be too fuzzy for your liking. Also, lots of data on career trajectories would be needed.

    And it is only good as a snapshot of a given class (these vary in composition). A lot can change in ten years. Look at CEIBS.

    Failing that, the best predictor is a look at median compensation, say five to seven years out of an MBA program across multiple surveys. Though imperfect, this allows for relative median compensation trajectories.

    If interested in a prediction, rather than relativity; you could, for example, build a training set on fifth year compensation vs. 20 year earnings (finding fifth year compensation from 15 years ago might be difficult). If you could get your hands on original survey data, you could refine this a little by career type.

    Even that can run into problems if the training set–say of a single program–is not predictive for all programs. And sometimes general predictions don’t hold for specific populations or across economies. Stat biasing, population selection, et cetera . . .

  • JohnAByrne

    Very true! By the way, your comment helped to trigger an interesting idea: is it possible to estimate the lifetime earnings of an MBA in the future? I’m talking with an economist friend about this on Monday.

  • Confused

    Thanks John, that clears things up. An interesting follow-up comparison would be to compare how the average expected non-MBA 20 year salary has increased since then and compare it to the the increase in average expected MBA 20-year salary as well as to how much MBA fees have increased in that time.

    I would expect the non-MBA salary to have increased at the rate of inflation but clearly MBA costs have sky-rocketed since then – this may go some way to answering the question whether MBA education has become a bubble.

  • Guest

    Key word here is “average”. The HBS grad who works for General Mills in marketing is going to have a much lower lifetime salary someone who goes to MBB and makes partner.

  • JohnAByrne

    These are historical numbers. So the MBAs in this survey started out 20 years ago earning much less than business school graduates today. The average starting base pay 20 years ago at Harvard was just under $85,000. This year, the median (average isn’t available on the HBS report) was $130,000. For any MBA going into either consulting or finance, the median was $140,000. And these numbers don’t include signing bonuses ($25,000) or other annual guaranteed bonuses. Today, a higher percentage of MBA grads get signing bonuses and other guaranteed compensation than did 20 years ago and a higher percentage also get stock-based compensation.

    Another example: At Dartmouth Tuck, the average starting base 20 years ago was $74,260. This year, the average was $123,900, a 67% increase. At Chicago Booth, the average had been $68,600 some 20 years ago. This year, the median is $125,000.

    These 20-year estimates, moreover, are very conservative. They do not include stock-based compensation of any kind, the cash value of retirements benefits, or other non-cash benefits, such as health care. If one were to include these other benefits, the numbers would be substantially higher.

  • Confused

    Please humor me here, I’m probably missing something. Let’s take HBS as the example. If new MBA grads earn $138k and over a 20 year period earn $3.2mil then dividing that number by 20 gives an average 20 year salary of $160k. That’s not much of a career progression following the MBA and does not quite seem to be worth the investment. And that’s the top MBA in the world…

  • Mark Taranto

    I have no idea what you mean by M7. INSEAD or LBS would be good choices. I have no doubt that Oxford and Cambridge will be great some day. As for now, they aren’t yet there

  • Investigating

    I’m currently investigating several programs and I would agree to the above go to M7 or INSEAD or LBS – Oxbridge are just a different chapter – at least in the moment. Going to the US or staying in the US means stick with the M7 and increasingly INSEAD especially for east and west coast jobs. Rest serves well, but may cause difficulties.

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