Can An MBA Add $1 Million To Your Income? A New Study Says So

Over 20 years, MBA alumni earn between $500,000 and $1 million more in salary than colleges without the degree

Over 20 years, MBA alumni earn between $500,000 and $1 million more in salary than colleges without the degree

Professionals with a graduate degree in business on their resumes earn between $1 million to $500,000 more during a 20-year career than colleagues who did not get an MBA or other advanced business degree. That’s the conclusion of a new study out today (Feb. 23) that showed that business school alumni earn a median cumulative base salary of $2.5 million over 20 years after graduation.

At a time when critics are questioning both the cost and value of higher education, even advising some students to drop out of college, the report by the Graduate Management Admission Council makes the strongest case yet for getting an MBA or another master’s degree in business. The estimates of post-degree compensation, moreover, are highly conservative because they do not include bonuses, stock awards, or other perks commonly given to MBA graduates and business executives.

Beyond the dollars-and-cents bottom line, however, GMAC’s survey of B-school alumni again shows exceptioanlly high levels of professional satisfaction with advanced business degrees. The survey of 14,279 business school alumni found that nine in ten, some 93%, say they would pursue their graduate management education again if given the choice. The vast majority say their education was personally (93% of respondents), professionally (89%), and financially (75%) rewarding. Alumni also are extremely likely to recommend their program to peers. Overall, the Net Promoter® (NPS®) score, a widely used metric of customer loyalty, was a +45 on all advanced business degrees, just two points lower than Apple. For the two-year MBA, it was +48, a point over Apple’s score.


No less crucial, the survey took into account the views of not only alumni of the highly ranked, elite business schools, but rather a much broader universe representing more than 275 graduate business programs at 70 universities in 20 geographies around the world. GMAC did not break out the results by how highly selective the programs were nor what rank the schools held. But it’s widely believed that graduates of highly ranked schools would yield even higher rates of satisfaction and career earnings.

The survey, however, was not all rosy news. Confirming earlier reports that the return-on-investment of the MBA has fallen in recent years, GMAC said that recent alumni from full-time two-year MBA programs show a flattening of ROI—hovering at about 40% at three years—due in part to increasing tuition and opportunity costs, which have trended upward at a faster rate during the past 20 years compared with starting base salaries.

One drawback of the analysis, of course, is that it is, by necessity, retrospective. The ROI calculations are based on tuition rates and opportunity costs that bear little relationship to present day reality. GMAC, for example, put the investment cost of a two-year MBA degree at only $105,000, the sum of a graduate’s out-of-pocket program costs together with their forgone pre-degree salary.


Today, however, the typical Harvard Business School MBA left a job paying roughly $85,000 a year and faces out-of-pocket tuition and other fees of $72,312 a year, not including room and board. That makes the “investment” balloon to a staggering $315,000, three times the estimate used by GMAC. Sure, half the students at HBS get scholarship dollars to offset some of their tuition costs, and today’s graduates make far more money, too, but until the last two years MBA starting salaries had been stagnant for four years, while the sticker price on tuition has gone up every single year.

A study commissioned by Poets&Quants in 2014 found that business school brand does make a significant difference in the earnings of graduates. Alumni with an MBA from a top three school, the study found, had median 20-year cash compensation of $3,011,000. That’s more than $1.4 million more than the general population of MBAs over the same timeframe (see The Most Lucrative Seven-Figure MBA Degrees).

The study, based on self-reported compensation data to PayScale, found that the premium for an MBA degree over those with bachelor’s degree was $470,000 over a 20-year span, with MBAs making $1,771,000 over BAs who made $1,301,000. But earnings varied significantly when the ranking of a given school was factored into the calculations. Top 10 MBA grads racked up $2,759,500 in income over the 20 years, while Top 50 MBA alums toted up $2,266,000 in cash compensation.


GMAC said that while the ROI of a full-time two-year MBA fluctuates with economic cycles, return-on-investment has remained positive three years after graduation in 19 of the past 20 years. The only exception, 1991 to 1993, coincided with the end of a recession. After the economic run-up in the 1990s, three-year ROI declined again during an economic downturn in the early 2000s. More recently, ROI began to improve until the Great Recession, when it remained stagnant, hovering near 40% in the three years between 2008 and 2012.

On a two-year MBA program for graduates from 1986 to 2012, the median ROI after five years is now 132%, after ten years, it rises to 445% (see table below). No wonder the survey found that more than four in five alumni are satisifed that their education met their investment expectations, an extraordinary degree of satisfaction given the “flattening of ROI” in more recent years.

The Bottom Line: Calculating The ROI Of Graduate Business Degrees

Source: GMAC 2016 Alumni Perspectives Survey

Source: GMAC 2016 Alumni Perspectives Survey


    is the 1242k salary is one year salary after 10 years or sum of the salary after 10 years

  • C. Taylor

    Financial Modeler ≠ financial modeler

    Financial Modeler wrote: “promises a greater than 1,000% return
    ROI = (payback in excess of cost) / cost
    ROI ≠ compounded return

    Financial Modeler wrote: “$25K wont even get you a part-time
    investment = out of pocket cost + forgone salary
    forgone salary for part time ≈ 0
    out of pocket cost = cost – (scholarships + grants + subsidies + stipends + etc.)

    Financial Modeler wrote: “[1] Am I not understanding something? . . . [2] I’m not sure what this article actually tells us.
    1) This is accurate.
    2) True.

    Financial Modeler wrote: “If [incremental] these CAGRs become quite rich”
    CAGR = Compound Annual Growth Rate
    This is the rate at which something grows. It is defined here accurately for the GMAC’s usage as:
    CAGR = ((current salary / post-degree salary)^(1 / number of years post-degree employment)) – 1
    This is measuring the growth in cash inflows from the first year post-degree to whatever point the survey was filled out.

  • Financial Modeler

    Well hey, if you can’t seem to argue around a $25K part time program or incremental gain, might as well use a one-off anecdotal story.

  • C. Taylor

    25k ‘investment’ for a part time MBA is a tree, not the forest. These guys at GMAC are focused on incoming cash flows (thus CAGRs for post-MBA salaries). Rightfully so. GMAC clearly states in its report that the investment is out of pocket costs + forgone salary as reported by the individual alumni surveyed. I would guess many part-timers are sponsored, in part.

    Some perspective. I read this week a post by a Cambridge (Judge) full time MBA grad. His starting salary was indeed lower than those had by grads of elite programs. However, his starting bonus paid for the bulk of his degree, and his second year salary matched those starting salaries of graduates from the elite programs (Wharton, HBS, LBS, etc.).

    And yes, the same companies recruited at Judge. Cambridge’s FT program cost around him somewhere around 40k+ pounds (post scholarship, I’d hazard). Yes, his starting bonus was the typical one for the company which hired him.

  • Financial Modeler

    @C. Taylor You are missing the forest through the trees. Initial investment is totally wrong. $25K wont even get you a part-time MBA at Phoenix Online. (Am I not understanding something?)

    Additionally, the article would lead one to believe that these results are incremental (greater than what would be experienced without an MBA). If that is the case, these CAGRs become quite rich.

    Between the bunk initial investments and lack of ROI analysis based off of incremental return, I’m not sure what this article actually tells us.

  • Confused

    One thing I don’t understand is, how can the top schools have so low median 20-year cumulative cash compensation. I am 7 years out of a top 3 MBA school and literally all my friends are making easily over 200k a year. Even my world saving ex-girlfriend is banging a 160k salary for cleaning up the seas from micro-plastics.

    I always thought it would be more like 4,5 million by the time we are 20 years out. I mean is there really hundreds of Harvard graduates out there per class making only 70k per year even when they are 40 years old. I doubt it very much.

  • C. Taylor

    Check your assumptions. The ROI is payback. Should be clear (cumulative salary). This absolutely has a base in reality. (590-348)/2 = median base of 121k, four to five years out. Seems a little high for the median, but the data source is expansive.

    I believe you were looking for the CAGR. The CAGR is only 7.1% for two year programs. This does not justify ‘drastically increased’ costs even in a constrained market.

    Ignoring the CAGR, there is ample supply competing for candidates. If HBS increased cost from 200k to 400k, there would be few takers. There are tons more qualified PhDs than spots at HBS. Now look at the MBA program for the median GMAT taker, as GMAC does. Do you see that program having more pricing power than HBS? Hardly. There is little benefit available for grads in doubling the cost.

  • It’s largely because our own analysis, which we commissioned from PayScale two years ago, pretty much proves the same thing. Otherwise, I would be as skeptical as you are.

  • Financial Modeler

    Most importantly, if you cannot understand the very basic assumptions used in this analysis, that are wildly flawed and have no basis in reality, you probably do need more schooling.

    If any of these numbers actually made sense, this would be the best case for MBA programs to drastically increase their cost. Typically any entity that promises a greater than 1,000% return on any investment ends up in jail.

    C’mon, John! Why are you endorsing this crap?

  • Foxtrot

    fantastic article