Silly News: WSJ Claims MBA Pay Is Falling

The MBA bashers are everywhere, especially in the media where uninformed reporters are eager to write stories that make little if any sense. The latest example surprisingly comes from The Wall Street Journal which today (Jan. 7) reports that MBA pay is declining.

Under the headline, “For Newly Minted MBAs, A Smaller Paycheck Awaits,” a Journal reporter cites statistics to prove her case. “For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com,” writes Ruth Simon. “Pay fell at 62% of the 186 schools examined.”

Predictably, a host of other online outlets have jumped to regurgitate the Journal’s premise,from The Atlantic to the Business Insider, even though it is without merit.

The article opens with the story of a recent MBA graduate from the University of Louisville. He’s 36 years old, has about $75,000 in student loan debt, and unable to find a job in the private sector.

THE JOURNAL PROVES ONE OBVIOUS POINT: GETTING A DEGREE FROM A GOOD SCHOOL IS CRUCIAL

Proof that the MBA is in decline? Hardly. It’s proof that when you go to a completely unranked business school that lacks a strong career development office and a valuable alumni network, you’re going to have a more difficult time landing a lucrative job. Louisville, after all, is not even ranked among the top 100 business schools in the U.S. and the city itself is not exactly an MBA town.

Yet, none of this stops the Journal from making completely baseless and inaccurate statements about the MBA degree. “It is all a far cry from the late 1980s and early 1990s heyday for MBAs, when some companies would hire 100 or more MBAs,” proclaims the newspaper.

Fact is that even in the so-called heyday, only a handful of companies hired more than 100 MBAs in a year. Those companies—McKinsey, Bain, BCG, Citicorp, Morgan Stanley, J.P. Morgan, Goldman Sachs—are still massive MBA employers and almost all of those firms continue to hire more than 100 MBAs a year. So do a lot of firms, including Accenture and Deloitte, which didn’t hire 100 MBAs a year in 1980s.

MBA MEDIAN PAY HAD RISEN AT 27 OF THE TOP 30 SCHOOLS IN THE U.S. SINCE 2010

So what about the median pay number reported by the Journal? Obviously, the only MBA graduates from a top 100 schools who are making only $54,000 a year are working in the non-profit sector or for the government. Starting pay at every top 100 school is well in excess of the median pay reported for MBAs by the Journal.

And what about MBA pay going down? The Great Recession has definitely had an impact on pay—for just about every professional. But starting salaries at most of the better schools have not gone down, they’ve gone up in the period cited by the Journal.

This is true not only for the MBAs who are coming out of Harvard, Stanford, Wharton, Chicago and Northwestern. It’s true for MBAs who are coming out of other highly ranked business schools. In fact, for 27 of the top 30 business schools in the U.S., median salaries this year are up from 2010. At the three remaining schools, they are stable.

AT DUKE, PAY IS UP TO $110,000 FROM $95,000 IN 2008

Consider MBAs from Duke University’s Fuqua School of Business. This year, the median starting salary was $110,000, up from $100,000 in 2010 and $95,000 in 2008.

At Indiana University’s Kelley School of Business, the Class of 2012 reported median base salaries of $99,500 and $20,000 signing bonuses, up from $89,000 and $16,000 respectively two years earlier.

At Vanderbilt’s Owen School of Management, average starting pay this year was $94,713, up from $89,891 in 2008. Signing bonuses averaged $22,219, up from $18,289 four years ago.

Indeed, at most of these schools, people are quitting jobs that pay the so-called median cited by the Journal so that they can attend an MBA program. And the return on the degree at the better schools is immediate and quite significant.

MANY MBAS ARE REPORTING HUGE INCREASES OVER PRE-MBA SALARIES

This year’s MBAs reporting the largest percentage increases over their pre-MBA salaries graduated from Michigan State’s Broad School (a whopping 268.6% increase from what they had earned before getting the degree), Notre Dame’s Mendoza School (up 148.8%), the University of Minnesota’s Carlson School (up 132.2%), the University of North Carolina’s Kenan-Flagler Business School (up 122.2%), and Indiana University’s Kelley School (up 119.6%). And these numbers exclude starting bonuses and other bennies that are often handed out to MBAs when hired.

So much for the Journal’s silly story.

DON’T MISS: WHAT THE CLASS OF 2012 MADE THIS YEAR or HIGHEST PAID MBAs IN THE CLASS OF 2012