The fastest growing segment in graduate business education has been the short-cut degree: an accelerated one-year MBA or the one-year Master’s of Management for students with little work experience. It’s not hard to see why. The costs of such business training is slashed to half of the traditional two-year MBA, requiring students to borrow less money and stay out of the workforce for much less time.
But the Graduate Management Admission Council today (Nov. 18) released data that shows there is a price to pay for taking a short cut. This year’s graduating class of Master’s in Management degrees saw their employment rate fall to 76% as of September of this year, the lowest level in five years, down from 84% in 2012. Graduates of one-year MBA programs this year, meantime, saw their employment rate decline to 82% from 89% last year.
And the somewhat out-of-favor traditional two-year MBA grad? Overall, the employment rate for those MBAs hit 92%, up from 90% last year and 85% in 2009. It would have been even higher if not for some sluggishness in Europe where 18% of graduating MBAs were unemployed in September. For U.S. citizens who graduated from two-year MBA programs, moreover, the employment rate was a whopping 95%, the highest level in the past five years and up from 91% last year (see chart below). The job rates are a dramatic contrast to what has occurred in law where the employment rate has fallen for five years in a row since 2008. Even nine months after graduation from law school, the Class of 2012 had an employment rate of only 84.7%, according to the National Association for Legal Professionals.
So much for the naysayers of the traditional MBA. Yet, most observers agree demand has flattened in recent years for the two-year MBA, partly because of the vast growth in institutions worldwide now offering the degree. The picture was less bright for non-U.S. citizens graduating from two-year MBA programs in the U.S. Their employment rate in September was 83%, up from 76% in 2009. Typically, foreign students require special work permits and visas and are less likely to have job offers before graduation than domestic students.
The new GMAC report—based on responses from 915 members of the Class of 2013 from 129 business schools around the world—continues to also show widespread satisfaction with graduate business education. GMAC said that 96% of the responding Class of 2013 rate the value of their degree as outstanding, excellent, or good, and the same percentage of the class would recommend a graduate management education to others. Three of every four members of the class say they could not have obtained their job without their graduate business education, according to the GMAC survey.
The median starting annual salaries offered to U.S. citizens who graduated from a full-time, two-year MBA this year was $90,000, with a bonus and additional comp of $10,000. That’s up from a median base of $86,700 last year. Of course, these numbers are for U.S. graduates of a wider sample of business schools. Stanford Graduate School of Business recently reported that its Class of 2013 MBAs earned median salaries of $125,000–$35,000 more than the GMAC number—with median signing bonuses of $25,000 and median guaranteed bonuses of $30,000. Kenan-Flagler Business School at the University of North Carolina said its Class of 2013 MBAs had median pay of $100,000, with $25,000 signing bonuses and $17,000 guaranteed bonuses.
Compensation, of course, varies greatly by geography, school, program, industry and work experience. U.S. citizens who graduated from part-time MBA programs reported median annual salary of $85,000, GMAC found. Citizens of India who graduated from full-time, two-year MBA programs reported a median starting salary of just $34,988. Europeans graduating from full-time, one-year MBA programs reported the highest median starting salaries in the GMAC sample: $101,093.
And what about the small percentage of grads who are unemployed, most of them either outside the U.S. or with one-year graduate degrees? According to GMAC, the primary reason they haven’t yet connected is due to “lack of relevant industry or functional experience, inability to find a job that pays enough, and inability to find an interesting job.” Two out of five job seekers are looking for entry-level positions, while two-thirds are seeking mid-level employment. Less than a third are targeting senior positions, while 13% were looking or executive-level jobs.