An update to this article has been published under the headline: The MBA Premium: What MBAs Earn Over A Lifetime Will Shock You.
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