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Four Reasons Why There Are Fewer MBA Applicants In The Pipeline

Fewer applicants coming through the full-time MBA pipeline, especially at U.S. business schools

HIghly ranked U.S. business schools have seen MBA application volume rise in recent years just as second- and third-tier schools have experienced declines. No longer. This past year many of the most highly selective schools at the top of the rankings are seeing 4% to 5% drops in the number of people who have applied to their schools.

You can blame four things for the fact that there are fewer MBA applicants in the full-time pipeline:

  1. The strong U.S. economy
  2. The rising cost of MBA programs and the unwillingness of many millenials to go into debt to get the degree.
  3. Donald Trump who has scared off thousands of international candidates who had been helping to offset a continual decline in domestic applicants for a number of years.
  4. A greater number of shorter, cheaper alternatives to a two-year, full-time MBA program, from one-year and online options to specialty master’s degrees in such subjects as data analytics and entrepreneurship.

When the Graduate Management Admission Council, meeting in Boston this week for its annual conference, surveyed prospective students recently it found that employment—yes employment—has become a formidable alternative to going back to business school to get a graduate degree. The survey is based on 9,471 individuals who registered on GMAC’s website between February and December of 2017. The complete findings rely on responses from more than 126,000 prospective students from 2009 through the end of last year.

‘EMPLOYMENT IS THE BIGGEST COMPETITOR TO BUSINESS SCHOOL’

Let’s take the economy first. Since the 2008-2009 financial crisis that caused the onset of the Great Recession, the U.S. economy had growth in each of the past 96 months, now the third largest economic expansion in U.S. history. While many economists believe the risk of a recession is rising, it’s possible that this could become the longest expansion on record. Only the expansions from March 1991 to March 2001 [120 months] and from February 1961 to December 1969 [106 months] were longer.

Strong economies depress MBA application volume. With the U.S. near full employment, professionals have plenty of job opportunities without having to pursue a graduate degree.  And during economic downturns, when layoffs occur, many young professionals seek refuge in school.

Today, GMAC estimates that seven of every ten prospective students in North America are considering alternatives to business school to achieve their goals. In Asia-Pacific, it’s even worse. Some 74%, vs. the 70% in the U.S., see alternatives to business school.

“Employment is the biggest competitor to business school,” according to the first of a series of reports on GMAC’s Prospective Student Report published last month. “Sixty-one percent of prospective students are considering pursuing a new job and 43% are considering remaining in their current job as an alternative to business school (see chart below). “More employers are saying you don’t need an MBA,” notes Dawna Levenson, director of MIT Sloan admissions. While that may be self-serving advice to keep strong employees in place, it has the impact of keeping them out of the applicant pool.

Source: 2018 GMAC Prospectuve Student Survey