Will The Coming Recession Cause A Boom In MBA Apps? Don’t Bet On It

Business schools are likely to benefit from a recession

These days, a little bit of gallows humor may go a long way for business school deans who are struggling through a now five-year decline in applications to their flagship MBA Programs. “The joke among the deans right now is, ‘All we need is a nice little recession,’” says Andrew Ainslie, dean of the University of Rochester’s Simon School of Business. “We are about the only people in the world who like a recession. We think it will still be good enough for us.”

But will a recession, in fact, be the industry’s savior this time? Applications to full-time MBA programs in the U.S. have now dropped for five consecutive years, with the most selective, elite business schools having endured two straight years of declines. Some of the latest drops are in catastrophic territory: At Dartmouth College’s Tuck School of Business, applications plunged 22.5% pushing up the school’s acceptance rate by more than 11 percentage points to a record 34.5%. At the University of North Carolina’s Kenan-Flagler Business School, applications plummeted 24.7%. At Indiana University’s Kelley School of Business, they plunged a breathtaking 40.6% loss in the past two years (see Apps To Major MBA Programs Plunge Again).

The question now being increasingly asked is whether MBA applications will spoke yet again with the next economic recession which could hit as early as next year. After all, higher education is a counter-cyclical industry. Stanford economist Caroline Hoxby has found that college-going has increased in every recession since the 1960s.


Afterall, the opportunity cost of getting an MBA significantly falls during economic downturns when it becomes harder to find a job, to keep a job or to get a promotion. The upshot: Young professionals who found plenty of upward mobility in an economic expansion suddenly decide to sit out a recession in school and ride into the next upswing as MBA graduates.

“I don’t wish a recession on anybody,” says Bill Boulding, dean of Duke University’s Fuqua School of Business. “Let’s keep people working and in jobs. But historically there is a counter-cyclical effect on application volumes to business school. As the economy worsens, applications go up and as the economy improves, applications go down. Having said that I am not sure that industry wide relationship holds for the top business schools because there also is analysis about what really drives applications to a top school and that is the increase in starting salaries. Students are looking at what is their upside. That can be very cyclical if they see upside in the jobs they are in.”

Yet, previous recessions have sent MBA apps soaring, typically in double digits. Back in 2009, in the last Great Recession, more than two-thirds of full-time MBA programs received more applications than they did the previous year, their best performance for five years, according to the Graduate Management Admission Council. When many of those students graduated in 2011-2012, more master’s degrees in business were conferred on U.S. graduates than ever before: 191,616, 25.5% of all graduate degrees awarded. And after the dot-com bust led recession of the early 2000s, graduates of master’s degrees in business made up the highest percentage of all graduate degrees ever: 30.1%, or 146,406 of the 473,502 master’s degrees conferred in 2000-2001. And these peaks occurred during the remarkable growth of graduate business education in the last half century (see chart below).


So there is little doubt that MBA applications will again see an increase once a recession hits. But there’s increasing evidence that this time could be different. But there is a big difference between a cycle and a trend. An upturn fueled by an economic cycle may offset more enduring trend lines, at least temporarily. But the business education market has changed dramatically since the last downturn and in meaningful ways. “If you look at the number of alternatives we now offer,” adds Ainslie, “we are cannibalizing our own market. So a recession will bring a temporary increase, but I think we’ll see a continued decline over the long term.” It is why he believes that 10% to 20% of the top 100 U.S. MBA programs will soon follow the recent decision by the University of Illinois’ Gies College of Business to abandon the full- and part-time MBA market.

A 2019 or 2020 recession, however, may do little to offset the more profound trends that have helped to shape business education since the last economic downturn. That is largely due to the reasons behind the current decline. Many believe the degree is too costly for young professionals who are still paying off their undergraduate student debt. Ted Snyder, who just left the deanship of Yale University’s School of Management, cites the high cost of the MBA degree as a reason why a recession won’t lead to double-digit jumps in application volume.

“Having followed along with annual increases in tuition rates at two percent above inflation for more than 25 years,” believes Snyder, “many schools have found themselves in a tuition trap in which they cannot find a market for their programs. I think the number one thing (holding back a rebound) is the high price so I don’t see how a recession is going to have a great effect. Schools have to stop raising the price.”

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