How much is an MBA really worth?
Most applicants make a critical mistake in answering that question. They scrutinize the starting pay packages of MBAs, take out their calculators and do a quick return on investment assessment. But starting post-MBA pay, however higher than what you now make, is only the start.The real return is what impact an MBA will have on your lifetime earnings.
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 post-MBA lifetime. MBA graduates from the top 50 business schools in the U.S., in fact, will pull down median cash compensation of $5.7 million after graduating and working for 35 years. That is a premium of $2.3 million over those with just an undergraduate degree.
FIVE MBAS PROVIDE LIFETIME MEDIAN CASH COMPENSATION OF MORE THAN $8 MILLION
And if you were lucky enough to earn your MBA from one of five schools–Harvard, Stanford, Berkeley, Dartmouth or Virginia–your estimated median pay would surpass $8 million over a 35-year period, according to Payscale. Because the average age of a Harvard Business School graduate is 29, that 35-year timeframe brings a person within a year of retirement age at 65.
And yet, as high as those numbers are, they 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 developed by Payscale are for base salary, cash bonuses and profit sharing in today’s dollars over both a 35-year and 20-year period. They are not a projection of future earnings. But the estimates show that the MBA degree–despite all the second-guessing over its value–is one of the surest paths to a lucrative career.
The bottom line: Despite the high costs of the degree, the long-term returns on the education are not in dispute. “Education should be a dream machine through which talented students come from anywhere —and go anywhere,” says Scott Beardsley, dean of the University of Virginia’s Darden School of Business. “While it’s true that an MBA is a substantial investment, on a strictly dollars and cents metric, the salary data shows a clear and compelling return. For those in pursuit of a lifetime of meaningful, high-impact work, there is no better investment, in my opinion, than an investment in your own future through an MBA, which will open up a world of possibilities.”
PayScale used its database of MBA graduates at the top 50 U.S. schools to calculate an estimate of median pay and bonus over a 20-year span as well as a 35-year period, essentially a lifetime of post-MBA earnings. The final list of top 50 MBA schools represents 2,390 graduates with a median sample of 41 salary profiles per school. Data leveraged in the report was collected from April 2018 to April 2021.
HARVARD AND STANFORD MBAS RACK UP THE MOST INCOME
For the most part, the results are pretty much 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 lifetime income of $8,500,000. Stanford MBA holders are next with $8,330,000, just $170K less than the school’s East Coast rival.
But in what may surprise many, the University of Pennsylvania’s Wharton School isn’t third. Instead, riding the tech boom in the Bay Area, MBAs from UC-Berkeley’s Haas School of Business capture third place with $8,250,000, followed by Dartmouth College’s Tuck School of Business, with lifetime pay of $8,240,000, and Virginia’s Darden School of Business, with $8,200,000. Wharton MBA graduates finished ninth, with $7,440,000 in total income over the 35-year period, behind MIT Sloan, Northwestern Kellogg, and Cornell University’s Johnson Graduate School of Management.
MBAs from Harvard, by the way, earned more than double over a lifetime than the overall population of MBAs: $8.5 million versus $4.1 million. Over their post-MBA professional life, grads who have an HBS diploma also rack up more than $3 million than MBAs from Syracuse University’s Whitman School of Management who earned an estimated $5.0 million, according to the analysis.
20-YEAR PAY FOR MBAS AT 15 BUSINESS SCHOOLS NOW EQUALS OR EXCEEDS $3 MILLION
When Poets&Quants last did this study with Payscale in 2014, it tracked pay for just 20 years. At that time, only MBAs from two business schools–Harvard and Stanford–had exceeded a $3 million threshold over a the 20-year timeframe. This latest number crunching has MBAs from 15 schools at or above the $3 million mark over that same 20-year span. The increase is less a result of inflation over the past seven years than the escalating starting pay for MBA graduates in the aftermath of the Great Recession. At Dartmouth’s Tuck School, for example, 20-year median pay is now estimated to be $3,660,000, up more than $950,000 from the $2,703,000 back in 2014.
Despite much hand-wringing over the degree’s value as tuition costs have exploded, the Payscale analysis shows that the return-on-investment over the long haul is unquestioned, even more so in an unpredictable, ever-changing world. “We all know from financial option theory that the value of an option rises with volatility,” adds Beardsley. “The future of many careers are more volatile than ever, driven by technology disruption. The transformational learning of a Darden MBA teaches you how to navigate that uncertainty, and increases your option value. Thus, the ROI of a Darden MBA may very well be close to an all-time high.”
Ultimately, the Payscale report provides evidence that brand matters. After all, applicants can see these disparities from the very start at graduation. MBAs from the more highly ranked schools typically pull down larger pay packages to start their post-MBA jobs than those from schools that are ranked further down or not ranked at all.
“It is not surprising that where you get your MBA has a strong association with your income potential,” says Robert Bruner, Beardsley’s predecessor as dean. “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.”
THE CASH VALUE OF AN MBA DEGREE ON YOUR PAYCHECK
|Degree||Lifetime Median Cash Pay||20-Year Median Cash Pay||Early Career Median Pay||20-Year Premium||Lifetime Premium|
|Top 3 MBA Degrees||$8,330,000||$3,700,000||$138,000||$2,220,000||$5,010,000|
|Top 10 MBA Degrees||$8,045,000||$3,500,000||$133,000||$2,020,000||$4,725,000|
|Top 50 MBA Degrees||$5,655,000||$2,500,000||$93,500||$1,020,000||$2,235,000|
|All MBA Degrees||$4,110,000||$1,830,000||$68,000||$350,000||$790,000|
|All Bachelor’s Degrees||$3,320,000||$1,480,000||$55,000||——–||——–|
* Early career median pay reflects pay for workers with 0 to 5 years of experience. Premium is the additional compensation over the median pay of someone with an undergraduate degree SOURCE: Payscale Data provided by under license. Last updated in 2021.
Comments or questions about this article? Email us.