Managers With MBAs Hurt Worker Pay, Study Finds

The average salary and bonus for MBA grads peaked in 2019.

Managers with MBAs Hurt Worker Pay, Study Finds

Managers with business degrees tend to reduce their employees’ wages over time. In other words, if your manager has an MBA, you may end up earning less money.

According to a new study from the National Bureau of Economic Research, US firms that hired managers with business qualifications (“business managers”) saw wages fall by 6% within five years. Within the same time, labor share fell by 5%.  The decline is similar in Denmark, where firms with business managers saw a 3% drop in wages. It’s a phenomenon that experts say business schools play a large role in producing.

“If you talk to business schools about our findings, a lot of them don’t find it surprising because part of what they teach is to maximize profits,” Alex He, a finance professor at the University of Maryland and one of the study’s authors, tells Quartz. “We’re just documenting that the kind of profit maximization that they do has these costs on labor.”

BUSINESS MANAGERS DON’T ACTUALLY IMPROVE SALES

The study also found that on top of reducing employee wages, business managers tend to not deliver an increase in profits or sales.

“Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, whereas business managers do not,” the authors write. “But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities.”

And yet, many companies are still intent on hiring managers with advanced business degrees. According to the authors, out of the 9,000 US firms studied, the number with business managers increased from 26% in 1980 to 43% in 2020 (with much of that growth concentrated in MBA degrees). The irony, however, is that business managers don’t actually help improve sales or profits.

“Our evidence suggests that business managers are not more productive,” the authors write.  “Firms appointing business managers are not on differential trends and do not enjoy higher sales, productivity, investment, or employment growth following their accession.”

Sources: National Bureau of Economic Research, Quartz, Bloomberg

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