2) MBA Pay Heyday: Show Me The Money

“It was the best of times, it was the worst of times…”

Give it a rest, Charles Dickens. When it comes to graduate business schools, MBAs are the new nobles, indulging in pageantry that would’ve stirred Jacobian jealousy. Alas, you won’t today’s radicals storming business schools for a reckoning. Instead, they’re joining the MBA ranks – and being paid handsomely to change the ‘system’ from within.

The safest bet, some say, is betting on yourself. That’s especially true if you’re pursuing an MBA degree. Just look at the numbers from U.S. News. This past year, there were only two American MBA programs – Harvard Business School and USC Marshall – where graduates earned less pay and bonus than counterparts from the previous class. Stretch it out two years and HBS and USC Marshall grads enjoyed pay bumps of $20,427 and $22,447 against the Class of 2021.

How impressive is MBA pay growth? Some 16 of the 30 highest-ranked programs reported starting salary and sign-on bonuses improving by $10,000 or more over the past year. That doesn’t include four schools that reported improvements between $9,000-$10,000. Over the past two years, just three schools saw pay differences of $20,000 or less: NYU Stern ($19,924), Rice Jones ($19,008), and Washington Olin ($17,629).

In the span of a year, for example, Ohio State Fisher MBAs saw starting pay and bonus jump by $32,902. The one-year improvements were $19,573 and $18,806 for Georgetown McDonough and Georgia Tech Scheller respectively. Over two years, six business schools saw class starting pay increase by $30,000 or more. Talk about a return!

How long can this run last? With consulting utilization cooling, employers may become more selective, believing they can get better talent for a lower price tag. That can have a trickle-down effort – at least outside the elite programs. Thus far, the market has continued boosting MBA pay by 10% year-over-year. How long is it sustainable? That’s what we’re eager to learn starting next fall with the Class of 2024.

3) A New Metric: 'Salary By Profession'? What Does It Really Mean?

If you peek under the hood of this new ranking, you'll find something new: an attempt to assess MBA starting salaries by profession. U.S. News presumably tossed this new metric into the mix to account for the fact that some MBA graduates choose professions that pay less and therefore impact the average starting salaries and sign-on bonuses that make up 20% of the ranking. Some schools, for example, might send more grads into education, healthcare, government, and non-profit jobs that are not nearly as lucrative as jobs in consulting and finance.

The new metric--worth 10% of the ranking--evaluates how a school's average graduate salary in each of these fields compares with the average of all of the U.S. News ranked schools. U.S. News explains it this way: "If a school's mean consulting starting salary was $150,000 and the weighted average among all schools that reported this data was $130,000, its score for consulting would be 150,000/130,000, or about 1.15."

To find the 10 percentage points for this metric, U.S. News decreased its emphasis on job placement, reducing by seven percentage points to 13% the weight it places on jobs three months after commencement and reducing by three points to 7% the weight it puts on jobs at graduation. The upshot: The new ranking places more emphasis on salaries relative to employment in its formula for measuring outcomes.

This is clearly a judgment call--and a bad one. While the justification for the new metric is legitimate, employment is every bit as important if not more critical as starting compensation to business school graduates. It's the primary reason candidates apply to MBA programs and why students are willing to spend two years off the job market. They enter MBA programs to not merely get a job but to enter a career, often one with far more upside potential than the one they left.

Regardless, the real question is what impact this new metric has on individual schools? U.S. News concedes that it didn't make that much difference at all. "Generally, a school's performance on the new ranking factor had a significant positive correlation with the old factor," according to U.S. News. "Even so, schools may have improved or declined a bit in this edition's ranking depending on how well their graduates' salaries, especially when controlling for profession, compared with the graduates of other schools; and whether for them this was a stronger or weaker ranking indicator than employment."

So which schools did it help? Which schools did it hurt? A simplistic way to answer these questions is to track how a program ranks on this specific stat against the school’s overall rank. If a program’s “salary by profession” rank is significantly better than its actual MBA rank, you can presume that the new metric has had a positive influence on the school. If that profession rank is lower than the overall MBA program rank, you can assume it had a negative effect.

Among the Top 50 ranked MBA programs, 10 schools saw either a positive or negative gap between its salary by profession rank vs. its overall rank (see table below). More notably, however, 43 of the Top 100 programs had double-digit differences, with 29 schools getting punished for their lagging salary by profession metric. The only Top 10 MBA program that was negatively impacted was Yale School of Management which ranked seventh this year but was 15th on this new measure, an eight-position difference.

Iowa State University's MBA suffered the most: Ranked 50th, the school's salary by profession rank was a miserable 112, a 62 place gap. The University of Georgia's MBA, ranked 27th best in the U.S., was given a rank of 51 on the new ranking factor, a difference of 24 points.

On the positive side, the University of Pittsburgh Katz School of Business placed 30th on the metric, 17 spots better than its actual rank of 47th. The University of Washington's Foster School of Business also benefitted. Ranked 27th overall, its salary by profession rank was 15th, a 12-point difference.

Most of the impact was felt by schools outside the Top 20. Stanford performed best on the new metric, ranking first, followed by Wharton, No. 3 Harvard and MIT, No. 5 Chicago Booth and Berkeley Haas.

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