Guest commentary: Is a Master’s of Business Administration degree still worth it?
By Gerhard Apfelthaler & Vlad Vaiman
Pursuing a Master of Business Administration (MBA) has long been considered one of the most effective ways for an early- or mid-career professional to boost their earnings potential.
In recent years, however, the return on investment for graduate business education has been questioned.
From concerned prospective students to the national media, the value of getting a Master of Business Administration (MBA) or Executive MBA degree specifically has become a widely discussed topic.
Career-minded professionals are asking themselves if the degree really does correlate with pay increases, and if so, how much can an MBA credential really increase one’s salary or propel one’s career.
The relationship between an MBA degree and income increases is still considerable, but let’s facts speak for themselves.
Based on extensive research, the Graduate Management Admissions Council (GMAC), an organization that tracks metrics relevant to business education, states that the median income with an MBA translates to an additional $3 million over a 35-year career compared with those with only an undergraduate degree.
Another study, by the platform Transparent Career demonstrates that those who earned an MBA report an average increase of $41,000 in their salary after their studies.
Poets & Quants, a popular platform for those seeking an MBA, undertook a study with Payscale, which collects salary data, and shows that the MBA degrees deliver a handsome seven-figure income over a post-MBA lifetime — regardless of the school’s ranking or reputation.
MBA graduates from the top 50 business schools in the U.S. have a lifetime income of $5.7 million after graduating and working for 35 years — a premium of $2.3 million over those with just an undergraduate degree.
Naturally, there are differences depending on the reputation of a candidate’s experience, the business school brand, the location of the employer, or the industry.
A self-reported survey in the healthcare industry revealed that the salaries of those employees with five to seven years of experience averaged almost 25% higher than those of those with only two to four years of experience, and employees with more than a decade of experience earned almost double.
In addition, specialization within an MBA program might increase earning potential.
An MBA in Finance, for instance, on average comes at a salary 30% higher than without an MBA. Marketing MBAs earn on average 18% more than those with merely a bachelor’s degree.
Regardless of the specialization or industry, however, an MBA always results in higher earnings compared with those without an MBA degree.
Sometimes, it only takes 2-3 years until the higher earnings make up for the cost of tuition for MBA programs.
And as far as location goes, it probably doesn’t come as a surprise that the cost of living can vary widely from region to region and that salaries therefore do, too.
A study published by the National Bureau of Economic Research analyzed nearly 700 community zones across the United States and found large differences in average wages.
For example, wages in San Francisco, San Jose or Washington D.C. are about 30% higher than the national average, while other smaller U.S. metros report ranges about 30% lower.
In addition to the salary premium, MBAs are also propellants for corporate careers.
Apart from the degree itself, MBA programs provide networking opportunities to its students that they would otherwise not have, and they help employees to get better and to get noticed.
Besides, MBA programs actually teach valuable skills – not only technical but soft skills such as communication and negotiation, which may come in handy when haggling over a starting salary or a salary increase.
And while GMAC in its Corporate Recruiters Survey sees a robust demand for business school graduates anyway, an MBA might also shield employees from layoffs.
When selecting an MBA program, it is critical to pick one that matches one’s objectives and lifestyle.
Universities that offer the flexibility of mixing on-campus with online or hybrid courses while juggling work or a hectic schedule are preferred by many today.
So, are MBA programs still worth their money? We certainly believe so.
Dr. Gerhard Apfelthaler is the Dean of the School of Management at California Lutheran University.
Dr. Vlad Vaiman is Professor of Management and Director of the Executive MBA, MBA, and MS in Management programs.
