The COVID-19 pandemic dampened overall economic outlooks, caused a recession, and put millions of people out of work. What it seemingly didn’t do, though, was affect the value of earning a graduate business degree. Indeed, most business school alumni said that their graduate degree improved their professional, personal, and financial situation, according to survey findings released in August 2021 by the Graduate Management Admission Council (GMAC).
Employability, job security, and hefty paychecks. Does an MBA still guarantee that?BY Sydney LakeNovember 17, 2021, 12:01 AM
A vast majority of respondents—90%—reported a positive return on investment from their graduate business education, according to the survey of more than 4,600 graduate management education alumni. The respondents include graduates of various programs— an MBA, a master’s in management, and other business degrees. Results showed that business programs led to higher earnings, increased employability, and a positive return on investment.
“New doors often open post-MBA, especially to those who move into highly lucrative career paths in investment banking, private equity, and management consulting,” Liz Bender, managing director of the MBA Exchange, an MBA admissions and career consultancy, tells Fortune.
The GMAC survey, Alumni Perspectives on the Value of Graduate Management Education, explores business school graduates’ thoughts about employability, earnings, and job security. Findings show that there’s still plenty of value in earning a graduate business degree.
GMAC’s study shows that 87% of business school alumni agree that their degree increased their employability, which Sameer Kamat says reflects employment data from top business schools. He’s the author of Beyond the MBA Hype and founder of MBA Crystal Ball, an admissions consulting firm.
The report doesn’t identify whether or not respondents are recent graduates, but it’s common for business school graduates to land a job close to graduation. For example, New York University’s Stern School of Business saw 96% of its 2021 full-time MBA graduates receive a job offer within three months of graduation.
“Most of our clients are applying to business school to either pivot their careers or accelerate their progression in their existing career path,” Melody Jones, a cofounder of Vantage Point MBA Admissions Consulting, tells Fortune. “These results confirm that the MBA delivers on that promise.”
Business school graduates are also employable because they have gained new skills while earning their degree. Plus, one of the main purposes of pursuing an MBA is to open doors to new opportunities, Bender says.
Another contributing factor to employability is, simply put, that finding a new postgrad job is precisely why the MBA candidate went to school in the first place, Bender tells Fortune. They want “to prepare themselves for new job prospects that simply weren’t options prior to school, given their undergraduate degree, their pre-MBA career choices, or other life circumstances.”
Jones uses herself as an example. She was an investment banker after finishing her undergrad degree and applied to business school to pivot her career to consumer products and marketing. She earned her MBA from Columbia Business School and landed her “dream job” as a marketing manager at L’Oréal. Three years later, she “took a leap of faith,” pivoting to entrepreneurship when she founded Vantage Point.
“An MBA will give you the tools to go do a lot of different things—even things you might not expect,” Jones says. “I don’t think I would have ever had the know-how or the confidence to start my own company if it weren’t for my MBA experience.”
An MBA degree can double as a golden ticket—a chance to increase your salary, sometimes as much as twofold. At top schools like Stanford University’s Graduate School of Business, some MBA grads earn more than $400,000 right after graduation; and many grads from Dartmouth College’s Tuck School of Business and New York University’s Stern School of Business earn more than $200,000 in fields including consulting and investment banking. Other schools, such as Duke University’s Fuqua School of Business, see graduates landing high-paying tech jobs.
For reference, 12% of GMAC survey respondents reported pre-MBA salaries of less than $50,000. One-third of survey respondents who earned between $50,000 and $100,000 prior to returning to graduate school saw their salary jump over the $100,000 mark after graduation. Another GMAC employer survey shows that an average 2020 MBA graduate earned a base salary of about $115,000. Overall, “nearly 60% of alumni increased their median salaries to higher income ranges,” according to the survey. Income brackets as identified by GMAC include less than $50,000; between $50,000 and $100,000; and more than $100,000.
A prime example of a business school that has increased salaries is the University of Chicago’s Booth School of Business, which saw post-MBA earnings jump 47% over the past decade. In 2020, the average Booth graduate earned $147,977 with a median signing bonus of $30,000—that’s nearly $200,000 immediately after graduation. A decade ago, the average starting salary was $102,000.
One of the main reasons MBA salaries out of top programs are so high, Jones notes, is that companies are competing for top talent.
“For that reason, they need to offer attractive compensation packages that will account for the fact that MBA grads are most likely paying off student loans for the next few years,” she says. “In addition, MBA grads are hired into positions where they are expected to perform at a high level and carry significant levels of responsibility from the onset. That talent is worth a lot.”
Business degrees also offer many students the comfort of knowing that after graduation they’ll be able to hold on to a job. Indeed, 63% of survey respondents agreed that their graduate business degree gave them better job security. Many of the top MBA programs over the past couple of years have seen 90% or more of their graduating class land jobs immediately after graduation.
While the MBA degree has certainly maintained its ability to make grads feel employable and increase their earnings, the pandemic did manage to shake up how secure they felt in their jobs; 13% said they strongly disagreed that their graduate business degree provided better job security. Jones says she thinks industries and schools could account for the difference in results.
“In industries like travel and hospitality that have been greatly disrupted by the pandemic, I can see how even a top-performing MBA grad could feel like the MBA cannot protect him or her from uncertainty,” she says. “I know that the results aren’t broken out by school, but I would imagine that a [Harvard Business School] grad is less likely to feel this way than a graduate of a far less competitive program.”
To prepare students for any blips, Kamat spends time challenging his admissions consulting clients’ post-MBA goals and long-term career plans, he says. “This has less to do with impressing admission officers, and more to ensure that the candidates don’t end up disappointed later,” he adds.
Still, many professionals see earning an MBA as a “safety net,” as Bender puts it.
“Even without job security, nine out of 10 respondents note a positive return on the MBA experience, so job security isn’t the only point of an MBA,” she tells Fortune. “Many MBAs may even seek the opposite—the confidence to take on some of the biggest professional challenges out there with a heightened probability of success.”