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The MBA degree, once seen as the quickest route to a fat salary, no longer delivers quite the financial fillip it once did.

In spite of a return to economic growth, the financial returns from completing a full-time MBA have fallen over the past three years and while a graduate can still expect to nearly double their salary, the average boost to earnings is down by almost a third from the qualification’s heyday. This is particularly true in the US, home to 50 of the world’s top 100 business schools, where there is growing disaffection with the qualification on the part of both employers and potential students.

Since the financial crash of 2008, many would-be MBAs have been reluctant to give up a secure job in order to go to business school, which frequently costs well over a hundred thousand dollars in terms of fees, living costs and lost salary. Many believe the returns no longer justify the investment.

The result has been that while the top few business schools go from strength to strength — Stanford Graduate School of Business in California, for example, admits just 6.5 per cent of applicants — those lower down the rankings, with fewer resources, are floundering. “Students say that if they can get into a top school they will go. If not, they won’t,” says Garth Saloner, dean of Stanford, ranked fourth in the world this year, behind Harvard Business School, London Business School and the Wharton school at the University of Pennsylvania.

The past year has already seen several second-tier schools close down their full-time programmes as application numbers dwindle. More are expected to follow, says Alison Davis-Blake, dean of Michigan Ross business school, as programmes become economically unviable. “The segment of the market that is healthy is quite small.”

Recruiters are increasingly hiring more people from pre-experience masters programmes, whereas MBA students typically have several years’ professional experience under their belts and expect to command higher salaries. According to the 2014 recruiter survey from the Graduate Management Admissions Council (GMAC), those who have studied on specialised programmes in finance, accounting and management are particularly in demand.

Data collected by the Financial Times as part of its 2015 Global MBA rankings shows that three years after finishing their degree, those who graduated with a full-time MBA in 2011 earned an average 92 per cent more than they did before starting their course. At the MBA’s zenith in 2002 and 2003, the increase was 153 per cent, and as recently as 2012 it provided an average 110 per cent step-up to earnings.

In 2003, alumni from 82 per cent of schools in the ranking saw their salaries increase by more than 120 per cent over a four to five year period. In 2015 just 7 per cent saw the same increase.

Two factors that have played into the trend of diminishing returns are the increase in women graduating from MBA programmes and a decrease in the number of graduates moving into high-paying finance jobs.

A decade ago, 23 per cent of respondents to the FT survey were women, compared to 26 per cent for the 2015 ranking. In the data collected for the latest ranking, women report an average salary of $120,000, compared to $138,000 for men.

Similarly, 29 per cent of the FT sample worked in finance and banking a decade ago; today the figure is 25 per cent. Finance salaries have traditionally outstripped those in other sectors, and the data collected for the 2015 shows no exception. On average respondents from the top 100 business schools earned $133,000, but those in the finance sector earned $152,000.

http://rankings.ft.com/businessschoolrankings/global-mba-ranking-2015

Copyright The Financial Times Limited 2017. All rights reserved.
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