Education

There are officially too many MBAs

January 8, 2013
Obsession
management
January 8, 2013

We’ve all gotten used to talking about the problems with law schools and the thousands of underemployed, debt-addled JDs that they graduate. But perhaps its time to start taking a similarly critical look at business programs. As the Wall Street Journal illustrates in a piece today, it looks like the U.S. now has a glut of MBAs.

The problem, it seems, is the proliferation of B-grade B-schools. Universities are now conferring 74 percent more business degrees than they did in the 2000-2001 school year. Much of that torrid growth has been driven by part-time and executive MBA programs at less-than-prestigious institutions looking to cash in. And while the supply of business grads has continued to grow, the WSJ finds that pay for young MBAs has dipped 4.6% since the recession, reflecting both the slow job market, and the fact that the degree seems to have lost some of its cache.

Meanwhile, the cost of tuition has risen 24 percent in the last three years.

As the WSJ illustrates in the graphs below, MBA programs aren’t alone in their troubles. Schools are handing out more advanced degrees than ever, and pay for grad-school alums has stagnated in turn. Part of this boils down to common sense: mediocre students who graduate from mediocre graduate programs aren’t going to suddenly find themselves working at Goldman Sachs or a tony law firm. They’re going to land the jobs they’re qualified for and drag down average pay for everyone, even if Wharton MBAs or Harvard JDs keep raking in huge paychecks.

WSJ_MBA__GLUT.jpg

But this trend also may be a sign that diploma inflation is eroding the overall value of putting a higher degree on your resume, at least if it comes from a run-of-the-mill institution. Worker pay responds to supply and demand, just like everything else, and right now it appears there’s more than enough supply of highly educated talent out there to satisfy employer demand. Going back to the plight of MBAs in particular, of the 186 business schools the WSJ looked at with help from PayScale.com, 62 percent saw pay fall for their graduates. The value of those schools’ diplomas is dropping even if their admissions and educational standards have remained the same.

To be clear, stalling pay doesn’t mean an MBA is now worthless–business grads still make more than your average bachelor’s holder. But it does mean the value of the diploma is eroding, especially as tuition rises. The more low-end schools that start offering online business degrees and the like, the worse we should expect the problem will become.

This originally appeared on The Atlantic. Also on our sister site:

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