In the years leading up to the coronavirus pandemic, applications to Master’s of Business Administration (MBA) programs declined as fewer prospective students saw value in leaving a stable job for an expensive professional degree.
The situation looks somewhat different two years after covid-19 upended the global economy and a Great Resignation is prompting millions of people to rethink what they want out of their careers. Applications to graduate management education programs rose 2.4% year-over-year in 2020 after a 3% decline in 2019, and rose once again by 0.4% last year, according to (pdf) the Graduate Management Admissions Council (GMAC), which administers the GMAT exam that most business schools require for admission. Three-quarters of MBA programs reported growth in applications during the first year of the pandemic.
An MBA is a pricey degree—a top program can cost $150,000 over two years—with a potentially lucrative payoff. But are there more cost-effective ways to pursue a similar career path?
MBA programs tend to cater to working professionals looking to enhance their career with the prospect of a raise or promotion, and in some cases pivot to a different sector entirely. It can be tempting to see the degree as a way out of a career that’s making you unhappy, but it’s worth considering all your options before you commit to applying.
“Getting an MBA because you don’t like your job is not a great reason to get an MBA,” says Judith Hodara, a former admissions director at University of Pennsylvania’s Wharton School of Business and co-founder at Fortuna Admissions, which provides MBA coaching and counseling.
What an MBA can do, Hodara says, is “introduce you to a network of individuals that will allow you to pursue career objectives,” and “do a deeper dive into where you envision yourself making your mark.”
Most MBA admissions departments provide ample employment data on their graduating classes, which can help give an idea of whether a certain program will help you land at the type of company where you envision yourself. Take a look at the employment outcomes of schools you’re considering to see whether the companies where their alumni work align with your professional values. If you’d never consider working for Amazon, for example, you might think twice before pursuing an MBA at an institution from which the company recruits heavily. If entrepreneurship is a goal of yours, look at what percentage of last year’s graduating class started their own companies.
Think about the skills you’re hoping to gain from an MBA program, and how the curriculum could help you get there. The interdisciplinary degree is said to attract both right and left-brained students, but may not be a good fit if you’re simply looking to get specialized training in finance or accounting, for example. These days business schools typically offer not only full-time MBA programs, but also part-time and flexible options for the degree. Executive MBA programs are another option for professionals who have been working for 10-12 years and want to enhance their career trajectory.
Hodara says she thinks of a bachelor’s in business as more of a functional degree, while the MBA “is going to be more about learning how to manage, lead, get consensus, negotiate.” So if you have an accounting degree, but you want to lead a team someday, or have entrepreneurial interest, the degree could be a good fit.
The network you get from an MBA program may be more valuable than any hard skills you learn in classes. Even without a business degree, most jobs are said to be filled via networking, and an MBA can cement ties to certain companies and industries. “It would be very difficult to replicate as an individual what you get from that business school experience in terms of building your network,” says Elissa Sangster, CEO of the Forté Foundation, which encourages women to pursue business education.
The value of an MBA degree has been debated endlessly, and admissions departments often point to a positive return on investment when you compare what students spend on the program with what they earn in the end.
If you enter an MBA program with plans to work in one of the top-recruited fields—consulting, finance, or technology, for example—there’s a good chance you’ll earn enough to justify the expense of tuition. The projected median MBA salary reached an all-time high of $115,000 in 2020, according to GMAC, about $40,000 higher than the median salary offered to hires already working in the industry. By contrast, undergraduate business majors are projected to earn $60,695 on average upon graduation this year, according to the National Association of Colleges and Employers. The average starting salaries for undergraduates coming out of colleges with top business programs such as New York University and Georgetown skews higher, above $75,000, according to an analysis by the higher education website Poets and Quants. After working for 20 years, MBA graduates from the top 50 US programs are projected to earn $2.5 million in median pay, according to an analysis by Payscale—more than enough to pay off a hefty graduate school loan.
An October Wall Street Journal analysis of nearly 600 MBA programs found that graduates typically earned enough to pay off their student debt within two years of graduating (although many continue to pay off their loans over time). This was true for 98% of programs analyzed, compared to just 6% of law schools in a similar report. The median salaries of graduates from University of Pennsylvania’s Wharton and University of Chicago’s Booth business schools rose by $5,000 last year, as corporations were willing to pay more for hires with management training amid ongoing pandemic uncertainty.
“These students were trained in business school to really think about weathering business uncertainty and problem solving,” says Sangster. “They’re just an easy hire when it comes to onboarding and expecting performance quickly, because they’re ready for that.”
MBAs can be found in every industry, but there are some kinds of jobs for which the degree is most useful.
The case for earning an MBA is perhaps strongest in consulting, where graduates can make double what undergraduate hires make. Consulting firms will often pay for employees to take a hiatus and earn their MBA before returning to the company. They also recruit the most MBA grads: McKinsey and Boston Consulting Group hired roughly 11% of MBA graduates from the top 24 US business schools between 2019 and 2021, according to an analysis by the admissions consulting firm Menlo Coaching.
But just how valuable an MBA can be depends in part on what kind of job a graduate is seeking. For those interested in working on Wall Street, an MBA may be less essential today than it was a few decades ago. “If you’re working already at an investment bank, and already know you want to become an investment banker, an MBA does not advance your career quicker,” says Noah Schwarz, a partner and managing director at Russell Reynolds, an executive search firm. At most finance firms today, Schwarz says, you can reliably advance to a higher salary tier with just a bachelor’s degree. This is a marked change from how the industry operated in the 1980s, when earning an MBA was part of the standard track for aspiring investment bankers.
If you don’t currently work in finance and are looking to break into the industry, though, an MBA can help you get there, Schwarz says. MBA graduates typically start at investment firms as associates, making higher salaries than entry-level analysts hired right out of college. “You will come in higher, but you lost two years of working, and you’ve paid $150,000,” he concedes. Still, Schwarz says an MBA is seen as the “gold standard” of advanced degrees in finance, so if you’re a career switcher with an interest in banking, this program might be your best option.
Though the MBA has lost some of its luster on Wall Street, it looks more valuable than ever in Silicon Valley and other tech hubs, which for years were skeptical of the degree and its holders. “For a long time we heard from the big tech companies, ‘Our founders didn’t go to college. Why would we care if anybody had an MBA?’” says Sangster.
That’s starting to change. Tech companies that did well during the pandemic, such as Amazon, Netflix, and Zoom, were some of the biggest MBA recruiters last year, according to a survey by the MBA Career Services & Employer Alliance. Amazon increased its hiring by 20% last year and plans to continue this trend into 2022. MBA graduates from US schools were offered $160,427 annually on average for jobs in the technology sector last year, according to tech employment platform Hired, about 9% higher than non-MBA candidates. Master’s in computer science candidates have been catching up though, and only received 4% lower salary offers on average, according to data provided by Hired.
Success in entrepreneurship doesn’t hinge on earning an MBA, either, even though programs are increasingly focusing on it. Entrepreneurs who graduated from the top five undergrad programs with the most founders raised $20 million more per capita in VC funds than did graduates of the top five MBA programs, according to data from Pitchbook. Most of the top-ranked schools were in the Ivy League, though, suggesting graduates had access to similar alumni networks.
The case to invest in the degree is sometimes less clear for non-traditional MBA fields, such as government or the non-profit sector. Just 1.4% of MBA graduates went to work at non-profits last year, according to Bloomberg, with salaries at the top-ranking programs ranging from $38,974 to $120,000 a year, and most falling under $100,000. Salaries among MBA graduates that went into government were similarly on par with the industry standard.
If your dream is to work in policy or run a non-profit, a master’s in public administration or policy might be a better, more cost-effective fit. It may also help to narrow in on a few companies where you’d see yourself working before entering an MBA program.
“Think about where you might want to work post-MBA and be ready to network at your target organizations,” says Bruce Del Monico, associate director of admissions at the Yale School of Management. You’ll have access to recruiters through the career development office, “but less traditional MBA fields often do not have the same on-campus recruiting infrastructure as consulting and finance and technology, so you may need to be more proactive and more directed in your search.”
Some MBA admissions directors and corporate recruiters continue to push the importance of in-person interaction, but the popularity of online programs is growing. A remote MBA can be an attractive option if you’re looking to gain leadership credentials but don’t want to stop working or switch careers entirely. The startup Section4 launched last year under the leadership of a former NYU Stern professor with a mission to deliver 50 to 70% of the value of an MBA elective at a fraction of the cost. Coursera offers “mini MBA” classes for working professionals looking to accelerate their career. Such ventures are starting to make aspects of the MBA education more accessible for prospective students that don’t feel a full-time program is the right fit.
If you don’t feel ready to give up two years’ income to earn an MBA but are still drawn to the curriculum, you might consider looking at a part-time or remote program.
Corporate recruiters say they don’t value online MBA program graduates equally with in-person MBA graduates, according to a 2021 GMAC survey, but the salary outcomes don’t look meaningfully different in some cases. At University of North Carolina’s Kenan-Flagler School, for example, online MBA graduates earned $132,329 on average in the first year after completing the program in 2018, whereas full-time MBA students earned $116,500 (pdf) on average.
If you’re based in the US and up for building your network abroad, international MBA programs can offer a more cost-effective route, as well. MBA programs outside the US, such as the ones offered by INSEAD in France, Singapore, and Abu Dhabi, for example, are typically just one year and often have a smaller price tag than their US counterparts.
If you’re seriously considering an MBA, make sure you’ve got a clear idea what you want out of the experience. And keep in mind that it might not be the right time. With labor demand at an all-time high, it may be a better time than ever to skip the degree altogether and go after that business idea you’ve been mulling over for years.