How Much MBAs Are Being Paid These Day
Maria |
May 18, 2024

In this episode of Business Casual, John Byrne, Maria Wich-Vila, and Caroline Diarte Edwards explore the financial benefits of earning an MBA from top U.S. business schools. They discuss recent data showing substantial salary increases for MBA graduates, significantly outpacing inflation, with notable salary boosts at Chicago Booth and Kellogg. Despite the decline in MBA applications, the strong growth in compensation emphasizes the lasting value of the MBA in today’s volatile economic environment.

Caroline highlights the effectiveness of career services at these schools, which quickly adjust to shifting recruitment trends, helping graduates land top-tier job offers regardless of economic conditions. Maria adds that despite the worries about inflation, the steady rise in MBA salaries confirms the degree’s robust return on investment. This episode illuminates the financial advantages of an MBA, affirming its status as a wise investment for those seeking lucrative and rewarding careers.






Episode Transcript

[00:00:04.370] – John

Well, hello, everyone. This is John Byrne with Poets and Quants. You are listening to Business Casual, our weekly podcast with my co-host, Caroline Diarte Edwards and Maria Wich-Vila. Maria, of course, is the founder of Application Lab. We can go and get a lot of great advice and see a lot of Maria on her video, her very exuberant video, very passionate. I love watching her in those videos. And Caroline Diarte Edwards, who’s a former managing director of admissions at INSEAD and the co founder of Fortuna Admissions, which I’m sure you know, one of the leading MBA admissions firms. And an INSEAD at MBA. I’m the only one here without an MBA. But after reading this story on my own website, Total MBA Pay at the Top 100 US B-Squals, I am regretting the fact that I don’t have an MBA. This story tracks compensation, and we measure compensation on the basis of starting salary after you get your MBA and the sign on bonus. In many cases, people get all kinds of perks, including reimbursements on tuition, moving expenses, sometimes stock, guaranteed year-end bonuses, and other things that are not even being counted in here.


[00:01:31.460] – John

But the five-year trend on pay should make everyone very happy. A far outpacing inflation, and we know inflation has been a big concern in the US in particular and elsewhere, frankly. But the graduates who have an MBA from Chicago Booth, their pay has gone up by 29.1% in the last five years. Kellogg, 28.2%, Stanford, 25.4%, Darden, 24%, Tuck, over at Dartmouth, 24.8%, Cornell, 24.9%. These are all really nice healthy increases. What I really think makes them interesting is they’re a direct contrast to decline in applications at full-time MBA programs. Caroline, what do you make of this? These are really nice sums of money that people are getting, and we’ll get into more of the detail as talk about this.


[00:02:31.270] – Caroline

Yeah, they are very impressive numbers. And I think particularly in the context of 2023, where we know that the recruitment market was a bit weak, right? And we were hearing stories of graduates who were getting offers and then employers would say, actually, don’t come in August or September, come in January or come in six months or so down the line. So they were being postponed, which suggested that it was somewhat tricky time for graduates coming out of business school. So it’s really fantastic to see that actually, despite that situation, the salaries did increase. And I think that also speaks to the great career services teams that these schools have, and they cultivate relationships with a very broad range of recruiters, and they have a great portfolio of companies that are coming to recruit every year. And so if there is a bit of weakness, for example, in tech recruiting, they can compensate for that in other areas. And so the graduates still have fantastic opportunities and great employers coming knocking at their doors. So really impressive to see how strong those numbers are in that context.


[00:03:51.230] – John

Yeah. And to underline that, I’ll give you some of the increases just year over year during this period where, in some cases, consulting, recruiting was down or people actually were putting off start dates on those who had offers. And then, of course, there was a bit of decline in the tech sector as they began to lay off some employees. But at UVA Darden over the last year, pay went up by 6.6% to just under 200,000. At Stanford, 5.5%, at just a little over 204,000 to start. Wharton, 4.6% up. So was Kellogg. Both schools are around $195,000 to start. Again, I’ll just remind everyone, these numbers only reflect starting salary and sign on bonus and not any other additional perks and benefits and bonuses that people might get in their first year. Maria, I’m sure these numbers are nothing like what you achieved in your first year out of Harvard.


[00:04:55.260] – Maria

They certainly aren’t. This article, I mean, I know that inflation has been such a thing on everyone’s mind these past couple of years, but here’s an upside of inflation. That these salaries have, in fact, been going up, and it looks like they’ve actually been outpacing inflation by not a ton, but certainly in a noticeable way by a percentage point or two. I think it only reinforces the value of this degree. I know that there’s a lot of hand wringing about application numbers, might be struggling a bit at certain programs or all over, honestly. But employers, it might be harder to get that job. But once you get it, it seems like employers are in fact willing to compensate people accordingly for the skills that they have invested in developing in themselves.


[00:05:46.490] – John

Yeah, that’s really true. Here’s also what’s interesting in this, and you should read the story if you’re really interested in pay and MBAs and career outcomes. It’s called Total MBA Pay at the Top 100 USB Schools. The The biggest increases occurred where you might least expect them. The business school at the University of Kansas, which has a small MBA full-time program, their pay growth in the past year is up 31%. Ohio State Up 26% in the last year, Buffalo, Suni, up 24%, North Carolina State, 20% at Pepperdine, and so on. What you see here is the second-tier MBA programs are producing graduates that are well in demand. Companies are willing to offer them fairly nice pay packages given the fact that they’re not the top schools. At Ohio State, the average pay last year was $155,000 plus. North Carolina State, $118. Pepperdine, $111,000. At Minnesota, $161,000. They went 14% in the past year alone. Really a good sign, I think, for MBAs in general and the demand that these graduates still have in the marketplace. Why do you think with numbers like these, are applications for full-time MBA programs still declining? Maria, what do you think?


[00:07:25.630] – Maria

I don’t… Your guess is as good as mine. I think one One interesting wrinkle that I’ve been hearing a bit more recently is I think there’s just a lot of uncertainty in the overall marketplace regarding things like, what is the economy going to be doing in 2-3 years? If I take a couple of a year or two off to go to school, what’s the economy going to look like when I graduate? What’s the political environment of the US going to look like? If Donald Trump does get reelected, what does that mean for international students? Are certain restrictions going to come back into place? I do think that There’s this overall feeling, I think, of uncertainty in the market, in the economy in general, that I would guess might be causing people to pause and say, Okay, well, if it’s not a guaranteed slam dunk, maybe it’s not worth taking on this risk. I also do think that employers are… I think employers are increasingly insisting upon things like, You have to come into the office, and they’re no longer sweetening the pot to convince people to come back to work as they did in the early days post-pandemic.


[00:08:34.250] – Maria

But I also do think that employers are increasingly… In our post-pandemic world, employers are recognizing that they do need to compensate talent if they want that talent to stay. I also think that perhaps people are finding other alternatives for career growth.


[00:08:48.290] – John



[00:08:49.310] – Maria

But I’m speculating. I’m just…


[00:08:51.750] – John

I think everyone is speculating because no one has a certainty in this answer. Caroline, what What’s your view on this?


[00:09:01.930] – Caroline

Yeah, I agree. I think there’s a lot of uncertainty with the economy, domestic politics, geopolitical uncertainties, which can deter people from what is quite a long process, right? Because if you apply to business school, for most people, it takes about a year, right? At least from when you start preparing and you’ve got to take the GMAT and submit your application, and it takes some time, all of that process. So you’re looking at probably three years down the line before you would be coming out of business school. Who knows where the world will be in three years time. I think that uncertainty does play into it. I think that there’s also more roads now to the same end point. It’s not as essential to do an MBA in certain careers as it might have been 10, 20 years ago. Companies are more flexible, and there are more graduate degree programs that candidates, young professionals can consider. It’s not just the full-time flagship MBA programs. There are just more educational opportunities out there as well.


[00:10:13.360] – John

True. And you look at business education in general and really the explosive growth, I’d say in the last 10 years has occurred in three arenas: the online MBA, which means people are still getting an MBA, but they’re doing it online. Specialty master’s degrees that were mentioned by Caroline, where you get a one-year stint in a business school and you can get a master’s in sustainability or a supply chain management or finance or accounting or any number of different disciplines. That might suffice over an MBA. Then finally, the incredible explosive growth in the undergraduate business sector. Undergraduate business programs have really become very good, very popular. In the US, it’s the top major. More people major in business than any other subject at university in the US. In Europe, the undergraduate degree is exploding in popularity. The quality of that education is so good that many people don’t think they need a graduate degree to advance in their career. So these are all other factors that have played into the maturity of the full-time residential MBA. But what we’re finding is maybe on some level, there’s The positive thing in this is if the full-time MBA programs are no longer growing, but in fact, the compensation is still rising above inflation, what we might be seeing here is more demand or similar demand, but less supply from full-time MBA programs that really allow you to switch your career in every possible way.


[00:11:55.920] – John

We’ve talked about the triple jump where you change discipline, industry, and geography in one fell swoop, which can be done in an MBA, and most people, probably many people at least do it, which you can’t really do in almost any other degree program. I’m looking at this compensation data, and my interpretation of it is, wow, there is still tremendous opportunity for people who want to give themselves really the most generous gift you can, the gift of education, and go to a program for one in two years, be fully immersed, meet new interesting, ambitious, smart people like yourself who will be your friends for life. All three of us are ambassadors for full-time MBA programs. There’s no doubt. We all just think it’s a totally transformational experience and well worthwhile. Which gets to a column we just ran from the former CEO of GMAC, Sangeet Chowfla, who writes about what he thinks is the return of standardized testing. Obviously, what the pandemic did to standardize test was pretty much diminish them. Many MBA programs, even at the most elite schools, went test optional or began to more generously grant waivers of tests, particularly given the holistic nature of MBA admissions.


[00:13:31.690] – John

What Sangeet is arguing in a story called The Return or Standardized Testing is that those schools that still have these policies of waiving standardized tests or making them optional have failed to meet their goal of lessening the friction on applicants to apply. Now, all of what we’re talking about today is connected because when you talk about declining applications to MBA programs and you talk about the maturity of the product, which probably was the most successful higher education product in the postwar period, you would think that if you didn’t require a standardized test, it would automatically result in an increase in apps. But saying you just argue that MBA applications actually declined in the last four years. It was 2% decline four years ago, 3.8, three years ago, 6.5 declined two years ago, and last year, 4.9% declined. Caroline, what do you make of this? Because you come from a school that never made the GMAT optional and accepts a GMAT and GRE and feels that it’s an essential part of the application process.


[00:14:46.640] – Caroline

Yes. Well, it’s difficult to know what would have happened if tests had been required through that period. Maybe the drop in applications would have been even greater. So we have no control experiment, really, for that, for those schools. So it’s difficult to draw conclusions. But I do agree that the standardized tests, although we love to hate them and no one enjoys taking the GMAT or the GRE, it is a very useful data point for schools. And that was actually one of the first things I looked at when I took my job at INSEAD as head of admissions. I was skeptical about the GMAT, as many students and alumni are. And we looked at the correlation of various factors that we could measure in the admissions process and how people then do in the program and how they do when they graduate. And there is a strong correlation between how people do on the GMAT and how they do academically on an MBA program, at least that was definitely true at INSEAD. And INSEAD is quite cautious about academic backgrounds because it is a one-year program, and so the pace is extremely fast, right? You have exams every eight weeks.


[00:15:57.550] – Caroline

If you have difficulty with some of the material, then you just don’t have a lot of downtime and slack in the system to catch up. So they are quite demanding on test score requirements. At INSEAD, with a very diverse pool, where it’s coming from all over the world from very different educational backgrounds, different institutions, different professional backgrounds. It is the one thing that people have in common. And so it’s the one data point that provides a useful metric to compare people from extremely different profiles and backgrounds. So I agree that there is a lot of value in that data point. And I’m honestly not surprised that top schools have gradually been reintroducing the requirements, both at undergraduate level, as he discusses in the article, and at a graduate school level. And I think I agree with him that the top schools will, in general, require standardized tests, both at undergraduate level and at graduate school level, and other schools further down the pecking order will be more flexible. I can understand the point that he makes that students who haven’t necessarily had the opportunities to Excel academically because they haven’t had the resources that some other students have had may not have such strong academic backgrounds, but they may be able to prepare well and do well on a standardized test.


[00:17:35.190] – Caroline

They may not have had the resource behind them to get into an Ivy League school for undergraduate, as some other well-healed students may have had, but they can prove their academic credentials with a standardized test. So I’ve definitely seen many candidates like that. Of course, we always want to broaden access to business education, and it’s nice to have some flexibility in the system. But I agree that the standardized test does have a role to play, especially at those top scores.


[00:18:05.660] – John

Maria, what do you think?


[00:18:07.550] – Maria

I agree with all of this. I actually am not opposed to standardized testing. I actually think standardized tests can be a real boon, as Caroline said, for people, especially who may not have had other opportunities to get access to elite academics. I actually enjoy the fact that the The standardize, the word standard and standardized, the fact that it is conceptually the same test for everyone, I do think it helps really level the playing field in terms of, okay, everyone’s going to get tested on the same concepts. Everyone needs to do the same type of preparation. And so go, right? Let’s really see how everyone competes and compares against each other. So, yeah, I’m actually in favor of standardized tests, and I think that the schools are increasingly going to start curtailing bit those test optional policies. The one thing I do say, and I think Caroline also touched upon this, again, we are all speculating on some of these numbers. But in the article, when it says, Well, The number of people applying still went down. Therefore, test optional did not encourage more people to apply. Anecdotally, I’m not sure that I agree with that conclusion.


[00:19:25.200] – Maria

I have seen anecdotally, so unscientifically, but I’ve seen a lot of people say things like, Oh, well, I’ve already applied to a bunch of schools, and my test scores weren’t quite where I wanted them to be, but, Oh, here’s some schools that are test optional. Let me throw in an application to those because what have I got to lose? I do think that test optional policies do encourage more people to apply, whether that translates to a macro trend where the overall number of applicants goes up. Not sure. But I think it actually would have been… I think those decreases in total applicant numbers would have more dramatic, perhaps, had the standardized test requirements still stayed in place.


[00:20:05.010] – John

Yeah, Maria, I agree with you because there were fairly significant jumps at schools that went test optional, particularly immediately after they did so. The other thing is this. Let’s face it, even though I think a standardized test does help get you ready, and today more than ever before, because of the shortened test, both for GRE and GMAT, they require less study time to prepare for because they aren’t nearly as demanding as they had been. But the truth is, look, if you’re an engineer and have an engineering undergraduate degree, certainly you can handle the quant in a program Or if you have a job where you do a lot of quant analysis, there should be no question about your quantitative abilities. There are a number of cases here where I think a standardized test might be for an admissions officer, even though it may better prepare you if your math and calculators are rusty in getting into an MBA program. But there you have it. I think the fact that MIT, Harvard, and other undergraduate schools are coming back to the SAT and the ACT does also relieve some pressure on business schools to bring back the GMAT or GRE if they, in fact, were granting waivers are totally test optional or actually abandon the test altogether, which some schools did.


[00:21:39.040] – John

I may encourage those schools that did that to bring them back. We’ll see. Meantime, here’s the bottom line. While the MBA may be perceived to be a mature product and applications are declining, people who graduate from them are making more money than they ever have in history of education. The demand is still there because the compensation proves it. The numbers are really jaw-dropping and eye-opening. If you have to take a test to get in, so be it. There you go. Hey, thanks for joining us. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual, our weekly podcast.


How Much MBAs Are Being Paid These Day
Maria |
May 18, 2024


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