How Much Is an MBA Worth? Less Than Ever

Last Updated Aug 31, 2011 10:21 AM EDT


If you want proof that the immediate rewards of the MBA degree have declined, look no further than the past ten years. From 2001 to 2010, the costs of getting the degree have significantly outpaced starting pay at every one of the top 20 U.S. business schools.

An analysis by Poets&Quants of school estimates of the cost of attending a two-year program and median starting salaries of new MBA grads show that large amounts of value have eroded from certain programs. The analysis did not take into account the fellowship grants that would reduce the costs of getting a degree.

Whether this is merely a reflection of the overall economy which has led to widespread layoffs and stalled salaries among many white collar employees or a sign that the cachet of an MBA has declined is up in the air. But there's no question that MBA candidates working toward the degree today will take a longer time to achieve a return on their investment than their predecessors did ten years ago.

Which schools saw the greatest depletion of value in the past decade?

The costs of attending Carnegie Mellon University's Tepper School rose 12.8 times faster than its MBA starting salaries--more than any other top 20 school--while the University of Texas' McCombs School of Business saw the cost of attending its MBA program jump 11.7 times its median salaries for graduates.

Schools that held the most value
The two at the top of the list: Stanford Graduate School of Business increased its budget recommendations to students by only 1.6 times its salary increases, and the costs of getting a Chicago Booth MBA rose only 2.2 times the salary of a Booth graduate. They were followed by MIT Sloan and New York University's Stern School of Business, both of which saw costs rise 2.4 times median salary increases.

Other findings:
  • the top ten schools did significantly better than the bottom ten in the top 20.
  • In the top ten schools, the costs of the degree rose three times the median salaries.
  • But in the bottom ten of the top 20 schools, the costs increased 6.5 times pay.
The single biggest increase in the cost of an MBA over the past ten years occurred at Texas-Austin where the recommended two-year budget for a student surged 140% to $127,444 from $53,034. Meantime, median base salaries went up only 12% to $95,000 for the Class of 2010 from $85,000 for the Class of 2001.

The smallest increase in base salary was at Emory University's Goizueta School, where pay increased by only 6% in the past ten years to $90,000 from $85,000. The cost of getting a Goizueta degree, however, jumped by 45% to $130,280 from $89,920.

Columbia Business School stands out--in a bad way
Among the elite private schools, the greatest deterioration in the value equation was at Columbia Business School. The costs of getting the degree rose 8.9 times faster than the starting salaries in the past ten years. The recommended two-year budget at Columbia jumped 71% to $169,502 from $99,388, while median base pay increased by only 8% to $100,000 in 2010 from $93,000 in 2001.
School 2010 Median Pay 2001 Median Pay %
Increase
2010
Two-Year
Budget
2001
Two-Year
Budget
%
Increase
Harvard $110,000 $100,000 10% $158,000 $109,600 31%
Stanford $120,000 $100,000 20% $168,812 $128,000 32%
Wharton $110,000 $95,000 16% $168,000 $119,456 41%
Chicago $102,000 $85,000 20% $154,060 $107,722 43%
Kellogg $105,000 $90,000 17% $156,990 $105,066 49%
Columbia $100,000 $93,000 8% $169,502 $99,388 71%
Dartmouth $105,000 $95,750 10% $159,900 $95,750 67%
MIT Sloan $110,000 $92,500 19% $160,378 $110,620 45%
Berkeley $110,000 $90,000 22% $144,746 $76,320 90%
Duke $100,000 $85,000 18% $137,746 $82,948 66%
Virginia $100,000 $85,000 18% $142,000 $84,000 69%
NYU $100,000 $85,000 18% $157,622 $109,234 44%
Michigan $100,000 $90,000 11% $141,210 $91,100 55%
Yale $100,000 $85,000 18% $151,982 NA NA
Cornell $96,000 $87,500 10% $142,404 $86,610 64%
Carnegie-Mellon $95,000 $88,000 8% $149,400 $74,000 102%
UCLA $100,000 $85,000 18% $147,278 $62,664 135%
UNC $95,000 $85,000 12% $136,860 $82,650 66%
Emory $90,000 $85,000 6% $130,280 $89,920 45%
Texas $95,000 $85,000 12% $127,144 $53,034 140%
Source: School reports to BusinessWeek. For public institutions, out-of-state recommended budgets were used.

Related stories: image courtesy of flickr user, markhillary
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    John Byrne is the editor-in-chief of PoetsandQuants.com and PoetsandQuantsforExecs.com. A former editor-in-chief of BusinessWeek.com and Fast Company magazine, Byrne also is the author or co-author of eight books on business, including two national bestsellers. Follow him on Twitter.

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