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Maybe You Need to Re-Think that MBA

October 16, 2011

MBA programs have long been popular with professionals looking to boost themselves onto different earning curves. But today there approximately four bazillion schools offering MBA programs (that’s an estimate). Discussing this trend is today’s highlighted article, “Trouble in the Middle,” from The Economist. The article explains that most MBA’s are not all they’re cracked up to be, anymore, when it comes to boosting one’s earnings potential: “the established model of business education may be in trouble, if not for all schools, then definitely for mid-ranking American institutions offering a traditional two-year MBA.” [all italics throughout this post have been added by me to denote quotes from the article]

In contrast with an MBA from a top tier school, most mid and low tier MBA’s don’t seem to promise the salary boost that applicants really crave. The real issue is that while the costs of getting an MBA have surged by almost a third in the last five years, the payoff from getting the degree is only about five percent higher in the same time. You don’t need a graduate business degree to figure out that deal isn’t too spiffy. This excerpt from the article really sums up the math:

Data taken from The Economist’s latest ranking of full-time MBA programmes (see article) show that an MBA from a mid-ranking school is no longer the investment it once was. In 2010 the average tuition fee charged by American institutions ranked within our top 100, but outside of the top 15, was $81,911 for the full two years. The average basic salary of those schools’ freshly-minted MBAs was $81,178 a year. Five years ago tuition at the same cohort of schools was nearly $22,000 cheaper—$60,247—while the average salary, $78,442, was barely less than today’s. This price rise comes at a time when enrolment is falling; for American mid-level schools it is down 20% over the decade.

This is a very interesting article, and well supported with data. It is worth reading if you are deciding between getting an MBA or buying, say, a new house.

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