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Salary Outlook for Business Administration Degree
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- Online Master of Business Administration
A lot of people now graduate with an MBA (Master in Business Administration) degree. This is a highly prestigious degree, but also one that requires a big financial and time investment. The question becomes, therefore, whether it is worth completing the MBA degree. A study was commissioned by the AACSB (Association to Advance Collegiate Schools of Business) to answer this particular question. Data has been collected of various salaries obtained by people who have completed their MBA.
MBA Job Market Scope
Generally speaking, all graduate students are in higher demand on the job market compared to their undergraduate or unqualified counterparts. They are more likely to obtain a position higher up the corporate level, and they enjoy greater salaries. This is because they have proven qualifications to deal with complex challenges and can, therefore, make a greater contribution to their employer’s profitability. MBA graduates, in particular, are in very high demand for these skills, and most notably in industries, such as hospitality, health care, engineering, industry, and financial services.
Starting Pay After an MBA
The AACSB-commissioned study demonstrated that the average pay of someone who has completed an MBA was 50% higher than what they enjoyed before their business degree. This has been consistent over the past 20 years and is the same across all universities. For instance, someone who earned $50,000 per year before taking part in an MBA program can expect to earn around $75,000 per year afterward. Interestingly, the study also demonstrated that this increase was slightly less high for those who worked part time. They could enjoy a 41% increase in salary.
There appears to be a number of factors that determine salary, however. One of these is the school through which the degree was obtained, with some schools earning greater respect and consequently, higher pay. Graduates from programs that are accredited by the AACSB are in particularly high demand. Geographical location is also of importance, with those in certain locations enjoying the highest salaries.
On average, the starting annual salary for an MBA graduate now stands at between $110,000 and $130,000 per year, if a student graduated from an AACSB-accredited institution. For other institutions, the average annual salaries are between $75,000 and $90,000 per years. Lower rates of pay are found in government institutions, where salaries are between $50,000 and $75,000 per year. Higher rates have been found in the health care industry, with starting salaries of at least $100,000 per year. This is believed to be due to the increase in demand for health care provision, a more complex system, and higher expectations of those who work in the field.
Once a graduate has been employed for one year, the salary will rise, with the average being $150,000 per year. Salaries rise steadily after that. Those who have 10 years experience or more often earn over $200,000 per year. This growth is seen in all areas of work. The table below highlights average salary expectations for MBA graduates within government organizations, for instance.
|Work Experience in Number of Years||Salary|
|Less than one year||$50,427|
|One to four years||$56,090|
|Five to nine years||$74,053|
|Ten to 19 years||$94,038|
|More than 20 years||$103,600|
The AACSB study also looked in to so-called ‘Fifth Year Pay’. This is because various other studies, including ‘The Success Principle’ and ‘The MBA Advantage’ consistently demonstrated that salaries increase the most after five years. Findings indicated that it seems that the rise is indeed at its peak, with an 80% pay rise being normal after five years. Again, this increase is much lower for part time workers, standing at just 56%.
Interestingly, the study looked at a range of other factors that could influence pay for MBA graduates, as the table below highlights.
|Pre work experience||One year of work experience||· $2,822 increase per year for full time employees· No difference for part time employees||The effect is there, but it is negligible.|
|Geographical location||State||· Florida – $67,130· Texas – $78,532
· Pennsylvania – $78,536
· Illinois – $83,998
· Massachusetts – $89,267
· New York – $95,083
· California – $96,599
|There is a strong link between someone’s geographical location and overall earnings. Larger cities usually also attract larger salaries. However, it is important remember that larger cities often, although not always, have a higher cost of living.|
|City||· Dallas, TX – $80,595· Houston, TX – $80,711
· Atlanta, GA – $82,410
· Chicago, IL – $89,495
· Los Angeles, CA – $94,605
· Boston, MA – $95,605
· New York City – $102,869
|Area of Concentration||Finance and Marketing||Newly graduated MBA holders with a finance concentration often earned $1,000 per year more than those with a marketing concentration. However, after five years, this difference no longer exists.|
|Job||Position||· Senior financial analysts earn between $60,200 and $98,940· Financial analysts earn between $45,104 and $90,359
· CFOs (Chief Financial Officers) earn between $76,048 and $212,666.
· Marketing managers earn between $48,777 and $112,058.
· IT Project Managers earn between $62,327 and $126,547.
· Operations managers earn between $45,186 and $114,986.
· Finance managers earn between $64,395 and $118,489.
· Natural sciences managers earn around $120,050.
· Engineering managers earn around $130,620.
· Human resource manager earn around $102,780.
|There are clear differences between certain jobs and roles. However, even within certain job roles, salary expectations can vary significantly.|
|Gender||It was found that, across the board, the average pay of women reached just 87% of that of men. At fifth year pay, this had increased to around 88%, which is still a significant difference.
Interestingly, the difference is reversed in finance majors. At graduation, women earned around 90% of what men earned (still less), but just 70% of what they earned at fifth year pay.
The gender pay gaps have been well-documented and are clearly related to the continuing glass ceiling that exists in the world of business.
|GMAT Scores||No correlation was found between GMAT scores and pay on graduation or at fifth year. This holds true for both full time and part time employees. The GMAT, therefore, may not predict whether or not someone will do well in business school. It does not measure future success.|
Consistently, the study found that the school where the MBA degree was obtained was of vital importance to the salary. The table below highlights some of the country’s most prestigious schools, and the salary that can be expected on graduation and at the five year point.
|Business School||Graduation Pay||Fifth Year Pay|
|Harvard Business School||$114,000||$190,000|
|The Wharton School||$122,000||$182,000|
|Stanford University Graduate School of Business||$118,000||$175,000|
|MIT – Sloan School of Management||$131,000||$171,000|
|UC Berkeley – Haas School of Business||$123,000||$169,000|
|Columbia Business School||$104,000||$167,000|
|Northwestern University – Kellogg Business School||$117,000||$164,000|
|UCLA – Anderson School of Management||$103,000||$160,000|
|University of Chicago – Booth School of Business||$122,000||$159,000|
|Duke University – Fuqua School of Business||$102,000||$158,000|
A final thing of interest that came out of the study was what students themselves felt would help them achieve higher salaries. It was found that:
- Learning as much as possible and starting with a large, prestigious company was of benefit.
- Working for a range of different firms rather than just one was not believed to be of interest.
- Ensuring that experience is achieved across functions rather than a single field is incredibly important.
- It wasn’t clear whether companies could be trusted to promote someone who performed very well.
- Pursuing a dream should be at the top of everybody who classes themselves as an entrepreneur’s list.
It was also found that students had a very high satisfaction level with regards to their degree. They felt it opened important career doors for them, offering them opportunities they would otherwise not have been able to access. They also felt that salary growth was a given and that their MBA was a really good investment. In fact, 94% of graduates said they would do it all over again if given the chance. This represented a 2% increase from the same study in 1995.
Is an MBA a Good Investment?
Clearly, the study has demonstrated that an MBA is an investment worth making. However, this investment pays for itself the most if students also attend a high quality school, which, in turn, is often more expensive. Where students work in terms of geographical location and industry is also important. As such, seeing a return on investment is common, but how long that will take depends on individual students. If a student attends one of the country’s top 50 ranked schools by the Forbes Business School Ranking, the average payback period is less than four years. Do also remember that an MBA degree is not just about financial gain, but also about the personal and professional satisfaction of obtaining such a highly respected degree.
Resources and References:
- Occupational Outlook Handbook: Management Occupations – Job outlook for managers. (BLS.gov)
- Master of Business Administration Salary – Information on the salary of an MBA degree holder. (Master-Business-Administration.org)
- Association to Advance Collegiate Schools of Business (AACSB) – Accrediting organization for business schools. (AACSB.org)