Is Getting an MBA Still Worth It?
The value of higher education is being questioned like never before. Pundits and the public are asking whether pursuing an advanced degree, including a master of business administration (MBA), remains a worthwhile endeavor.
Much of the questioning results from the recent economic recession and the weak recovery that has followed. As corporate layoffs began taking their toll and college-educated workers struggled to find jobs, people pointed to the high cost of education and asked if the benefits were worth it. Graduate business education was no exception. Earning an MBA is no longer a guarantee of a job, and MBA graduates can and do struggle alongside other workers in today’s employment marketplace.
As the vice president and managing director of an institute that conducts research on work skills, workforce development and working learners — including those who pursue an MBA degree — and as an MBA graduate myself, I believe that the MBA remains a relevant and valuable academic credential. Here’s why.
People Are Usually Much Better Off Financially After Completing an MBA
The notion that education provides an effective path to a better income can no longer be taken for granted. Students, in their role as consumers of services provided by colleges and universities, have a right to ask for evidence that their efforts will be rewarded.
Research shows that investing time and money in an MBA will most likely yield a strong financial reward over the course of a career. In one study that tracked MBA graduates over several years, participants achieved an average salary increase of $26,888, or 52 percent. Statistical evidence shows that, historically at least, pursuit of an MBA degree has proven financially worthwhile for most people.
Accessible MBA Programs Provide Great Educational Value
At the University of Phoenix Research Institute, one area of research focus is the return on investment of a higher education degree. Precisely how much value do students get in return for the money and time they invest in school? Calculating return on educational investment (ROEI) provides one answer.
For example, in a study titled Traditional and Nontraditional Students: Is a Bachelor’s Degree Worth the Investment? researchers at the University of Phoenix Research Institute compared the ROEI of students who attend college directly after high school with that of nontraditional students who postpone college until after age 23 and work while going to school. The results showed that nontraditional students actually earned a higher ROEI, regardless of the type of college they attended.
To determine ROEI for MBA graduates, the gains graduates reap in salary over time are measured against the cost of earning the degree. Calculating and comparing ROEI for an MBA degree from different categories of schools yields a surprising result:
- Top-10 MBA school graduates earned on average a 12% ROEI.
- Top-50 MBA school graduates earned on average a 17% ROEI.
- Non-top-50 school graduates earned on average a 20% ROEI.
Why did graduates of nontop-50 schools earn a higher ROEI? The reason is largely due to lower tuition costs, which translate into greater value for each dollar spent. When it comes to an MBA, paying the higher price of a top-tier school does not on average result in the greatest financial payback for money spent. Accessible programs provide a great value.
The Future Belongs to the Well-Educated
Questions about the value of an MBA are being asked in the context of unprecedented scrutiny of the value of all postsecondary education. Well-respected think tanks and publications have questioned the value of college-level and advanced degrees in light of economic realities such as globalization and outsourcing, a volatile job market, emerging technologies that can replace highly educated workers, and the high cost of education itself.
Job insecurity for the college-educated and the high cost of education are serious concerns. However, the evidence points to an overwhelming fact: the future belongs to the well-educated. The fastest growing jobs in the coming decade are expected to be jobs that require a college-level degree or higher. According to the U.S. Bureau of Labor Statistics, between 2008 and 2018:
- Jobs that require on-the-job training or work experience only are expected to grow by a mere 8%.
- Jobs that require a bachelor’s or master’s degree are expected to grow by 17% and 18%, respectively.
The emerging knowledge and innovation economy will demand that workers have more education, not less.
Beyond Dollars and Cents: An MBA Confers Powerful Intangible Benefits
As an educator, I believe the discussion of the value of an MBA must go beyond employment and earnings numbers and take into account quality of life and career. The intangible benefits experienced by MBA graduates are described in a 2005 study. In this study, MBA graduates affirmed they had gained valuable knowledge, skills and self-confidence as a result of their MBA education. Participants also credited the MBA degree with giving them a broader worldview, increased control of their careers, better quality of life, improved productivity and more positive relationships.
Like all academic degrees, the MBA represents an opportunity; it is not a guarantee of a career outcome. To make the most of this credential, MBA graduates must analyze how their abilities fit with the demands of the marketplace, set specific goals, and develop a plan for taking advantage of the opportunities an MBA affords. Postgraduation success will not come from waiting to be discovered; it requires self-discovery followed by action.
Women MBAs: Room to Grow
No discussion of the MBA degree is complete without mentioning an ongoing concern: the low percentage of women in the nation’s MBA programs. Women are currently estimated to comprise 30% to 40% of enrollment, depending on the source cited.
Even at the higher estimates, the percentage is significantly lower than the percentage of women enrolled in law or medical school. The concern about female MBA enrollment echoes an even greater concern: in the corporate and financial world, women continue to be underrepresented at the executive level. The work of empowering female business professionals remains as urgent as ever.
To help promote the advancement of women in business, the University of Phoenix School of Business is partnering with the National Association of Women MBAs (NAWMBA) to present several “Women in Action” panels and networking events in cities across the nation, May 24-26. These events offer the opportunity to interact with local women executives from diverse fields and dialogue about women’s roles, negotiating skills, professional action plans and more. For information, visit http://WomenInAction.eventbrite.com.
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Holtom, B. C., & Inderrieden, E. J. (2006, December 22). Examining the value added by graduate management education. GMAC Research Reports, RR-06-I6, 1-9.
Rouse, R. A., & Cline, H. M. (2011). Traditional and nontraditional students: Is a bachelor’s degree worth the investment? Phoenix, AZ: University of Phoenix Research Institute.
Holtom, B. C., & Inderrieden, E. J. (2007). Investment Advice: GO for the MBA. BizEd, 6(1), 36- 40.
Heitner, K. L., & Miller, L. A. (2011). The great divide: Worker and employer perspectives of current and future workforce demands. Phoenix, AZ: University of Phoenix Research Institute.
Carmichael,T. T., & Sutherland, M. M. (2005). A holistic framework for the perceived return on investment in an MBA. South African Journal of Business Management, 36(2), 57-70.
Hollenshead, C., & Wilt, J. (2000). Women and the M.B.A.: Gateway to opportunity. New York, NY: Catalyst, Center for the Education of Women at the University of Michigan, and University of Michigan Business School.
Bertrand, M., Goldin, C., & Katz, L. F. (2009). Dynamics of the gender gap for young professionals in the corporate and financial sectors. Cambridge, MA: National Bureau of Economic Research.
Dr. Tracey Wilen-Daugenti, Vice President and Managing Director of the University of Phoenix Research Institute, has published eight books and numerous articles on international business, higher education and technology. She speaks globally on the future of education, work and society.