While answering the question “how much is an MBA worth” this question, most MBA applicants only consider the starting salary, and starting salary benefits (bonuses, options, stock, etc.) which might not be the correct way to do this calculation. The real MBA ROI is the impact of an MBA on one’s lifetime earnings.
A recent analysis by PayScale, which collects salary data from individuals through online pay comparison tools shows that MBA graduates from the top 50 business schools in the U.S. will pull down a median cash compensation of approximately $5.7 million after graduating and working for 35 years.
This is a premium of 40% or $2.3 million over those with just an undergraduate degree.
Interestingly, if you have done an MBA from any one of these top 5 MBA Programs: Harvard Business School, Stanford Graduate School of Business, Berkeley Haas, Dartmouth Tuck, or University of Virginia Darden your estimated median pay would surpass $8 million over a 35-year period which is nearly 60% higher than those with just an undergraduate degree. Because the average age of a Harvard Business School graduate is 29, that 35-year timeframe brings a person within a year of retirement age at 65. And these numbers are on the conservative side. Most of these figures do not include stock-based compensation of any kind, non-cash benefits, etc. The estimates developed by Payscale are for base salary, cash bonuses, and profit-sharing in today’s dollars value over both a 35-year and 20-year period. They are not a projection of future earnings. But the estimates show that the MBA degree–despite all the second-guessing over its value–is one of the surest paths to a lucrative and well-paid career.
The highly ranked, prestigious branded schools tend to deliver the highest earnings over 20 years. Harvard Business School’s MBAs come out on top, with a median lifetime income of $8,500,000. Stanford MBA holders are next with $8,330,000, just $170K less than the school’s East Coast rival. But in what may surprise many, the University of Pennsylvania’s Wharton School isn’t third. Instead, riding the tech boom in the Bay Area, MBAs from UC-Berkeley’s Haas School of Business capture third place with $8,250,000, followed by Dartmouth College’s Tuck School of Business, with a lifetime pay of $8,240,000, and Virginia’s Darden School of Business, with $8,200,000. Wharton MBA graduates finished ninth, with $7,440,000 in total income over the 35 years, behind MIT Sloan, Northwestern Kellogg, and Cornell University’s Johnson Graduate School of Management.
In 2014, only MBAs from two business schools–Harvard and Stanford–had exceeded a $3 million threshold over the 20-year timeframe. This latest number-crunching has MBAs from 15 schools at or above the $3 million mark over that same 20-year span. The increase is less a result of inflation over the past seven years than the escalating starting pay for MBA graduates. At Dartmouth’s Tuck School, for example, 20-year median pay is now estimated to be $3,660,000, up more than $950,000 from the $2,703,000 back in 2014.
Ultimately, the Payscale report provides evidence that brand matters. After all, applicants can see these disparities from the very start at graduation. MBAs from the more highly ranked schools typically pull down larger pay packages to start their post-MBA jobs than those from schools that are ranked further down or not ranked at all.
THE CASH VALUE OF AN MBA DEGREE ON YOUR PAYCHECK
||Lifetime Median Cash Pay
||20-Year Median Cash Pay
||Early Career Median Pay
|Top 3 MBA Degrees
|Top 10 MBA Degrees
|Top 50 MBA Degrees
|All MBA Degrees
|All Bachelor’s Degrees
Industry choice and geography obviously play a huge role in how much a person can make. Nevertheless, it is evident that an MBA from any of the top five schools should allow a graduate to earn about $5 million more over a post-MBA lifetime than the averages for all professional degrees. That is a handsome return on one’s investment.
The bottom line: Despite the high costs of the degree, the long-term returns on an MBA education are not in dispute.