If you work in the business field, the MBA degree can be the gold standard in both position and compensation. But on the flipside, an MBA is not an inexpensive degree to obtain. You can easily spend six figures getting the degree, and that’s on top of a similar cost to obtain your undergraduate degree.
Is an MBA worth having? The better question is; how much is an MBA worth?
There’s no simple answer to that question. There is something of a rule of thumb on the cost to acquire the degree. You take the cost of getting the MBA, and then divide it by the increase in salary that the MBA produces. If your degree costs $100,000, but results in a salary increase of $25,000 per year, you will recover the cost of obtaining the degree in four years.
But the only way to know that is to know how much the program costs, and how much you can expect to earn as a result.
The cost of an MBA
The website MBAPrograms.org reports that the average cost of tuition at a two-year MBA program ranges between $50,000 and $80,000. Other sources report much higher fees at top MBA schools (see below).
The actual calculation for the cost of an MBA is complicated, even more so than an undergraduate degree. In addition to tuition, there’s also the cost of room and board near the school. There are also the usual higher education related expenses, such as books, fees, and the cost of a specialized computer, if necessary.
But an even bigger expense is the opportunity cost. Since MBA students often come out of the workforce, and enroll in the programs in order to advance their careers, there is the lost income from the job that has been vacated.
If you are earning $50,000 per year on your job before enrolling in an MBA program, the two-year opportunity cost will be $100,000. That’s on top of all the other direct expenses related to the degree.
As well, the tuition itself varies dramatically, between in-state public institutions and highly ranked private universities.
The answer to the how much does it cost to obtain an MBA question has no simple answer. The actual answer is, it depends – on all of the factors above.
In doing some detailed research, it turns out that there is no average salary for MBA graduates. At least not in the sense that you might think of an accountant, an engineer, a nurse or a teacher.
Virtually all career fields have wide variations in average salaries. But those variations seem to be more pronounced in the case of MBA related careers.
A newly graduated MBA out of a state college program, living in a small city in a rural state might earn $50,000 per year. But a graduate of the top program, with several years of experience, and living in New York City or San Francisco, might earn $300,000.
Salary depends on the occupational specialization
A survey by US News reported that the average salary for an MBA graduate is about $90,000, five years after graduating. But they’ve also indicated that there is a wide variation in MBA salaries, based on the industry that the MBA is employed in.
Salaries for 2016, five years after graduating from MBA programs, look like this:
- Consulting, $126,919
- Financial services, $116,395
- Technology, $110,538
- Energy, $106,965
- Healthcare, $102,296
- Retail, $101,171
- Consumer packed goods, $97,968
- Real estate, $96,809
- Manufacturing, $93,102
- Media and entertainment, $92,828
- Other, $83,026
The job website, Monster.com provides average mid career (10 years’ experience ) salaries for specific MBA occupations:
- Finance, $121,000
- International business, $116,000
- Marketing, $113,000
- Information systems, $106,000
- Technology management, $102,000
- Business management, $96,900
- Accounting, $84,000
It also depends on the school you graduate from
According to the Forbes 2017 List of America’s Best Business Schools, salaries for graduates of the top five business schools in the country (five years after graduation) are as follows:
- Wharton, University of Pennsylvania, $225,000
- Stanford University, $215,000
- Harvard, $212,000
- Haas, UC-Berkeley, $212,000
- Columbia, $203,000
Further down the list, average salaries for graduates of Michigan State (Broad) come in at $117,000, Alabama (Manderson) $96,000, and Missouri (Trulaske) $84,000.
The survey also noted that the average tuition at the top 25 MBA programs is $119,000, though it can exceed $150,000 at the very top schools.
And also on geography
Information compiled by Payscale.com shows a wide variation in MBA salaries from one state to another. Here is a sampling of states they provide:
- California, $100,652
- Texas, $83,863
- New York, $91,824
- Florida, $74,357
- Illinois, $87,835
- Ohio, $77,811
- Massachusetts, $94,994
Just looking at that list of seven states shows a wide disparity in average salaries. For example, the salary gap between MBA salaries in Florida is more than $26,000 below California.
Unfortunately, gender is also an issue with MBA compensation. The same data by Payscale.com shows that the average male MBA earns between $52,803 and $123,678. The average woman earns between $45,046 and $99,311.
Is an MBA worth getting?
The general answer seems to be yes. But much depends upon the cost of the degree, in contrast to the expected compensation as a result.
That of course will be determined by a combination of factors, including the school that you graduate from, the occupational specialization, where you will live and work after obtaining the degree, and even, unfortunately, your gender.