Posted by fmba
on Jun 15, 2011 in Value of an MBA
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New research into long-term MBA pay suggests you get what you pay for. Top schools like Harvard, Wharton, and Stanford leave the rest of the pack in the dust
News flash: Grads from the top MBA programs make more money over the course of their careers than peers from lower-ranked B-schools. That's not much of a surprise, considering MBAs from programs like Harvard, Wharton, and Stanford command the highest salaries"$126,000, on average"upon earning the business credential. But what is surprising is how much more grads from these highly ranked programs will make over a 20-year career compared with grads from lesser-ranked programs. According to new research commissioned by Bloomberg Businessweek, the difference is more than $1 million.
Executive compensation expert Ken Hugessen isn't shocked at the disparity in MBA earnings. "The differences in salary at the beginning are hugely predictive of the 20-year accumulation," he says. "If you're at a top school, you must be pretty smart to get in. You're a stronger breed of cat from day one. That will follow you throughout your career."
For the third year, Bloomberg Businessweek asked PayScale, a company that collects salary data from individuals through online pay comparison tools, to use its database of MBA graduates at the top U.S. business schools to calculate their median cash compensation"salaries and bonuses"around graduation and after they have an average of 5, 10, 15, and 20 years of pre- and post-MBA work experience in the same industry. We then used those data to calculate an estimate of median cash earnings over the entire 20-year span.
Overall, grads from the 57 top programs earned an estimated $2.4 million in base pay and bonuses over the course of a 20-year career, according to the data. On the high end is Harvard Business School (Harvard Full-Time MBA Profile), where grads earned about $3.6 million.On the low end is the University at Buffalo (Buffalo Full-Time MBA Profile), where grads earned about $1.7 million.
After Harvard, grads from the University of Pennsylvania's Wharton School (Wharton Full-Time MBA Profile) earned the most, with total cash pay of $3,340,334, followed by Stanford's Graduate School of Business (Stanford Full-Time MBA Profile) at $3,291,894.Of the 10 schools that boast the highest 20-year payoffs, eight are ranked in the top 10 of Bloomberg Businessweek's Best Business Schools ranking.
But not all of the elite programs fare so well.
MBA grads from the top-ranked Booth School of Business (Booth Full-Time MBA Profile) at the University of Chicago, made an estimated $2.9 million, on average, over a 20-year career, good for only ninth position overall. Julie Morton, associate dean of career services at Booth, says a lot of the difference has to do with the industry that students go into, specifically consulting. More grads at other top schools take consulting jobs than at Booth, where finance jobs are more popular, and that, she says, explains a lot. "Straight out of the gate, consulting firms' bases are about $15,000 higher than banking base salaries," Morton says. "From that perspective, a school like Harvard is going to have a higher base because they send more people into consulting than they do banks."