The MBA degree has traditionally provided a lucrative return on investment for managers but the salary boost a business education provides is now on the wane.
Despite stronger economic growth in the US and some parts of Europe, the average boost to earnings from an MBA has fallen by nearly a third from the pre-crisis peak.
Average income earned in salary has dropped particularly hard in the US, despite the country maintaining the largest collection of high-ranking business schools globally this year.
According to data compiled by the Financial Times for its 2015 MBA rankings, those who graduated with a full-time MBA in 2011 earned an average 92% more than they did prior to starting their degrees. But in 2002 and 2003, the increase was 153%. Even in 2012, an MBA provided an average 110% increase in pre-enrolment salary.
In 2003, when the MBA was in vogue, graduates from 82% of ranked business schools increased their salaries by more than 120% over four or five years. Yet this year, only 7% of MBA alumni achieved the same boost to earnings.
The degree has faced many challenges since then. Managers are now more reluctant to give up their careers and take the financial hit of lost earnings and tuition fees. The rise of flexible and online learning has compounded the MBA degree’s problem.
Specialized masters programs, in fields such as data analytics and entrepreneurship, are also gaining ground at business schools, while professional qualifications in financial services remain popular.
Recruiters are increasingly hiring more people from pre-experience masters programs, and banks are looking to undergraduates, who will command lesser salaries.
The diminishing returns may be partly the result of more women graduating from MBA programs, and a decrease in the number of graduates moving into financial services, which typically pay high salaries.
A decade ago, 23% of respondents to the FT survey, used to compile its MBA rankings, were women; today 26% are female. According to 2015 data, women report an average salary of $120,000, compared to $138,000 for men.
Salaries paid out in the financial sector in 2015 show respondents from the top 100 business schools earned $133,000 in average salary, but those in the financial services industry earned $152,000. Nearly 30% of the FT sample worked in finance and banking ten years ago; today just 25% do.
But there are exceptions. The top three business schools in the US – Harvard, Stanford and Wharton – produce MBA graduates netting more than $170,000 in average yearly salary.
The Indian Institute of Management in Ahmedabad graduates MBAs into jobs paying $167,676 in average salary.
MBA graduates of INSEAD, a global business school which has campuses in France, Singapore and Abu Dubai, are earning about $155,000 in salary, on average.
However, some of the business schools ranked by the FT enrol MBA candidates who already command impressive earnings. As a result the institutions that provide the largest increases in salary are generally lower-ranking overall.
Shanghai Jiao Tong University, Antai MBA graduates increase their yearly salaries by an average of 160%, according to the rankings data, the highest worldwide.
It is Asian business schools, from countries including Singapore and India, and European universities that provide the greatest salary increases, measured in percentage.
This includes ESADE Business School in Barcelona, whose MBA graduates increased their salaries by 117%.