Brand has real value in the business school world. If you go to a top ten business school, chances are you’ll outearn MBAs from lower-ranked schools when you graduate but also throughout your career.
That’s the conclusion from the latest study of career pay by Payscale, a data-crunching compensation firm. The numbers were published earlier this week on June 12 byBloomberg Businessweek which concluded that the short- and long-term value of the MBA degree closely correlates to rank.
Of the 10 schools with the highest career pay, eight are top-10 schools in BusinessWeek’s latest ranking, while all but five of the 30 schools with the highest career pay are among the top 30 schools. Only MBAs from eight schools–all ranked within the top ten on some if not all major rankings–earned more than $3 million in cash and bonus during their professional careers, according to the data.
Harvard MBAs make $3.6 million in salary & bonus over a career
Not surprisingly, Harvard Business School assumed the top spot in the ranking, with 20-year pay of $3,639,643, followed by the University of Pennsylvania’s Wharton School at $3,460,707 and Stanford Graduate School of Business at $3,432,013 (see table below).
These numbers, especially for the big brand schools, are highly conservative estimates. Payscale, for example, concluded that Harvard MBAs are making $136,000 five years after graduation. The latest number published by Harvard’s career management office show the median base salary alone last year was $120,000, with nearly seven of every ten graduates earning a median signing bonus of $20,000 and nearly one in five earning guaranteed year-end bonuses of $35,000.
The upshot: the median salary and bonus for Harvard MBAs in year one last year was close to $140,000, not including the year-end bonuses. That’s already $6,000 more than Payscale is reporting for Harvard MBAs five years after graduation.
The reason for the discrepancy has to do with the way Payscale calculates its estimates. The pay reports the firm uses are “for groups of people who graduated from the same school at various times, not for one group of people who reported their pay throughout their careers.” The estimates, moreover, do not include the value of stock or stock options or the value of tuition reimbursement, which can make up a big chunk of MBA pay in the short- and the long-term.
It’s also possible that the most highly compensation alums are less likely to report their income to Payscale which makes these estimates based on what it says is a database of 100,000 MBA graduates.
Career choice and geography are big factors in career pay
Obviously, career choice and geography also weigh heavily in these estimates. A Harvard MBA who gained a job in hedge funds last year earned median base salary of $150,000 to start, with 23% of them reporting other guaranteed compensation of $150,000 in year one. On the other hand, Harvard MBAs who took jobs with the government or with a non-profit organization last year earned median base salary of $90,000, with no upside bonus.
Graduates of the 10 programs with the highest earnings took home nearly $3.2 million apiece, or $159,122 a year, an increase of 3.6% from a year earlier. The remaining 47 schools averaged $2.3 million, or $114,724 a year, virtually no change from last year.
“The effects of the Great Recession on the labor market for MBAs can still be felt today, a full three years after the official end of the recession,” Katie Bardaro, analytics manager at PayScale, told BusinessWeek. “The only MBAs who appear to be escaping these stagnant wages are graduates from top-ranked programs.”
Schools with the lowest starting salaries typically had the biggest increases. Payscale said MBAs from the University of Georgia’s Terry College of Business showed the biggest gain—a whopping 174%, to $139,000 at the 20-year mark. MIT’s Sloan School MBAs had the smallest, at 4%, to $169,000.
Why MIT had the smallest increase: a data problem
“The MIT numbers highlight one of the study’s inherent limitations,” BusinessWeek acknowledged. “Pay data for smaller schools such as MIT may be based on fewer than 50 reports and may not accurately reflect pay for the entire class.”
