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The on the R O I MB A Some critics claim a master's degree in business has little job-market value. But crunching the numbers reveals substantial long-term benefits to graduates with an MBA. T by Antony Davies and Thomas W. Cline illustration by Lou Beach 42 he darling degree of the 1990s was the MBA, which has been described as the ultimate business credential. Yet the debate regarding the value of the MBA has never been more con- tentious. Some critics argue that the luster of the degree has been tarnished by an oversupply of MBAs, excessive tuition at top-20 schools, an uncertain economy, and corporate misconduct. Others use anecdotal evidence to declare that an MBA has very little effect on a graduate's subsequent salary or career. However, a macroeconomic analysis of the value of an MBA earned in the U.S. proves these critics wrong. This analysis doesn't compare MBAs to high-powered groups working as con- sultants, or to CEOs without professional educations. Instead, it simply attempts to show whether or not average, plain-vanilla MBAs can expect to fare better or worse than average college graduates over the entire course of their careers. Deconstructing the Benefits Four economic benefits are linked to obtaining an MBA degree: a higher starting salary, greater compensation growth, more stable long-term employment, and a higher likelihood of participating in the workforce. Starting salaries. In 2002, the median full-time MBA student earned $50,000 before obtaining an MBA, according to The Graduate Management Admission Council's "The 2003 Global MBA Graduate Study." Immediately after completing the MBA program, that same student expected to earn $75,000, excluding signing bonus. Compensation growth. Since 1993, the expected annual wage growth for workers with professional degrees, including MBAs, has exceeded inflation by more than two percent. Those figures are provided by the Statistical Abstracts of the United States for the years between 1995 and 2003, which covers aver- age annual wages for those with BS, BA, and professional degrees. BizEd JANUARY/FEBRUARY 2005