Is an MBA worth it? A look into the finances –– and outcomes
The master of business administration (MBA) has become one of the most popular and prestigious graduate degrees. Harvard established the first modern MBA program over 100 years ago. Other universities soon followed, offering their own graduate-level business programs.
Then and now, most MBA programs take two years to complete. However, this timeline varies depending on the program and other factors, such as if you choose to study online or in-person, or full time or part-time.
You'll need a bachelor's degree to enter most graduate-level programs. To earn an MBA, most –– but not all –– schools require students to take either the Graduate Record Examination (GRE) or the Graduate Management Admission Test (GMAT).
The academic curriculum for an MBA usually includes courses in accounting, marketing, organizational behavior, leadership, and business ethics.
Business schools also sometimes require students to have 2-3 years of work experience. Applicants must submit a resume, letters of recommendation, and a personal statement.
Why do people choose this degree?
Individuals pursue MBAs to unlock career opportunities and increase their earning potential.
John Marsh, an associate professor and associate dean for faculty at the College of Business at the University of Mary Washington, said some people choose to pursue an MBA earlier in their careers "because they expect that eventually, they will need it and that classes will be easier to manage when they are younger." Some people find that an MBA puts them in a better position for career advancement.
"Others pursue it because it will help them stand out from other applicants," Marsh continued. "So yes, in some fashion, earnings potential is certainly a major consideration for most people pursuing an MBA."
Joe Handy, president and CEO of the National Black MBA Association, echoed that sentiment. The organization has 41 local chapters nationwide and more than 20,000 members.
"With an MBA, the opportunities are endless," Handy said. "For many MBA students, earning potential is a top consideration. Having an MBA can enhance a professional's marketability and increase the quality of job opportunities. An MBA also helps professionals fine-tune their business skills. These skills can help professionals with MBAs climb the ladder quicker and obtain high-ranking and higher-paying jobs."
Beyond developing new skills and positioning themselves for advancement, some students view business school as an opportunity for self-discovery, setting the stage for them "to figure out what they're interested in doing next," said Jeff Tang, senior director of the Career Development Center at the University of Virginia's Darden School of Business.
"An MBA is a Swiss-army knife tool that solves a number of issues for people, and I think that's why it remains so popular," said Tang. "Obviously, earning potential is a top consideration –– the return on investment has to justify the cost of an elite MBA experience, but any ROI covenant is different for each person. … In this big soup of considerations, earning potential is just one small part of the equation," said Tang, who is also a Darden graduate.
What's the financial return on investment for an MBA?
In one word: Huge, according to one recent analysis of the potential financial ROI for an MBA. Business education publication Poets & Quants partnered with PayScale to provide a numbers-based answer to this question.
Their analysis found that MBA graduates from America's top 50 business schools will earn "median cash compensation of $5.7 million after graduating and working for 35 years." That's $2.3 million more in earnings for people who hold only a bachelor's degree. The bottom line, according to P&Q? "Despite the high costs of the degree, the long-term returns on the education are not in dispute."
Business schools also use data to validate their assertions that people with MBAs have more career opportunities and earning potential. For example, the Wharton School of Business at the University of Pennsylvania said 93.5% of its students seeking full-time employment in 2020 received job offers. The starting salary for those jobs ranged between $130,000 and $165,000.
Is an MBA worth it?
The pandemic and the Great Resignation affected interest in MBA degrees. Nearly 3% of the American workforce quit their jobs in August –– a record number of people. Many factors led people to leave their jobs.
But deciding if an MBA is worth it –– beyond the potential boost in your pay –– is a subjective decision in most cases. After nearly two years of work-related, physical, and mental stress, Marsh, at Mary Washington, said some students likely see the pandemic as a carpe diem moment for their careers.
"During the pandemic, there was an uptick in people looking to go back to school," Marsh said. "If you were stuck at home in quarantine, there weren't a whole lot of other things to do. So many people took courses online. If getting an MBA had been in the back of your mind for a while, the pandemic was as good of a time as any."
Tang, at UVA, said the pandemic and this summer's wave of resignations have "had a huge impact" on interest in MBAs. Each person's personal circumstances, he said, "can send potential students either way –– towards or away from an MBA."
"On the one hand," he continued, "the Great Resignation and the current hiring climate have given many the feeling that the grass may indeed be greener on the other side, and that now is the time to get that MBA and make that change. On the other hand, companies are throwing more incentives at great talent to keep them around (or attract new talent), so folks may be lured away from MBA by great working opportunities."
Data supports that assertion. After a surge of interest in MBA programs in 2020, the number of applicants to some of the most prestigious business schools in the US declined in 2021, according to the Wall Street Journal.
In short, Tang said, "I think the pandemic unleashed a spur of 'I'll take whatever I can get' mentality, which led to a counter effect of the Great Resignation, with students now feeling a little more selective about what they want to do with their careers."
Now, with the worst of the pandemic-driven workforce cuts seemingly over, "the job market is opening back up and the workforce is becoming more competitive," Handy said. "Having an MBA allows potential employees to stand out among the rest."
At the same time, Handy continued, "although the pandemic and the 'mass resignation' created more opportunities for innovation and creativity, the increase in job losses have made it harder for graduate students and professionals to pursue an MBA. As a result, schools had to adjust as well." Those adjustments include offering more online programs and making changes that accommodate students' needs in the pandemic era.
MBA careers that pay you back
An MBA degree opens doors to dozens of growing and high-paying career opportunities. An MBA can even position you for an executive or organizational leadership role.
"An MBA can be valuable in almost any field," said Marsh. "There are doctors that find an MBA helpful when trying to open their own practice. Small business owners use it to brush up on their knowledge outside of their own business. At the University of Mary Washington, we see very strong demand in IT fields, among systems administrators looking to advance to management roles, and among government contractors, where pay is sometimes linked directly to post-graduate degrees."
Thinking about a career in business? Our guide to high-paying business careers can help you explore your options and find the right role for you, or you can explore our top-ranked online MBA programs.
This article was reviewed by Krystal Covington, MBA
Krystal Covington, MBA, is a business growth strategist with 15 years of experience in marketing and public relations. Her company, Go Lead Consulting, provides clients foundational tools to build new client and customer relationships.
Covington founded Women of Denver, one of the largest privately held membership organizations in Denver, Colorado. Her program helps women increase their business acumen, sharpen leadership skills and connect with other high-achieving women. Covington received her MBA from Western Governors University in 2012.
Krystal Covington is a paid member of the Red Ventures Education freelance review network.