Specialized education threatens the very existence of MBA programs.
With ten years having passed after the global economic recession, the recovery isn’t all we expected it to be. The economies of America and Europe have just begun stabilizing. This is why nowadays even a 2% economic growth is a reason to rejoice.
It’s cheaper to hire non-MBAs
The luckiest industries of today are those that can raise their prices instead of dropping them. This model of pricing has been used by universities providing MBA programs throughout the past decade. Tuition fees for these programs have been growing by 5% annually – it’s twice as much as dollar inflation, Financial Times reports.
According to Financial Times rankings, the average business school tuition fee is as large as $112,000 nowadays – not including food and rent. At the same time, salaries obtained by MBA graduates have been growing at a much smaller rate – only 2% a year. Of course, overpricing abstract products like education, consulting and advising is much easier. For most people, the cheaper education is, the less useful it will be after graduation.
However, in spite of the fact that most universities have gone out of their way to establish a business school on their campuses, the MBA industry is not feeling that good right now. The number of US schools with increases in applications is getting smaller with every year. Of course, this is partly due to the fact that many people don’t want to leave their jobs to get an education. Still, it doesn’t account for the flatness of application growth. Since 2010, the application rates have been at a standstill, and this year, they have dropped a little.
This situation has forced many universities to terminate their MBA programs and give more power to specialized degrees instead. Most students, who come to master’s programs straight from college, choose to become a master of finance or management.
Fresh talent is not found at business schools
Employers and consultants agree that modern businesses are looking for fresh and malleable talent, not for people with degrees. Additionally, hiring non-MBAs saves both the recruit’s and the company’s money: one-year specialized programs cost less while employers don’t have to cough up the ridiculously high starting salary for an MBA degree holder. This is confirmed by the growing number of applications to one-year programs.
Clayton Christensen, author of The Innovator’s Dilemma, mused in his book about the reasons for employers wanting more specialized and less overqualified recruits. According to him, business schools rely too much on the MBA’s non-educational part, namely its ‘golden pass’ status and networking that come with it. Of course, upper-end schools like Harvard or Stanford don’t have to worry for a while – their graduates are top entrepreneurs with the best connections in the world. Still, 12 million people apply to business schools annually. Will it be the best option for their future careers? Probably not.
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