One of the earliest examples of badmouthing the MBA degree happened more than thirty years ago, in 1985, when James Fallows wrote an essay condemning the MBA’s growing popularity among students.
Fallows argued that the MBA culture makes people thinks their achievements in education and professional life will equal their wellbeing in reality, Poets&Quants reports.
Nowadays, not much has changed: the MBA degree’s popularity has grown even more, while the critics are more vocal than ever. Still, Fallows actually had a point in his essay: the worth of an MBA degree can be found using its ‘value-added ratio’, meaning the amount of value an MBA adds to your salary in comparison with the cost of tuition fees and living while getting the education.
In his essay back in 1985, Fallows mentioned that business schools follow the ratio: for instance, tuition at Dartmouth Tuck School was $11,000 a year, while the alumni’s starting salary was somewhere near $43,000. The school managed to keep the four-to-one ratio for many years - no less than twenty. The same ratio was found at Harvard (in 1969, it was even seven-to-one).
Past 20 Years Have Seen the Ratio Tumble Down
So, what has changed in 33 years? Tuition fees have grown significantly, while the salary rises have not been so consistent. Consequently, the Fallows ratio has become lower and lower: the same Dartmouth Tuck School reported a 198% increase in its graduates’ starting salaries, which now average at $127,986.
What about the tuition fees? At Dartmouth Tuck, for instance, they have grown by a shocking 526%, equalling $68,910. Hence, the Fallows ratio has gone down from 4:1 to 1.86:1 in 33 years.
Maybe, the problem lies with Tuck alone? Not an option: at Harvard, the ratio has also plummeted to 1.8 - much less than the 4 in 1985 and the glorious 7 in 1969. For Stanford, the problem is the same, although its ratio is at 2.09, still twice as little as in 1985.
The best ‘value added ratios’ are held by 4 public universities, University of Washington’s Foster School of Business (2.52), University of Texas’ McCombs School of Business (2.25), Indiana University’s Kelley School of Business (2.14) and Berkeley Haas School of Business (2.10).
Top MBA Programs All Increased Their Tuition in the Last Years
Thanks to the constant rises of tuition cost, MBA programs stopped being the most paraded ones in business schools. While top schools like Harvard of Stanford can still afford having enormous price tags while staying popular, less prestigious programs are trying to save themselves by finding alternatives to full-time MBA programs, like part-time and online MBA.
The main reason for the value added ratio to tumble down is the overall financial situation in the world: after several recessions, companies cannot afford to increase managers’ salaries at the same rate business schools raise their tuition fees.
The nest reason for this is the problem of supply and demand. Back in 1985, when Fallows’ paper was just written, the annual number of MBA graduates was no more than 67,000. Nowadays, the USA alone graduates about 200,000 students with master’s degrees in business administration.
Anyway, it’s a bit difficult to find the exact value-added ratio, as the MBA tuition price is usually bigger than the real cost: many business schools are giving our scholarships and fellowships to give students tuition discounts. For instance, at Harvard, almost 50% of MBA students receive some sort of compensation. If we take scholarships into account, then the value added ratio is not so dramatically low - it’s somewhere at 3.7, which isn’t much worse than the 1985 one.
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