MBA Employment: A Whopping 95% In U.S.
http://poetsandquants.com/2013/11/18/mba-employment-a-whopping-95/
Employment Status by graduation year and program type — Source: Graduate Management Admission Council
The fastest growing segment in graduate business education has been the short-cut degree: an accelerated one-year MBA or the one-year Master’s of Management for students with little work experience. It’s not hard to see why. The costs of such business training is slashed to half of the traditional two-year MBA, requiring students to borrow less money and stay out of the workforce for much less time.
But the Graduate Management Admission Council today (Nov. 18) released data that shows there is a price to pay for taking a short cut. This year’s graduating class of Master’s in Management degrees saw their employment rate fall to 76% as of September of this year, the lowest level in five years, down from 84% in 2012. Graduates of one-year MBA programs this year, meantime, saw their employment rate decline to 82% from 89% last year.
And the somewhat out-of-favor traditional two-year MBA grad? Overall, the employment rate for those MBAs hit 92%, up from 90% last year and 85% in 2009. It would have been even higher if not for some sluggishness in Europe where 18% of graduating MBAs were unemployed in September. For U.S. citizens who graduated from two-year MBA programs, moreover, the employment rate was a whopping 95%, the highest level in the past five years and up from 91% last year (see chart below). The job rates are a dramatic contrast to what has occurred in law where the employment rate has fallen for five years in a row since 2008. Even nine months after graduation from law school, the Class of 2012 had an employment rate of only 84.7%, according to the National Association for Legal Professionals.
Employment rate among U.S. citizens in the Class of 2013 — Source: Graduate Management Admission Council
So much for the naysayers of the traditional MBA. Yet, most observers agree demand has flattened in recent years for the two-year MBA, partly because of the vast growth in institutions worldwide now offering the degree. The picture was less bright for non-U.S. citizens graduating from two-year MBA programs in the U.S. Their employment rate in September was 83%, up from 76% in 2009. Typically, foreign students require special work permits and visas and are less likely to have job offers before graduation than domestic students.
The new GMAC report—based on responses from 915 members of the Class of 2013 from 129 business schools around the world—continues to also show widespread satisfaction with graduate business education. GMAC said that 96% of the responding Class of 2013 rate the value of their degree as outstanding, excellent, or good, and the same percentage of the class would recommend a graduate management education to others. Three of every four members of the class say they could not have obtained their job without their graduate business education, according to the GMAC survey.
The median starting annual salaries offered to U.S. citizens who graduated from a full-time, two-year MBA this year was $90,000, with a bonus and additional comp of $10,000. That’s up from a median base of $86,700 last year. Of course, these numbers are for U.S. graduates of a wider sample of business schools. Stanford Graduate School of Business recently reported that its Class of 2013 MBAs earned median salaries of $125,000–$35,000 more than the GMAC number—with median signing bonuses of $25,000 and median guaranteed bonuses of $30,000. Kenan-Flagler Business School at the University of North Carolina said its Class of 2013 MBAs had median pay of $100,000, with $25,000 signing bonuses and $17,000 guaranteed bonuses.
Compensation, of course, varies greatly by geography, school, program, industry and work experience. U.S. citizens who graduated from part-time MBA programs reported median annual salary of $85,000, GMAC found. Citizens of India who graduated from full-time, two-year MBA programs reported a median starting salary of just $34,988. Europeans graduating from full-time, one-year MBA programs reported the highest median starting salaries in the GMAC sample: $101,093.
And what about the small percentage of grads who are unemployed, most of them either outside the U.S. or with one-year graduate degrees? According to GMAC, the primary reason they haven’t yet connected is due to “lack of relevant industry or functional experience, inability to find a job that pays enough, and inability to find an interesting job.” Two out of five job seekers are looking for entry-level positions, while two-thirds are seeking mid-level employment. Less than a third are targeting senior positions, while 13% were looking or executive-level jobs.
GMAC says the survey is based on a 19% response rate, which is fairly consistent with previous polls. It does not calculate a margin of error for the poll which asks graduates if they are employed in September, which can be between three or four months after graduation depending on when commencement was held. Employment includes MBAs who are self-employed, but not those who are no longer looking for a job.
GMAC found that the three most common industries of employment for the class of 2013 alumni—products and services, finance and accounting, and consulting—remain consistent with prior years. By function, positions in finance and accounting, consulting, and marketing and sales continue to be most popular for the class of 2013 (see below).
Industry & function of employment for the Class of 2013 — Source: Graduate Management Admission Council
GMAC found that globally, interest in the technology industry has grown in the last five years, from 12 percent in 2009 to 15 percent in 2013.
A majority of the class of 2013 (61%) job holders work in mid-level positions, while 14 percent hold entry-level positions, 20 percent are in senior-level positions, and 6 percent have executive-level status in their organizations. Job levels do vary by program type, however, possibly reflective of alumni levels of pre-degree work experience: Half (50%) of non-MBA business master’s graduates hold entry-level positions. Seventy-one percent (71%) of full-time two-year MBAs and 62 percent of full-time one-year MBAs hold mid-level positions. The majority of alumni in senior-level (60%) and executive (76%) positions graduated from professional MBA programs.
GMAC said that nearly two in five alumni (39%) have supervisory roles with direct report staff. A third (33%) of alumni in mid-level jobs, 66 percent of alumni at the senior-level, and 84 percent of executives hold supervisory positions. Only eight percent of alumni in entry-level positions are supervisors. Mid-level supervisors indicated a median number of 4 direct reports, senior level supervisors indicated 5 direct reports, and executive supervisors indicated 15 direct reports.
Jobs created by self-employed MBAs in the Class of 2013 — Source: Graduate Management Admission Council
The council also gathered information on graduates who went the startup route. GMAC said that only five percent of the responding MBAs said they are self-employed or entrepreneurs. Self-employed alumni operate a variety of business types, including sole proprietorships (29% of respondents), partnerships (31%), and LLC or S-corporations (27%). A majority of self-employed alumni (69%) have employees and/or expect to hire employees in the next 12 months.
GMAC said that more than one-third (38%) of self-employed alumni classify the scope of their business as multinational, followed by national (22% of respondents), with 69% regional and local equally sharing the remaining 40 percent (20% each). The three most common industries for class of 2013 alumni entrepreneurs are consulting (27%), technology (23%), and products and services (23%). Globally, Class of 2013 entrepreneurs reported median annual business revenue of just $128,569. Of course, this is as of September–only a few months after graduation.
Nine out of 10 (91%) entrepreneurs in the Class of 2013 are satisfied with the experience of being self-employed, and 87 percent reported that their education provided them with the essential knowledge, skills, and abilities to develop their business.
Only two weeks ago, an IE Business School alum came out with a book entitled The MBA Bubble in which she claimed the degree is overhyped and overvalued. This latest survey by GMAC, which admittedly is a pro-MBA organization, shows that is hardly the case. GMAC said that “regardless of employment status, the vast majority of the Class of 2013 agreed their education developed their skills, expanded their network, and prepared them for the job market.
Outcomes related to business education for the Class of 2013 — Source: Graduate Management Admission Council
“Development of qualitative skills, preparation for leadership positions, and advanced quantitative skills were the top educational outcomes employed alumni cited,” GMAC said. “Key educational outcomes that self-employed alumni reported include development of qualitative skills, learning to work in an international business environment, and increased earning power. Alumni who are still seeking employment agreed their management education helped them develop their qualitative and quantitative skills and prepared them for leadership positions.”
Bottom line: The vast majority of the Class of 2013 (96%) would recommend their program, regardless of employment status, program type attended, or citizenship. Retrospectively, more than nine in 10 (92%) alumni reported they would still have pursued their degree knowing what they know now.
Clearly, the reports of the MBA’s diminishing value have been greatly exaggerated.
Percentage of surveyed business graduates who recommend the degree — Source: Graduate Management Admission Council