The MBA Salary Gap

Nunzio Quacquarelli, founder of the global career and education network QS Quacquarelli Symonds Ltd, recently examined the growing MBA salary gap in an article on topMBA.com. A 2007 International Recruitment Survey and Salary Report polled 489 international MBA employers and reveals that MBA salaries across most major industry sectors and geographies have increased more rapidly than salaries for non-MBAs with four years of work experience.

And if you needed any more convincing that an MBA is right for you, the report confirms that the MBA is the highest paid postgraduate qualification worldwide. According to the article, the highest average MBA salary of any sector (EU and North America) is US$99,154, in consulting/professional services, whereas a candidate with four years of consulting experience without an MBA earns an average salary of US$72,129, or US$77,415 with a PhD. These salaries look unlikely to slacken off, Quacquarelli predicts, given the forecasted increases in demand for MBAs by consultants over the next few years.

The survey results show that, on average, an MBA joining a bank will earn US$93,515, compared to US$66,231 for a candidate with four years of banking experience but no MBA. And while banks and consulting firms compete for the same talent, banks may have the edge in MBA recruitments because of the larger bonuses they pay, (investment banks in particular), which provide the greatest compensation for the first year out of business school.

Overall, the research reveals that in many sectors the gap between salaries for new hires with MBAs and new hires without MBAs is widening year-on-year. The downside of such high MBA salaries and the growing salary differential to non-MBAs, Quacquarelli has found, is that some employers become disaffected with MBA hiring, creating a ceiling beyond which they will start to target non-MBAs. Andre Sieger of Hilti tells Quacquarelli that this “highly competitive market for MBAs drives compensation insane.”

Even the ”˜big hitters’ have concerns, the article states. Mesha Mott, a recruiter at Mead Westvaco USA confirms that “depending upon the school/reputation and the skills sets required, salary requirements may be misaligned with what the candidates actually bring to the table.”

Such recruiters have reported greater success looking beyond the traditional pool of top-tier schools by targeting second-tier schools. These schools are increasingly attracting the high quality MBA candidates who, for reasons of budget, specialization, environment or disdain for rankings, have chosen to spurn the top-tier.

As a final piece of advice, Quacquarelli urges MBA graduates to consider the cost of living when comparing salary packages across regions: the real, versus the nominal wage a company and country offers. It’s much easier to stretch a dollar in Hungary or Mexico than in London or Tokyo.

source: QS Top MBA

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