BUSINESSWEEK ONLINE : OCTOBER 2, 2000 ISSUE
COVER STORY Want an 82% Pay Hike? That's the difference between the average salary package of new MBAs and what they earned before attending business school There's no getting around it: Snagging that MBA degree will take a year or two of mind-numbing hard work. And tuition alone can exceed $60,000 for a two-year program. But once that piece of paper is in hand, MBA grads pretty much have Returns on Careers Job Category Total Investment*  Salary Increase, post-MBA Years to pay back Consulting FASTEST Texas $120,900 108% 3.5 SLOWEST Thunderbird 132,800 60 5.7 AVERAGE 122,900 95 4.2 Finance FASTEST Pittsburgh 80,600 100 3.3 SLOWEST Case Western Reserve 131,200 57 6.2 AVERAGE 123,200 81 4.6 Marketing FASTEST Texas A&M 75,200 117 3.4 SLOWEST Stanford 179,300 31 9.3 AVERAGE 119,600 82 4.9 Entrepreneurship FASTEST Columbia $156,300 105% 4.2 SLOWEST USC 160,300 39 8.5 AVERAGE 135,700 77 5.7 Information Technology FASTEST S. Carolina 93,600 117 4.0 SLOWEST Stanford 197,400 54 6.6 AVERAGE 127,100 72 5.4 Operations FASTEST Purdue 104,200 100 3.9 SLOWEST Thunderbird 125,700 75 5.8 AVERAGE 118,500 78 4.9 *Eighteen months of lost earnings plus pretax income needed for tuition. Calculated from student survey respondents within each job track. Averages are from BW student surveys of 73 schools where 15 or more students responded. DATA: BUSINESS WEEK, JENS STEPHAN, UNIVERSITY OF CINCINNATI it made, with their pick of jobs and a paycheck that has never been bigger. Students graduating in 2000 received an average of 2.7 job offers and a salary averaging $75,900 before bonuses, according to the latest BUSINESS WEEK survey of MBA students. The big bucks represent a steady ratcheting-up of post-MBA salaries as the good times continue to roll for B-school graduates. This year, 9,651 students at 73 schools sent us salary data, which showed a 15% jump in pay for newly minted MBAs since our last survey two years ago and a 30% jump since the 1996 survey. The numbers are even more impressive when you consider that this year's graduates of U.S. MBA programs are raking in an average 82% pay hike over their pre-business-school salaries. The news gets even better. This year, as part of a major expansion of our survey, BUSINESS WEEK conducted a first-ever salary survey of women business students. And no other group improved more than women. The traditional pay gap between genders disappears among MBAs, at least at the start of their post-grad careers. Of the respondents who reported gender, women made about 10% less than the $50,000 median yearly pay that men reported prior to entering B-school. After graduation, the playing field leveled, with men and women who answered these questions earning the same $80,000. Rachel Duncan, 30, a single mother with two kids, doubled her $40,000 salary. ''I had climbed the totem pole as high as I could. I wanted more options,'' says Duncan, who now works for Hallmark Cards Inc. COLOSSAL INVESTMENT. And this year, for the first time, we crunched the salary data to adjust for regional differences in the cost of living. That's important because reeling in the biggest salary doesn't always translate into the highest disposable income. Look at grads settling in the Northeast. Sure, they're pulling down an average annual pay package of $125,000, but that only gives them the purchasing power of someone making $66,000 in Dallas. Also for the first time this year, we included schools outside the U.S. The grads surveyed by BUSINESS WEEK in Europe and Canada enjoyed salary hikes of 71% over their pre-MBA salaries. The rosy picture for MBAs fades a bit when you look at the expense side of the ledger. U.S. B-schools are a colossal investment for the average 28-year-old, setting the class of 2000 back an average $126,700 in tuition, fees, and lost salary. And it's not over on graduation day. This year's class left campus with an average debt load of $20,600. Next, we looked at the numbers to figure out how long it takes to be made whole again after, in most cases, two years of B-school. To determine a return on investment (ROI) for each school, BUSINESS WEEK turned to Jens Stephan, academic director of MBA programs at the University of Cincinnati's College of Business Administration. Stephan, who has been helping calculate our survey results since 1996, found that students will break even in anywhere from 2.8 years to 6.6 years. That's a significant improvement over 1998, when the breakeven period ranged from 3.7 years to 7.2 years. To make the calculation, Stephan took into account pre-MBA salaries, lost work time, tuition, and the bigger bucks MBAs reported earning. Stephan assumed that a student loses 18 months of income in a two-year program, allotting summer months for a paid internship. He tacked 10% on to the pre-MBA salary during the second year of the program to reflect an assumed raise the student would have received. That lost income was combined with the school's tuition over two years. He then projected what MBAs should earn over the next eight years, including starting salary, extra compensation, and signing bonuses--62% of U.S. grads surveyed said they received an average $8,900 bonus. U.S. Schools The Quickest Payback... School Median Total Investment* Percent Salary Increase Median Years to Payback** Median Salary at Graduation Median Salary Adj. by Region*** Brigham Young $70,900 120% 3.5 $67,000 $64,200 Tennessee Knoxville 77,200 115 3.6 65,000 67,100 Iowa 83,400 100 3.7 70,000 65,200 Purdue 102,600 122 3.8 77,000 69,700 Pittsburgh 82,600 62 3.9 65,000 59,600 Georgia Tech 93,500 100 4.0 72,000 70,400 Texas A&M 83,000 98 4.0 68,000 64,600 Michigan State 94,200 100 4.1 71,000 64,300 Penn State 97,100 101 4.1 73,000 59,900 Yale 148,600 100 4.1 80,000 52,000 ...And the Slowest George Washington 125,800 67 6.3 67,000 56,200 UC-Irvine 133,400 68 6.1 75,000 60,900 Thunderbird 129,700 60 5.8 72,000 61,800 Stanford 179,300 60 5.7 100,000 82,100 Boston U. 133,200 83 5.6 80,000 58,700 USC 144,600 68 5.5 80,000 65,000 Rutgers 115,400 60 5.5 66,500 35,400 American 115,200 60 5.4 67,000 55,800 Babson 132,500 78 5.4 75,000 55,000 Florida $100,000 68% 5.3 $65,000 $62,900             AVERAGE 126,700 82 4.7 75,900 64,400 European and Canadian Schools The Quickest Payback... School Median Total Investment* Percent Salary Increase Median Years to Payback** Median Salary at Graduation Median Salary Adj. by Region*** INSEAD France $101,500 60% 2.8 $90,000 $N/A IMD Switzerland 110,500 63 3.0 100,000 62,800 Cranfield England 84,300 56 3.4 75,000 N/A ...And the Slowest ESADE Spain $92,700 73% 5.7 $50,000 $34,000 Toronto Canada 99,000 50 5.7 57,000 45,100 York University Canada 83,000 67 5.6 41,500 32,800             AVERAGE 101,500 71 4.4 70,700 62,400 *Eighteen months of lost earnings plus pretax income for tuition. **When the pay gain as a result of the MBA equals the total investment in B-school. Includes time spent in school. ***Total compensation is deflated by the cost of living index assigned to each school. DATA: BUSINESS WEEK, JENS STEPHAN, UNIVERSITY OF CINCINNATI So which school gives the biggest bang for the tuition buck? Utah's Brigham Young University snatches the ROI crown in the U.S. with a payback period of 3.5 years. Students at BYU landed jobs with a median salary of $67,000, a 120% increase over their pre-MBA salaries. And tuition of about $7,000 a year makes the school a steal. CONSULTING IS KING. The reigning 1996 and 1998 champion, the Katz Graduate School of Business at the University of Pittsburgh, dropped into fifth place this year with a 3.7-year payback period for its one-year program because salary increases failed to keep pace with the pack. George Washington University had the slowest U.S. ROI at 6.3 years. Those grads saw a 67% salary increase after an investment of $125,800. (Due to an error in the data, Florida was originally reported to have the slowest payback time.) Not surprisingly, the mostly one-year European schools offer the fastest payback period. France's INSEAD led, with students there breaking even in just 2.8 years on a total investment of about $101,500. Spain's Escuela Superior de Administracion y Direccion de Empresas (ESADE) ties with the University of Toronto's Joseph L. Rotman School of Management for the slowest ROI, of 5.7 years. MBAs from these schools walked away with only about $50,000 in salary and rarely got signing bonuses. Another big factor in figuring how long it takes for an MBA to pay off is the career choice a grad makes once school is over. About 23% of those surveyed in the U.S. settled on consulting, the category with the highest average annual salary, at about $100,000. That resulted in a relatively fast ROI of 4.2 years. Investment banking was next with 4.3 years. At non-U.S. schools, investment bankers were No. 1, with an ROI of 3.8 years, thanks to signing bonuses, company-financed cars, and other perks. No matter how you slice the numbers, an MBA remains a better investment than ever in 2000. True, tuition can be huge, and it may take a while to pay off loans. But by then, this year's crop of grads should be well up the corporate ladder, and that $100,000-plus it cost them for B-school will be a distant memory. By Mica Schneider in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Best B-Schools Table of Contents The Best B-Schools COVER IMAGE: The Best B-Schools TABLE: How the Report Cards Get Graded It's a Whole New B-Game A Global Report Card Building a World-Class Business School in Japan (int'l edition) INTERACT E-Mail to Business Week Online

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