Posted by: Louis Lavelle on June 9, 2008
If past is prologue, then there are probably a lot of people out there who are giving serious consideration to applying to MBA programs in the fall right now, for one reason and one reason only: the economy. Applications to business school are, in fact, a counter-cyclical phenomenon—they grow when the economy isn’t. In fact, the most recent numbers from GMAC suggest that prospective MBA students have been expecting the economy to tank for quite a while now. Since bottoming out two years ago, GMAT testing volume is up about 27%.
But is taking on an MBA program during a sluggish economy really a smart move?
Those who espouse the conventional wisdom point out that the opportunity costs of an MBA in a slow economy are less--especially if you're unemployed, or your take-home pay depends in large part on big year-end bonuses that might not materialize during a recession. And regardless of opportunity costs, an MBA will increase your earning power in future years, so there's really no bad time to get the degree. True enough.
But what about the herd factor? With so many people applying to b-school I suspect the selective schools become super-selective, so a lot of folks who are aiming for Wharton may have to settle for less. And two years later, when you're graduating in a larger-than-average class, with your not-quite-Wharton degree, getting the job of your dreams may not be that easy. For starters, if the downturn lasts more than a couple of quarters, employers will either scale back on the number of interns they hire, or the number they make job offers to at the end of the summer. If the downturn lasts much longer than that, you'll be graduating into downturn.
This particular economic downturn makes these kinds of calculations all the more risky. Not only don't we know if we're in a recession....for all we know it may already be over. The credit crunch, the housing crisis, oil prices, inflation--there are too many moving parts in this mess to know exactly how it will play out. People applying to MBA programs in order to ride out the tough times, may instead find themselves graduating into an economy that's worse off than it was two years earlier--or sitting on the sidelines and riding out the recovery instead.
I always wondered if it made a lot more sense to apply to MBA programs when the economy is booming--it may cost you a bit more, but it would make it (a little) easier to get into a top program and (a little) easier to land the dream job. Is anybody actually doing that?
How are people approaching the whole decision to enter an MBA program during a downturn?