University of Chicago Graduate School of Business second-year student Alison Nickum is planning to rest easy at her June graduation. With three job offers under her belt, she's taking on a position in Wal-Mart's corporate finance department this fall. And if she's like many other newly minted MBAs, she's likely to be seeing a bigger paycheck than last year's.
With a strong job market, and in many cases, multiple job offers, new MBAs are finding strong bidding for their services, with average salaries, according to one estimate, up more than 4 percent.
Chicago's career services department estimates that the median starting salary for the Class of 2006 will be around $95,000, which is not a bad payback for the $41,000-per-year education. Chicago grads are not alone.
B-school students across the globe are signing for hefty packages, thanks to renewed employer confidence in the economy. And experts say this trend should last well into the future.
Why MBA salaries are increasing is something the grads would understand — supply and demand. While the number of MBA candidates has remained stable, companies have increased the number of people they're hiring. "With higher demand comes an increase in the amount companies are willing to pay," says David A. Wilson, president and CEO of the Graduate Management Admission Council, a nonprofit education organization in McLean, Va.
GMAC, best known for administering the Graduate Management Admission Test, recently surveyed more than 6,000 students at 147 business schools worldwide and found that the MBA continues to be a solid value in the U.S. and abroad. MBA graduates in 2006 are commanding heftier salaries than their counterparts did last year, with the average MBA earning a starting base salary of $92,360, up 4.2 percent from $88,626 in 2005, according to GMAC's 2006 Global MBA Graduate Survey.
MBAs also have more choice when it comes to their first job out of school. The survey also showed that 52 percent of business school graduates said they had received or accepted a job offer before graduation, compared with 50 percent in 2005 and 42 percent in 2004. For example, University of Virginia graduate Trevor Brown received two offers before commencement and had declined five final-round interviews.
Brown says that most of his peers have received multiple offers, and many were able to negotiate substantial increases in compensation. "The job market was strong this year," he says. "I think many firms found that overall compensation was higher than they initially expected as well." In addition to the increase in job offers, signing bonuses are also on the upswing, with two-thirds of new MBAs who were surveyed landing average bonuses of $17,603, up slightly from $17,428 in 2005.
Although these numbers show how eager recruiters are to sway the right hires, observers should not think this is a return to the heady days of the late '90s, when recruiters were offering all sorts of perks to job candidates. Experts expect growth in both compensation and bonuses for MBAs in the coming years, but companies are taking a cautious approach to this market trend. "We aren't seeing signing bonuses that include a lease on a new BMW," says Wilson. But that is probably a good thing.
"Never again are we going to see the irrational exuberance of the dot-com era." Wilson says. "There was nothing real about those salaries or the stock market in those years."
While GMAC has generally found that an MBA will increase a graduate's salary by 44 percent compared with their jobs before entering B-school, the recent increases seen in the worldside survey show how employers are valuing the MBA, Wilson says. "The MBA has really become a global currency," says Wilson, who recently visited MBA programs around the globe. He adds that significant MBA players will increasingly be coming from prominent programs in Europe, China, and India. It's a small, and increasingly lucrative, world, after all.