Financial rewards for MBA graduates have declined by more than half since the early 1980s, according to the Association of MBAs. Recent graduates who remained with the same employer have increased their salaries by an average of 20 per cent, compared with an average increase of 40 per cent for those who graduated between 1980 and 1985. Increases for recent graduates who joined a new employer were lower - averaging 16.5 per cent.
The survey explodes the popular myth - still widely circulating last year - that an MBA typically boosts a manager's short-term earning power by 50 per cent, and it is likely to be seized upon by detractors of the controversial American management qualification, as further evidence that the MBA is yesterday's degree. It comes amid worries of some business schools dropping their admission standards to full-time MBA courses, to cope with an abrupt end to three years of steady growth in enrolments at 18 per cent per annum. Roger McCormick, director general of the Association of MBAs, said: 'A precise figure is not yet available for 1992/93 enrolments, but the fall in numbers is greater than 15 per cent and could be 20 per cent.'
MBAs' Salaries and Careers is by far the most comprehensive analysis to date of the effect of taking an MBA, and includes the salary levels attained by MBAs with each year of experience after they graduate. These indicate that once the opportunity costs of studying are taken into account, there is no short-term monetary gain from a full-time MBA.
A manager earning pounds 30,000, who took out a plan of pounds 25,000 (at the going fixed rate of interest of 13.5 per cent) to cover full-time course fees of pounds 8,500 and 12 months' living expenses, and who obtained a job in the financial sector, would take more than six years to make up for lost earnings and the cost of study with the salary increases resulting from the degree.
However, gaining a higher salary now takes only fourth place among the motives of those who have taken an MBA. A change of career direction is the most widespread motive, cited by 95 per cent of graduates. Enhanced job opportunities is also strongly cited, by 85 per cent. The qualification is effective in delivering this particular mix of advantages and graduates themselves explicitly endorse it: 74 per cent in the survey said it had proved 'very or extremely relevant' to the advancement of their careers and 62 per cent felt the skills it gave them were 'very or extremely relevant' to their subsequent jobs.
MBA graduates are still overwhelmingly male university graduates with first or second- class degrees living in London and South-east England. Some 17 per cent of them move to another sector of the economy after qualifying, with business consultancy and finance, which together employ over 30 per cent of MBAs, making huge gains at the expense of the public sector and the engineering and construction industries.
More than 20 per cent of graduates leave large organisations for small companies employing less than 100 people, while others change their business function, typically abandoning production, research and development, computing and administration for corporate planning, marketing and sales.
MBA graduates display a high degree of upward mobility which they appear to sustain throughout their subsequent careers: 51 per cent of those who studied alongside their job were promoted immediately on completion of the degree; 43 per cent of all graduates are senior managers or board directors, with graduates from the early 1960s having enjoyed, on average, seven promotions - those from the early 1970s having been promoted an average of five times and those from the early 1950s, three times.
General management appears to be their most common long-term destination: 27 per cent of those surveyed - most of whom graduated between 1960 and 1992 - are currently general managers.
'The MBA is a qualification well-attuned to those who will be pulling together several disciplines towards the end of their career and performing a general management function,' Mr McCormick says.
The long-term financial prospects vary widely according to the sector a manager works in. An MBA with 12 years' experience since graduation could expect to earn a basic salary of over pounds 65,000 in the financial sector, over pounds 55,000 in consultancy and pounds 50,000 to pounds 55,000 in manufacturing. In electrical and mechanical engineering the same experience would bring a pounds 43,000 salary. In addition 52 per cent of graduates receive performance-related pay, the report stresses.
Many managers are reducing the costs and risks of the MBA by remaining in employment while studying. Part-time courses have overtaken the fulltime model and may themselves be eclipsed by the distancelearning degree which managers can take with them if they change location or company.
The entry in 1989 of the Open University into the previously limited market for MBAs, by distance learning, has given an enormous boost to this form of study. The OU's Open Business School is already the largest school, with more than 12 per cent of all MBA students; by 1995 it expects to be providing 20 per cent of all MBA graduates in the UK.
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