Poets and Quants just posted some data on the long-term salaries and earnings of MBAs by school. Conveniently, seven of the top eight school by 20 year earnings were the "top 5" schools I've called out. So one might guess that there's a relationship between a school's rank and its students' earnings, which would be logical.
But I'm less concerned about rankings and more interested in return on investment. So I threw together some quick graphs that look at earnings against cost per year of the program and average student loan debt at graduation. Do you see any trends?
On all
three of the earnings data points
(Total earnings over 20 years,
Median pay 20 years out and Median
pay 10 years out), Harvard comes out
on top. Sometimes by a little,
sometimes by a lot. Stanford
and Wharton are Harvard's closest
competitors. So congrats to
all the Harvard folks out there,
you're in the money.
What also
struck me though is that neither
cost or average debt were
significantly correlated with any of
the earnings metrics. Debt
correlated best with median pay 20
years out with an r^2 of .05, not
linearly related at all, and was
worse for the rest. Total cost
fit better with an r^2 of .6 for
median pay 10 years out and around
.2 for the two other earnings
metrics. But basically it's
hard to say you get what you pay for
with an MBA.
Instead,
average
ranking was a better fit
with an r^2 of .6 for median pay 20
years out and .5 for pay 10 years
out and earnings over 20 years.
Kellogg
is a big exception here, but overall
rankings may actually have some
predictive value. Better than
I thought certainly. So maybe
I need to revise my idea that Harvard
and Stanford are the best MBA
deal and just go out and say
Harvard is the best deal for
an MBA. Though the
difference isn't as significant as
it looks in these graphs since the
scales have been changed to fit the
data, on a scale from zero the
differences would look a lot
smaller.
What do
you think? What trends do you
see in this data?
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I couldn't see the graphs in Google Reader.
ReplyDeleteA sample size of 8 schools is pretty small. Do you think this correlation will still apply for lower ranked schools? What if you expanded the data to include 50 or 100 schools instead?
ReplyDeleteDanielle - Thanks for the feedback. I'm not sure what the issue is but I noticed the problem in Google Reader as well. Hopefully I can sort it out.
ReplyDeleteAnyone have it happen outside of Google Reader?
Anonymous - 8 is definitely a small sample size, but my guess would be that earnings would on average decrease as you went down the rankings. In general, I don't pay much attention to schools below the top 20 since the ROI gets sketchy. There's more thoughts on ROI and ranking in this Poets and Quants article:
/2011/06/27/when-is-an-mba-worth-it%E2%80%94when-is-it-not/
FWIW, I didn't mean this post as any sort of robust analysis, just wanted to throw the data together and see if anything stuck out. I think it might be hard to do a more robust analysis since a top school is so different from a school ranked around 100 and a lot of it is based on intangibles.
Two observations:
ReplyDelete1) The Harvard brand rocks. It just does.
2) Haas is an "also ran" with Stanford. It's kind of like how Pepsi sells a ton of soda, but Coke still cleans their clock.
Also, there's probably some bias in the degrees at each university. Wharton, for example, probably has more finance MBAs than Stanford. Stanford's MBA grads are more likely to start their own businesses, which, assuming they do well, brings up the average, but hardly the median earnings.
Very cool post, NDM.
JT - I was thinking it'd be cool to see the 25th and 75th percentile data for each, standard deviation and mean. Then you'd really see the effect of start ups vs financiers vs non profits. I'm betting Wharton has a lower variance than Stanford or HBS for example.
ReplyDeleteWhat does the average mba from these schools make compared to the average school where they charge just as much to go to a lesser named MBA program? Why go to a lower ranked school full time?
ReplyDeleteLAL - Here are some reference points for median starting salary at big state schools:
ReplyDeleteUniversity of Virginia (Darden) - $100,000
University of Minnesota (Carlson) - $90,000
University of Maryland (Smith) - $$85,625
For more data points see:
http://www.businessweek.com/interactive_reports/bs_2010_US_FTMBA_TAB_1111.html
People go to lower ranked schools (my guess) because they can't get in elsewhere or they are offered merit aid. The ROI is sketchier but with significant aid or an employer sponsorship it may still make financial sense. However, I would bet that there are also students at these programs who haven't seriously looked at ROI or aren't concerned with it.