anxiety. Job cuts, especially in the investment banking, private equity, and corporate finance sectors might also contribute to concern among current students and applicants.
However, thus far, early indicators do not suggest gloom or hiring freezes. On the contrary, hiring for summer internships as well as for first-year associate positions is up from last year. Salaries are also up.
But why are salaries for MBA
graduates increasing? Why is hiring up even in times of low economic growth? Why do businesses continue to place such a high value on those who have completed an MBA, even in times of recession? These are valid questions to ponder in today’s market for those engaged in the MBA
Why are salaries for MBA graduates increasing, and why is hiring up?
Companies tend to look into the future when they, for example, give a summer intern an offer at the close of the summer. Firms are sometimes looking as far as 4 or 5 years into the future. Thus, the hiring decisions of firms are not always verdicts on the health of a current economy, but rather verdicts on the economy’s future. Since firms predict that they will need these new recruits later on, they must hire, train, and pay them now. According to the Wall Street Journal, $300,000 USD (including bonus) is a rough average figure for a first-year associate’s salary at top investment bank in 2007. In 2008, this figure is growing.
Why do businesses continue to hire MBAs in volatile economic times and pay them often more than a non-MBA candidate for the same position?
According to certain business people, business school provides only formal training in management. In concentrating so heavily on formal training, they fall short of its proclaimed end of producing talented and prepared businessmen and women. These critics charge that although MBA
graduates have studied the game, they in reality are quite unprepared to play it. Though such a theory gives increased legitimacy to pursuing a part-time MBA in which a student works while studying or the short-term executive MBA traditionally for the seasoned businessperson, hiring trends still show that corporations value MBAs, and even in times of weak growth recruit and hire them. This can be attributed to another interesting aspect of corporate hiring: companies view MBAs as possessing formal skills that with time will combine with sufficient experience creating better leaders and executives for the corporation’s future.
What does this mean for all of you?
- It is not necessarily time to worry about the impact that a possible economic recession will have on hiring levels this year
- Holding an MBA can dramatically increase your salary and your marketability to potential employers
- As a new employee you are an investment and investments typically produce future financial gains. That being said, even though the economy may be faltering now, the near future could require many talented new employees for major companies
- Even though the MBA degree has its naysayers, salaries and hiring levels should speak for themselves
A Word of Caution
Finally, it is undisputable that a potentially turbulent period is looming. There is no downside to being more cautious and to working more diligently. We still remember: eight years ago so many MBA graduates were tipsy with their McKinsey or Merrill Lynch offers, and found that after graduation they were left idling for a year to take the job later, or taking a package to leave.
Learn the most you can at school! If there are many sharpened tools in your toolbox, there will always be some bright spots for you regardless what happens to the market.
The outlook for first and second year MBAs seeking summer or permanent positions in 2008 is still bright. The mortgage crisis and talk of recession may cause aspiring MBAs and those currently enrolled in