Cheer up, it still pays to go to business school

Forget the economic gloom, there's proof that an MBA can boost your earnings – even in bad times

When the financial crisis erupted just over a year ago a collective frisson went down the spines of business schools and their graduates. Was this the end of a bull run for MBAs which had mirrored that of the markets? Did the MBA and other courses need reform? Would business schools have to reinvent themselves? The broad answer to all these questions from a new report by the Association of MBAs is that the fears were exaggerated and life has continued largely unaffected.

The report, "Economic Downturn Survey", is the first wide-ranging and systematic survey of schools and MBAs to look at how they have fared. It concludes: "The data shows general robustness in the career prospects and salaries of MBAs, despite the recession. It also supports the view that the MBA degree will continue to benefit both individuals and organisations during times of financial crisis."

An easy riposte is: "They would say that, wouldn't they?" But some of the research results are counter-intuitive in the backing they give to an MBA's case. Take salaries, for example. The mean earnings of MBAs who responded to the survey rose from £70,250 in 2008 to £75,092 in 2009, despite the percentage receiving bonuses falling sharply from 83 to 45. Almost all job categories reported higher earnings except for independent consultants.

Among business schools, nearly three-quarters of the sample expect demand for the MBA to grow. Many schools base this forecast on experience of earlier recessions, but the depth of the latest crisis cause some to question whether the past was a reliable guide. However, the report notes that the survey finding, if true, "bears out the conventional wisdom that people will return to study during economic uncertainty, either as a means of further differentiation or to avoid the difficult recruitment market until employment conditions return."

Partly because of the evidence on salaries and MBA recruitment, the overall mood is – perhaps surprisingly – optimistic. More than half of MBA respondents believe that the degree is likely to give them greater job security in the recession and 70 per cent think that their company is well-placed to ride out the downturn.

Among business schools, no fewer than 80 per cent are confident that they can weather the storm. About half think it unlikely that their income will be lower than in 2008 and more than a third think it unlikely that their profitability will fall. Most expect to go on recruiting academic staff and, significantly, 15 per cent intend to beef up the number of career services staff.

The picture for companies employing MBAs is more predictable, closely resembling the picture for companies generally. About a third of the companies where MBA respondents work had imposed a pay freeze, although very few had forced through pay cuts. A grimmer finding was that 44 per cent anticipate a reduction in their headcount.

Indeed, not all the news is good. Almost a fifth of business schools introduced a pay freeze. The report's findings on remuneration for individual MBAs reveal some big changes. Variable cash earnings were significantly lower, reflecting reduced bonuses, and female fixed salaries declined between 2008 and 2009. Women's mean fixed cash earnings were £53,558 in 2009 against £59,309 in 2008. By comparison, male mean fixed cash earnings went up from £74,441 to £78,495. These figures also show that female MBAs still make noticeably less money than their male peers.

While schools expect an increase in applications for full-time courses, the prognosis for other modes of delivery is less favourable. Part-time programmes are considered least likely to increase and most uncertainty hangs over distance learning. Perhaps the biggest casualty is executive education. About 63 per cent of respondent business schools expect the general MBA intake to be less affected than executive education, largely because companies have cut training and staff development spending.

Cheer can be taken, however, from evidence confirming the correlation between holding an MBA and having a job at a strategic level in a firm. Of respondents in 2009, 11 per cent were chief executive officers or presidents, the same percentage were main board directors, partners or vice-presidents, 5 per cent were subsidiary board directors and 35 per cent held senior manager or senior professional positions.

Given the recovery – albeit restrained – in business confidence since the survey was conducted, it is probable that this snapshot is a little gloomy. It seems that last year's worries, though understandable, were misplaced.