The salary increase after MBA graduation is often dramatic because employers value not just what you have learned, but also the kind of professional you have become.
An MBA gives you a mindset as well as a skill set
The reason Master of Business Administration degree holders are so competitive for so many types of positions is as much about how they think as how much they know. As the baby boomer generation approaches retirement age, many companies need to create pipelines to replace their leadership. Also, corporations have begun to understand how sustainability and corporate responsibility reduce costs and create short- and long-term sustainability for them. They need critical, strategic, creative thinkers who can analyze problems from a global, long-term perspective.
The salary increase after MBA graduation rewards not only the knowledge you accumulate and the skills you acquire, but also the perception that you are a disciplined, critical thinker with a 360-degree, 100-mile view who approaches challenges strategically. Why does an MBA increase your salary? Because you're not just competent, but visionary, and that's worth a lot to companies looking for tomorrow's leaders.
Why else does an MBA increase your salary?
There are many factors involved, and there is no single magic formula, but the overall perception is that MBA programs are tough, and the fact that you made it through yours says a lot about your drive and stamina as well. Also, you learn important, specific knowledge and skills in an MBA program that account for why an MBA does increase your salary. Recruiters and employers believe that MBA graduates are generally much more critical thinkers who know how to understand a problem, ask the right questions and gather information to develop informed, innovative, strategic solutions. They also believe that MBA graduates tend to be better communicators who can sell ideas and generate excitement, engagement and buy-in.
What other factors affect the salary increase after obtaining an MBA?
Any number of factors can contribute to the amount of your salary increase after you complete an MBA. For starters, where you live has a lot to do with how much you can expect to earn. However, cost of living can vary widely among locations, so a CEO salary in Kansas City, for example, might look less impressive at face value than that of a CEO in San Francisco. The Midwestern CEO, however, might find that her salary goes further than her West Coast counterpart's.
The industry you work in also has a lot to do with how much you can expect to earn. For example, an MBA who works in the healthcare sector might earn more than one who works for a non-profit, but less than one working for a technology company. Work experience also plays a big role and is often weighted just as heavily as your MBA in determining your salary increase after earning your MBA, especially if you earn your degree part-time or from a non-elite business school. The upside of that, though, is a much larger return on investment since you will spend less for your degree, continue working while you study and likely pay your loans off within a few years.
Other factors that can affect your salary increase after getting an MBA include specialization, connections and, sadly, gender, although this gap is steadily narrowing.
There's no question that in most careers, education pays. But the reason you generally see a salary increase after receiving an MBA is because employers perceive the value of your MBA based as much on what you learn as who you become as a professional and a leader.
DeJong, Jennifer. "MBA degree: Why companies prefer MBAs," Monster.com.
Lavelle, Louis. "MBA salary: Sober reckoning or wishful thinking?" Bloomberg Businessweek, May 23, 2013.
"2014 Corporate Recruiters Survey Report," Graduate Management Admission Council.
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