Is the Business of Predicting MBA Bubbles a Bubble?
Recently, the business school community has been debating an article published in The Atlantic called “Is An MBA Bubble Popping?” The article suggests that there is a surplus of MBA graduates, and that the job market for MBAs is on the brink of collapse. Its author, Jordan Weissman, argues that studies have found “decreasing pay and shrinking job opportunities for business grads, even as the rest of the job market keeps healing.” However, Business Insider published a critique of the original Atlantic article, saying that the MBA Bubble theory is “wildly overhyped.”
Business Insider author John Byrne begins his critique by observing that stories about whether the MBA Bubble exists or not have appeared on several news sites, because these stores attract internet traffic. Byrne challenges Weissman’s interpretation of the studies Weissman uses to support his conclusion that the job market for MBAs is about to collapse. In the Atlantic article, Weissman cites a Graduate Management Admission Council (GMAC) survey of MBA recruiters that shows that 42% of employers would keep MBA salaries flat this coming year. Byrne observes that in the same study, 45% of employers said that they would increase MBA base salaries to account for inflation, and 11% would increase salaries above the rate of inflation. Only 2% of employers surveyed planned to decrease their starting salary offers for MBAs. These results suggest that overall, MBA pay is going up.
The second survey cited by the Atlantic is from Michigan State’s Collegiate Employment Research Center. That study surveyed 6,500 employers and concluded that MBA recruitment would decline 25% next year. That is certainly a frightening projection, but Byrne observes that those results conflict with the results of the GMAC study, and that the companies involved in the GMAC study are more likely to hire MBAs than the companies involved in the Michigan State study. GMAC found that 87% of employers in their survey planned to maintain or increase their MBA hiring in 2014.
In 2012, the Michigan State’s Collegiate Employment Research Center predicted that MBA hiring would decrease by 6% in 2013. That decrease did not happen, which challenges the predictive model they used to conclude that the job market would decline 25% in 2014. While the future cannot be known, it seems like the MBA is still an intelligent educational investment.
