MBA Salary: Expectations and Reality in 2015

The very nature of researching the return on investment (ROI) of an MBA degree entails having a figure in mind for the MBA salary you hope to achieve on graduation.

While the monetary benefits of the qualification will play out over the long term as much as the short term, the initial post-MBA salary is, understandably, a clear point of interest when ascertaining its suitability to your individual goals.

So, how do the target MBA salaries of tomorrow’s MBA students match up to the reality found among graduates of the world’s top business schools?

Two annual pieces of research put together by the data geeks in the QS Intelligence Unit allow us to make such a comparison. The figures below detail the average current earnings and target MBA salaries of prospective MBA students responding to the QS TopMBA.com Applicant Survey 2015, by region, and the remuneration reality for MBA cohorts, as reported by their employers for the purposes of the QS TopMBA Jobs & Salary Trends Report 2014/15.

Comparing 2015’s target MBA salaries to those on offer in 2014

Sources: QS TopMBA.com Applicant Survey 2015 and QS TopMBA Jobs & Salary Trends Report 2014/15. Please note: actual salaries are total compensation figures and the worldwide figures represent merely the average of the regional averages and are given purely for illustrative purposes.

Of course, this comparison is by no means a perfect indicator of how MBA salary expectations measure up to the reality of just how deluded or overly-optimistic this year’s batch of MBA prospects might be.

First and foremost, it is based on the premise that graduates will seek an MBA salary in their home region – which we know to be far from certain, given the international mobility of both the MBA students and graduates of today. Secondly, the actual MBA salaries on offer will always vary quite widely across industries, limiting the accuracy of averages.

However, it is still a useful comparison to make because applicants’ expectations should be based on their understanding and knowledge of the MBA job market. These applicants aren’t exactly pre-experience kids without an inkling of the machinations of the employment market; these are high potential young professionals with a few years in industry already under their belts.  

Renewed confidence among tomorrow’s MBA students?

Yes, the MBA salary expectations are higher than the reality in every region – but it’d be a bit strange if prospective MBA students were dreaming of packages that are lower than those already being given out in reality. Plus, these are students who won’t be graduating for at least the next year or so, and we did see salaries in the mature MBA job markets of North America and Western Europe rise in 2014, particularly in the US – where by most accounts a corner was turned in its economic recovery.

Looking back to previous years, we see that applicants’ expectations are up a fraction, from US$112k to US$114k. However, they are still lower than the equivalent figures of US$117k and US$126.5k in 2013 and 2012, respectively. With actual MBA salaries rising for the most part, it doesn’t seem perturbing that applicants’ expectations have also risen slightly. Indeed, applicants’ current earnings have also risen - from US$41k to US$42k – which might go some way towards explaining the renewed confidence in their earning ambitions here.

The long-term trend is therefore one of the gap between expectation and reality narrowing and if you look at individual regions, you can see that the figures point to a doubling in earnings in all but two regions, which is surely a decent return in the timeframe.