Starting salaries for new MBAs have risen 9% this year to $82,000, according to research among the world's leading recruiters. Further increases in 2005 and 2006 can be expected, says Nunzio Quacquarelli of QS Research, organiser of an annual survey of MBA salaries. 'All indicators suggest that 2004 is the starting point of another upswing in the MBA hiring cycle,' he reports.
This year the QS survey had responses from over 300 leading international recruiters of MBAs, including McKinsey, Citibank, Lucent and UBS. The survey has been running since 1990 and, until a dip in 2002, it showed a steady growth in earnings for MBAs. Prospects picked up slightly last year, but it is only now that recruiters are significantly improving their offers with financial services and consultants leading the rebound.
'Optimism among MBA recruiters is high and competition is increasing for top talent,' says
Quacquarelli. 'The only cloud on the horizon is the potential impact of further shocks to the global economic system from rising oil prices and global terrorism.'
All being well, Europeans should be as well placed to benefit as Americans. MBA salaries in the US are slightly higher at $85,000 compared to $82,000, although more openings for MBAs are likely to be created in Europe in 2005.
Earnings do vary significantly by sector. For instance, jobs in consumer products and retail pay almost $30,000 less than finance jobs, which offer the largest base salary of $98,000. Consulting is next at $86,000, followed by transportation, media and healthcare.
Salaries in finance and consulting are almost exactly the same in the US and Europe, which reflects a high level of multi-nationalism in these industries. Rates in technology salaries are also the same, although in general industry they are much higher in the US.
Bonuses are the other main variable. According to TopMBA.com, only 10% of recruiters do not pay a bonus on top of base salary. For the other 90% of MBAs, the average bonus in 2004 is $19,000. In f inancial services, bonuses average $42,000 and many investment banks pay $70,000-$100,000 to first year MBAs.
These bonuses are nearly always tied to performance, allowing employers to introduce variable compensation. 'It is a means for companies to ensure they do not make financial promises they may not be able to keep at year-end,' says Quacquarelli. 'An MBA with loans to repay cannot count on a performance bonus. This could make lifestyle planning, including meeting minimum loan repayments,
Within Europe itself, salary levels differ sharply. New MBAs in central Europe generally start on $30,500 a year. 'Remember is it is not the nominal but the real wage that is important,' says Quacquarelli. 'Job applicants should consider the cost of living when comparing salary packages across regions.'
He gives Hungary as an example. 'Purchasing power parity is 55% lower than the US. That means that an MBA earning 44% less in Hungary will still enjoy a higher standard of living than a US graduate.'
Recruiters are well aware of such differences and are making their offers more standard. 'They do not want to drive top candidates away from key geographies because of a salary differential.'
Taking an MBA at Kellogg is certainly paying off for Morten Horness from Norway. Since starting the programme, he says, his pay-outs as a partner in his business have tripled. General market conditions have helped, but he also believes that he is already making better investment and management decisions.
For Stefan Muehlemann, a German who has just graduated from the Tuck School of Business, the goal is 'to become a successful senior manager in a global financial services company, and establish a functioning business network.' He now believes that he has the self-confidence to tackle problems for any company in any industry in any region of the world.
Like other MBAs, Muehlemann should also feel the financial benefit. QS Research shows that, between starting and finishing an MBA, Europeans can expect to improve their earnings by 118%.
From October 2004, TopMBA.com Scorecard will feature a detailed Return On Investment (ROI) calculator. The Scorecard enables MBA applicants and MBA students to estimate ROI and benchmark salaries by country and region, based on school data from the previous year.