According to the QS TopMBA.com International Recruiter Survey 2009, despite the recession, or perhaps because of the need to restore their reputations amongst top MBA candidates, banks in the US offered the highest total compensation to MBAs in 2009 at $130,000, ahead of Consulting - $120,000, IT - $120,000 and Energy - $118,000. All sectors, apart from Defense, Government and Transportation, offered total compensation ranging between US$100-140,000.
Salary stagnation was a major concern for candidates this year as the gap between supply and demand widened. Recruiters have the bargaining power to determine how many jobs they will post and at what level they will set MBA starting salaries. However, employers surveyed stated that they planned to maintain salaries at 2008 levels.
According to the report, Western European salaries have been relatively stable since the dot.com crash. In reality, an MBA graduate today will face similar prospects on either side of the Atlantic. Salary levels in financial services and consulting are very similar in both regions as are technology salaries and those in general industry. The recent strength of the US dollar means that average European salaries reported in US dollars have fallen this year to $87,000, but in Euro terms they have remained stable. There is a great variation in salaries across the region. The United Kingdom, France and Switzerland are paying the highest MBA salaries, all with averages of $100,000 or more, well ahead of the regional average. MBA salaries in Germany and the Netherlands have dropped back below the average for the region, though this may be explained by the fact that fewer (and a higher proportion of smaller) companies in these countries have responded to the survey this year.
Because of fluctuations in the exchange rate, MBA salaries by sector, in US dollar terms, have dropped this year. Consulting offers are averaging $92,000. Financial Services offers are averaging $89,000 (these figures exclude bonuses). The highest salaries have been offered by IT/Computer services companies, which average $95,000.
The average first year bonus guaranteed for new MBA hires across North America/Western Europe in 2009 was US$21,700 - down compared to the 2008 figure of US$26,875. This bonus, which is typically used to repay school fees, is the area of MBA compensation employers have felt most comfortable cutting during times of recession.
The average reported bonus ranges between US$0 and US$40,000 depending on the industry sector. Banks are still reporting the largest average bonus at US$37,500, only slightly down from the previous year.
The Energy sector is also offering bonuses in excess of $30,000, probably caused by their need to compete with banks and consultants to attract top talent.
The Consulting sector is offering slightly lower bonuses of $28,000 on average, compared with the previous year.
The sectors which have reduced MBA bonuses the most are: manufacturing (down from over $30,000 to $20,000) and high tech (down from over $30,000 to $22,000).
MBA bonuses have tended to be volatile in the past and it may be that if MBA demand bounces back in 2010, so will these average bonuses, says the report.
It is important for candidates to understand the fiscal status of their bonus. Maximizing after-tax bonus value should be prioritized: in some US states, bonuses are taxed at nearly 50%. In the UK, relocation expenses and tuition reimbursements can be claimed tax-free. In such cases the cost is the same for the recruiter, but the benefit far greater for the candidate.
Furthermore, an up-front starting bonus carries greater value than a year-end or performance bonus. Candidates can compare their offers with their peers to ensure they are getting a competitive offer and communicate this benchmarking to the recruiter. In at least one case, a top-tier consulting firm has increased its offer for the entire entering MBA class in order to match competitors. No MBA graduate can count on the promise of a performance bonus, making financial planning, including meeting minimum loan repayments, more difficult.
Performance bonuses, whether tied to individual, team or company performance, are a means for an employer to introduce variable compensation and to ensure they do not make financial promises they may not be able to keep the report says.
While MBA salaries is an important factor in understanding post MBA career options, it's not less to understand what working hours you will be expected to commit. Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors, a research piece published in January 2009 by Chicago Booth and HBS researchers1, shows that weekly hours are high for almost all MBA positions. Hours are highest in investment banking and consulting. The average investment banker puts in a whopping 74 hours per week, the average consultant 61 hours per week. Also reaching close to the 60 hours per week mark are those employed in venture capital and sales and trading.
Mean earnings by gender are comparable directly following MBA receipt but they soon
diverge. Women earn $115K on average at graduation and $250K nine years out; men earn
$130K on average at graduation and $400K nine years out. Median salaries by gender also diverge in favor of men with years since graduation but not by as much as do mean salaries. The median female MBA starts her career at the 34th percentile of the male distribution but after 15 years has fallen to the 19th percentile. ZoomInterviews will explain this phenomenon in one of our following posts.
Finally to complete this analysis and provide more comparable information we combined the salaries statistics by function collected by the University of Chicago Booth School of Business and working hours statistics reported in the Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors report1. This data does not include year-end performance bonuses because of high variability of this item.
Despite a perception of high salaries in investment banking, in reality, hourly wages for this industry were the lowest among all MBA jobs. Investment bankers work approximately 74 hours per week and receive $34 per hour. However, higher performance bonuses in investment banking compensate for this gap. According to our calculations, in order for the hourly rate to equal that of other job functions, the minimum annual bonus would need to reach about $45,000.
The hourly rate in other MBA job functions can vary from $42 to $46, while working hours vary from 61 hours per week in consulting to 50.8 hours per week in operations.
We would advise MBA applicants to consider a range of factors including future salaries, bonuses, life work balance and general career potential in choosing their post-MBA career. However, while these considerations are important, in our view the most important factor in making your career decisions is doing what you really like. This is especially true when you know that the per hour wage, at least in your first few years after graduation, will be the same in most job functions. While salaries in various job functions may diverge in the following years, the chances that you will earn more in a job that you don't enjoy are not very high and it's highly questionable if the money is worth the sacrifices that you will make on the personal level accepting such a job.
1)Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors, January 2009, Marianne Bertrand (University of Chicago Booth School of Business, NBER, CEPR and IZA) Claudia Goldin (Harvard University and NBER) Lawrence F. Katz (Harvard University and NBER)
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