At what age should someone pursue an MBA to get the highest payoff right out of B-School? Research by Bloomberg suggests 30 is the ideal age. Students who are 30 get the highest pay packages out of B-School and students older than that earn less, not more!
An analysis of data collected by Bloomberg suggests that getting a master’s in business results in a pay bump that increases the older a graduate is—until she hits 30.
As part of its ranking of full-time MBA programs, Bloomberg surveyed more than 10,000 people who expected to graduate business school in 2014. The ages and starting compensation for people who had jobs lined up when they graduated, plotted in the chart below, show that in one’s mid-20s, paychecks bump up for every year of age, which makes sense—a 28-year-old will typically have more work experience and education than a 24-year-old.
Surprisingly, though, age stops giving graduates a pay advantage fairly quickly. Pay levels hover in the mid-$120,000s range between ages 28 and 34, peaking at age 30, and then begin to drop off steadily, falling to $110,000 at ages 36 and 37.
Why does compensation drop beyond for students older than 30? Analysts say this could be due to recruiters seeing candidates older than 30 as directionless.
What could also be a contributing factor, and one which the research doesn’t talk about, is that older students might be doing an MBA in order to start a new career in functional areas or professions that they were not previously qualified for. In such cases, the past experience of such students would be ‘discounted’ to some extent which would impact the salary they command.
These candidates may nevertheless be gaining substantially from an MBA in terms of getting access to new roles which excite them. By combining multiple skill sets, these students might eventually earn more than those students who got high paychecks right out of B-School.
Looked at from a point of view of percentage gain in outgoing salary over incoming salary, the younger a student is the more she will gain in percentage terms – older graduates may get a lower salary bump in percentage terms since their incoming salary is already high. In absolute terms though, these older students will take home much more than their younger classmates.
Be aware that this data and analysis pertains to one-year full-time and two-year full- time MBA programmes pursued by students with substantial work-ex. and not to two-year pre-experience Masters in Business Management (two year PGDM/ PGP programmes) offered in India which are typically pursued by freshers. While these programmes are packaged as MBAs by B-Schools these courses are accredited as MBMs by AMBA as they are pursued by freshers with minimal work-experience. Students with more than 3 years work ex. often find their additional experience a liability is these programmes since most offers during placement season are at the entry level.
The chart below shows the post-MBA pay increase for students who had jobs before they started B-School, and were set to start jobs when they graduated.
Compensation bumps get smaller with each year of age, reflecting the fact that older MBAs tend to enter their programs with higher salaries, making their post-B-School pay increase less dramatic.
Of course, it isn’t as if the ancient 30-somethings are getting nothing out of their time on campus. The typical 37-year-old got a 37 percent pay bump after finishing school. Compared with the youth, though, that uptick does not seem impressive. Twenty-nine-year-olds saw their compensation balloon by a median of 81 percent, and 25-year-olds enjoyed an enviable 130 percent pay increase.
The upshot for people mulling a degree in business? Start early, when you can still feel superior to people your boss’s age. (Source – Bloomberg)
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While this is more of a study where the sample would have been primarily US and western Europe, I think the % jump graph is pretty close to what Indian 1 yr MBAs would see.
As an alumni of the IIMC PGPEX programme, I think 6-8 years experience (normally 27-29 age) from a top school gives a sweet balance. The upsides (apart from the degree) are getting a great network, highest % bump (4-6 years exp generally dont join at the mid level management level even after MBA) and possibly saving of around 3 years in the career ladder.
Good points Vivek - thanks for adding to the discussion.