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MBA Economist

MBA Economist

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Published by: Shailesh Jain on Oct 13, 2010
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MBA programmes

Back to business school
Oct 25th 2001 | BOSTON, CAMBRIDGE AND NEW YORK From The Economist print edition

A gamble that more people want to take TO TAKE a master's degree in business administration (MBA) at Harvard Business School, the first exclusively graduate business school and still, on most measures, the world leader, is not cheap. Tuition fees are $30,000 or so for each of the two years; other bills and living costs add another $25,000 a year. Add to that earnings forgone: the cost in recent years, for a clever 28-year-old, might well have been another $100,000 or so over the two-year programme. Surely only students with great confidence in their employability would take such a financial risk. In fact, no. Business schools find themselves in a bizarre situation. They are struggling to find jobs for their current crop of graduates—but overwhelmed with inquiries from would-be students. While, on some estimates, more than one in five of this summer's MBA graduates is still jobhunting, all the signs are that there will be a bumper crop of applications for the class of 2004, whose students will begin their courses in September next year. The unfortunate class of 2001 struggled to find employment, or discovered that promised jobs evaporated as the economy deteriorated. One reason for the popularity of the MBA is that it had become an entry ticket to lucrative jobs. “Investment banking and consultancy drive our business,” says Meyer Feldberg, dean of Columbia Business School in New York. As those two industries tanked, so did jobs and summer internships for graduates. At Wharton, the business school attached to the University of Pennsylvania, eight students saw their job offers rescinded and 38 had their starting dates pushed back. Almost all the culprits were consultancies. Other schools have been similarly bruised. Even at Harvard Business School, some students are out of work: campus rumour says up to 20% of the summer's graduates, although school officials think that is much too high. But at least the top schools can protest: when a couple of companies dared to withdraw job offers to HBS students in particularly brutal ways, Kim Clark, the school's dean, promptly banned them from recruiting on the campus for the next two years. Bad though 2001 has been, next year may be even worse. This is the season of campus recruitment fairs, but companies that once sent three or four recruiters to conduct eight interviews apiece may now send only one, and some are going to fewer schools, or (like Reuters, a media group) are making a presentation but not hiring. Booz Allen, a consultancy that normally makes job offers at the end of a first-year student's summer internship, is now postponing offers until December—if indeed it makes any at all. Because such employers have in the past usually paid a student's second-year fees, the effect is to plunge students into financial uncertainty. Or to force them to look for alternatives. Back in the 1960s, students took MBAs mainly in order to run manufacturing companies (see chart 1). Maybe those days will now return. Dull old



One indicator is the Graduate Management Admission Test (GMAT). Another portent is attendance at roadshows: Stern. Although the numbers do not take account of people who take the test repeatedly. plenty more would like to join them. Richard Schmalensee. though. a maker of agricultural feeds and fertilisers. the trend is sharply upwards (see chart 2). Health-care companies are also attracting big crowds. Along with its fulltime MBA course. At HEC School of Management in Paris. compared with 60 last year. The rise in interest is not confined to the United States. an upand-coming school attached to New York University.economist. http://www. Applications for the spring course are up 50% on last year. while “Toronto just blew everybody's socks off. the evidence suggests resurgent demand for next year. was annoyed to be told recently by a student that there was an implicit bargain: “I pass my courses. Demand for MBA courses boomed for much of the 1990s. at Duke University in North Carolina. saw a 47% rise in applications for the current year's class. Columbia received 5. double the number in 1992 but down on the 1998 peak of 5.com Page 2 of 3 manufacturers are back in fashion.” Business schools are mainly an American industry. saw attendance at a recruitment reception rise from 30 last year to 300 this year. Smaller schools are more nervous: Didier Develey. the one in Paris attracted 135. France's top school. compared with 70 last year.cfm?Story_ID=835874 11/11/01 .Economist.277 applications for this year's MBA intake. Doug Breeden. dean of the Reims Management School. And still they come However much today's students worry.com/PrinterFriendly. The dearth of jobs puts top business schools on the spot. and then tailed off as the glamour of e-commerce lured students away. says that applications for the 18-month MBA course starting in January are 8% up on a year ago.719. dean of the Fuqua School. worries that people may now “reduce their investment in education”. INSEAD. but many European schools are prospering. Now. the dean. you find me a job. when demand was flat. dean of MIT'S Sloan School of Management. is exploiting the network of alumni to try to drum up new job prospects. Columbia's Mr Feldberg reports that this autumn's information session in London attracted 200 people. the school runs a part-time course that takes in students twice a year. Bernard Ramanantsoa. Cargill.” He thinks students are not eager enough to use their own resources to look for work. has seen a rise of 30-50% since September. American schools now recruit all round the world.

the countercyclical nature of the demand for MBAs will certainly be a relief. former dean of the London Business School. they may demand different skills: perhaps expertise in engineering or law.economist. Many universities. turns out to ebb and flow in line with the economic cycle. and the MBA will remain the surest route to the top. acquired at great expense.000 consultancy job.com/PrinterFriendly. For universities. All rights reserved.com Page 3 of 3 One reason for rising applications is doubtless the fall in opportunity cost: as companies stop hiring. according to “Which MBA?”. http://www. an activity that business schools have been expanding even faster than MBA programmes. In America. published this week by the Economist Intelligence Unit (The Economist's sister company).cfm?Story_ID=835874 11/11/01 . such as Chicago and Northwestern. according to John Quelch. Another is faith that business will once again be a lucrative career. But the demand for MBA graduates may not quickly return to the boisterous levels of the 1990s.Economist. students are less likely to miss out on that $100. And executive education. If the firms that do most of the hiring are not consultancies or investment banks. Copyright © 2001 The Economist Newspaper and The Economist Group. draw a subsidy from their attached business schools. more than half the chief executives of big companies have MBAs. rather than a general understanding of business principles.

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