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Welcome to MBA Podcaster, the only broadcast source for cutting edge information and advice on the MBA application process. I’m Janet Nakano.

According to recent compensation surveys MBA salaries are on the rise. “The highest increase was in Western Europe where we saw a 7% increase that compared to a 4% increase in North America.” That’s good news for MBAs. GMAC reported that the average MBA starting salary in 2007 ranged between 80 to $85,000 per year not including bonuses. But many factors can influence how much you’ll actually make. Years of experience, location, industry, function and region are just a few things that can significantly raise or lower your MBA salary. Join us as we explore MBA salaries, how to properly determine how much you can earn and how to have realistic expectations. We’ll hear from GMAC, TopMBA.com, PayScale.com and MBA Career Management Directors.

TopMBA.com conducts an annual compensation survey where they ask between 4 and 600 hundred recruiters how much they offer to new MBA hires. For 2007 the average salary across North America and Europe was $93,400 USD up from $90,500 last year. Latin America averaged at $69,000, Asia Pacific $71,000 and Eastern Europe came in at $41,000 dollars. Nuzio Quacquarelli is Editor of TopMBA.com, he says salaries also differ by country, “For example, within Europe salaries in the UK are coming in at 180,000 USD a year whereas in France it’s $97,000 USD, Germany $89,000 and all over Greece which is part of the European Union where the average salary is $43,000 USD but by region, by country there are big variations.” Quacquarelli says merging markets as well show wide ranges in salaries, “If you were to go to a country like Croatia which it doesn’t have many developed industries then even a very, very well educated person who has a good MBA would struggle to earn more than $30,000 USD, in Croatia. Or if you look at Asia and there are countries like Japan that are paying North America salaries but if you were to get a job in Vietnam, you’d be struggling to find a salary above $20,000 USD. Or even in India although there is a lot of inflation in India that the majority of MBAs who are working in India for domestic Indian companies would expect to be earning between 15 and $25,000 USD.”

Both TopMBA.com and GMAC report on starting MBA salaries but how are MBAs faring five, ten and twenty years out? Payscale.com is an online salary survey where individuals enter their own compensation information and then find out how their salaries compare to others in the same position. Payscale has gathered data from more than 100,000 MBAs; Al Lee is Payscale’s Director of Quantitative Analysis. “Typically beginning MBAs, generally Junior ones, people who have gotten an MBA early in their career so they’ve only been a field for one to four years and have gotten a MBA on average median for the US for salary not counting bonuses and so forth make around $55,000 in the US, which sounds kind of low but you have to think of all of the places that you get a degree and these are people who are still early in their career. Five to ten year around they’re making kind of around 75,000 at that range. Ten to twenty years it goes up to kind of 93,000 and then people who have been in the field for twenty years or more whether it be any of the possible areas of specialization that an MBA might be in. If they’ve been out there for twenty years and then have an MBA they typically make over $100,000 a year.” Lee says those are national averages. According to Payscale’s data work experience is clearly a major factor that influences salary.

Rachel Edgington is GMAC’s Director of Market Research and Analysis. She says GMAC’s salary surveys reveal that many more factors affect compensation, “What really drives salary are two things, one is individual, the individuals themselves, their prior work experience dominates the salary that they are going to receive but also the choices they make in their company when they are choosing to go to that employer. For instance, if they make a trade off for job security they’re more likely to have a low salary. But if they have accepted a job because of high visibility to the executive team they are more likely to make a higher salary. So some of it is personal preferences in the job but most of it is their prior work experience. And then the other aspect that drives salary is the employers themselves. Definitely different by industry, the non-profits are going to pay lower salaries than say consulting or finance. Organizational size has a lot to do with it and this has to do with how much their able to pay, large companies are able to pay higher salaries than smaller companies. Companies that recruit MBAs actively, so they have a flow blown recruiting program, pay higher salaries than organizations that might hire a MBA but don’t actively recruit them. And then obviously the region that the employer is located in affects salary.”

Payscale’s Al Lee says the job you do is another big differentiator in how much you make, “If you’re a CFO, right at a company it’s not atypical to be earning just your average CFO and this will be at also at companies of 100 people, 200 people. It turns out if you think about it most executives actually work at small companies because that is where most of the jobs are. So everybody always knows what the CFO at Microsoft is making a tremendous amount of money but the average CFO works at a company of 150 people or so and they’ll be making a salary around $125,000 a year. Generally on a median MBA, which now we’re talking about someone who is making around $80,000 or so whether they work at a for-profit company, a private practice or firm, even at a hospital of the federal government, the pay doesn’t vary a lot. You know it’s 75, it’s 77, it’s $80,000 a year. However, if they decide to work at a non-profit organization the typical pay drops down to $63,000 a year. That is not surprising, right? Similarly if they decide to work at a state or local college or university the pay is also down at a 55 to $60,000 year range.”

Industries that are mainstays for MBAs are strategy consulting and investment banking. Quacquarelli says in these industries you can earn well above the average, “Say for example the consulting industry came with an average salary of about 98,000 USD and investment banking was very similar at about 98-99,000 USD. They also tend to pay much higher bonuses than other industries so investment banking for example reported an average bonus of $42,000 so that meant if you got a job with an investment bank in 2007, your total compensation would have been over 140,000 USD. So it’s for a fresh MBA that is one of the most attractive compensation packages in the history of the MBA. Consulting would have been slightly lower than that, the average bonus in the consulting industry would have been a little over 25,000 USD. But those industries are paying more than other sectors and interestingly they are paying similar levels wherever you join in the world because there are global companies, they tend to move people around so they would have the same differentials.”

Cost of living is an important factor when evaluating salaries. Quacquarelli says you could have a good quality of life on below average salaries in certain countries. “I do a lot of MBA admissions presentations at the World MBA Tour and I do these presentations around the world and I always look at these depressed forward faces when I am in the room in Buenos Aries and I have to tell the audience that the average MBA salary is in Argentina is only 55,000 USD a year and it’s $90,000 a year in America and I say if you take into the account of cost of living, if you come back to Argentina and earn 55,000 USD a year you are going to be a lot better off than the MBA who is living in flat in New York earning $90,000 a year. The reality is that MBAs in emerging markets often are much better off even in the lowest salary than in normal terms.”

One other note on New York City, Payscale.com has a cost of living calculator and Al Lee says he found some interesting data when he compared New York to Chicago, “It turns out the median MBA in Chicago makes about $90,000 per year and the median MBA in New York City makes about $101,000 a year. So you say okay you get, you know cost of living difference between New York and Chicago you’re getting paid a little bit more than 10% extra but then if you actually with our cost of living calculator according to standard comparisons of rent and if you want a 1200 square foot apartment and you want to compare them and so forth, it turns out New York City costs about 90% more than Chicago to live in so I was kind of fascinated because at one level everyone should move to Chicago because you can get so much more for the same money and yet people still like to live in New York.”

European companies often pay MBAs in ways other than the base salary. Jessica Austin is Director of Career Development and Alumni at RSM Erasmus in the Netherlands. She says MBAs in Europe are offered a number of secondary benefits, “In the Netherlands, in Belgium and some other countries in Mainland Europe they’ll have vacation pay and what this is, is it guarantees a percentage of income that will be added to their salary. In the Netherlands it’s usually around 8%. So for example, I know that in May 8% will be added on to my pay check that month. Other forms of monetary compensation which are guaranteed which aren’t included in these base salaries what they call a 13th and a 14th month; so even though we’re only working 12 months a year there will be a 13th month payment added into a paycheck. This is very standard in the Netherlands, even in the offer letters. It is discussed if there will be a 13th and 14th month. Almost always there is a 13th month so it is a form of guaranteed payment but because of the way it is paid it is not considered to be a part of the base salary package.”

Austin says for these secondary benefits MBAs are encouraged to negotiate the terms. “For example, our MBA students at RSM almost all of them are not local Dutch citizens so most of them are coming from other countries, these students we advise if they’re looking to negotiate their package to ask the companies to consider a relocation package even though they have been living in the Netherlands for the entire time they have been studying. They probably didn’t move all of their belongings to the Netherlands because they were not sure that they would be staying here. So factoring in their relocation is pretty standard, that is something that is able to be negotiated then. Also tuition reimbursement or forms of sign-on bonuses is something that companies in Europe, many companies in Europe don’t automatically offer but are willing to do so when the candidate brings it up. So I would actually advise that people always look at the secondary benefits and think about what could be added on there and we do see a lot of negotiation happening on the secondary benefits.”

Earning $93,000 your first year out of business school can be enticing for those considering a MBA degree but not all MBAs make that much. Quacquarelli says that expected salaries are always higher than actual salaries, “I mean this year the average salary expectation was for salary of 100,000, roughly 100,000 USD per year compared to our average of 93,000 USD. So it’s human nature to maybe want a little bit more than the reality but we have a lot of recruiters now saying to us that it’s beginning to be a problem and that many MBAs are coming out of good business schools with completely wrong expectations. They hear about someone doing investment banking is earning 140,000 USD per year and they think irrespective of which industry or which geography they go to work in they should be earning somewhere between 100 and 140,000 USD and it’s not the case. If you’re joining a manufacturing company in Minnesota and you’re 26 years old you’ve got you know one or two years work experience, the chances are that you’re going to offered about 75,000 USD. So if you have an expectation of 110,000 USD that’s a big mismatch.”

Tom Kozicki is Executive Director of the MBA Career Center at UCI Paul Merage School of Business and is also President of the MBA Career Services Council, an organization that sets standards in the reporting of employment data by business schools. He says inflated expectations are likely the results of misinterpreted information. “The standard in those schools that abide by the standard for reporting full-time salary data are required to do a couple of things. One, they have to report on a minimum 80% of their class and they have to have 85% of that 80% reporting providing salary information. So it is a very good representative sample. I think where people get a little bit lost or confused in the data is that they tend to look at the overall aggregated average instead of taking a look at the break outs for the different industry sectors and for the major functional areas. Taking a look at the ranges, taking a look at the median and then taking a look at what the profile is of the incoming classes at the school. So an individual perhaps has maybe one to two years of limited work experience and goes to a school where their average work experience may be five years are going to find that their salary opportunities probably aren’t going to be as great upon graduation simply because the market is not going to value their experience the same way it would if someone had five years of work experience.”

GMAC reports that part-time MBAs earn roughly 80-$85,000 a year, the same as those from full-time programs. And Executive MBAs earn between 105 and $122,000 a year. Kozicki says it’s important to note that part-time and Executive MBA salary information is harder to quantify, “The reason why is that the impact that the MBA may have in an individuals employment may not take place within the time period that the student is attending school. With full-time programs students stop out of the work force and then they start back in again after graduation so it’s much easier to measure. Wherewith Executive and part-time programs they may see a promotion halfway through the program, they may see something upon graduation, they may see something a year after graduation so you don’t see as many schools reporting that kind of information simply because it is more difficult to quantify and the MBA Career Services Council has yet to develop standards, agreed upon standards for reporting that information. It is something that we’re looking into now because of the tremendous growth that we have seen in those programs but there is no standard way of reporting them currently.”

At Payscale.com you can find out how you’re comparing with others in your field by completing their online survey and Al Lee says it’s a pretty easy process, “Basically what you do is when you first arrive at the homepage of Payscale.com you’ll see some radio button so what you want to select is if you currently already have a MBA and you currently have a job and you want to compare with people like you, you would select on Current Employee and go through and at that point we’ll ask you certain questions like what is your current job, how long have you been in the field, who is your employer, what industry are they in, how big is the company and as you might imagine all of the kind of questions including where you got your degree and so forth. And so it takes, I don’t know what we say it takes, you can do it in as few of a couple of minutes and at the end you’ll get to a report, all our reports are free, where you can see how your pay compares with other people with jobs similar to you. At that point you can decide if you don’t currently have a MBA you can go ask the question well what if I had a MBA, how much more would I be paid and we have a “What if” scenario section where you can go ahead and change those factors and see what happens. There is another which we have on our site which we call Gig Zig which lets you see what kind of jobs lead to jobs later. We ask people what job they had been doing five years previously, so the question is if you want to become a CFO what job should you do when you first get your MBA because clearly very few CFOs are out there doing it with less than ten years of experience in the field so you go to college you go right and get a MBA 24 years old, what path should you take, that tool Gig Zig is actually kind of very interesting to kind of see that you might get to that path that you’re interested in.”

MBA salaries are on an upward trend and Quacquarelli says he sees some exciting areas of growth, “The highest increase we saw was in Western Europe where we saw a 7% increase, that compared to a 4% increase in North America and 4% increase overall. So reasonable but not explosive growth in MBA salaries. The up and coming industries are probably media and technology. I think that technology obviously had a huge slow down after the 2000 crash and we are seeing quite big increases in the number of people being hired into media and technology companies now. Regionally I think that there are probably three regions around the world which are really, really vibrant and none of the traditional markets. Probably the most vibrant market is Dubai which takes a lot of people by surprise but it’s going through an incredible boom. The second region would be Russia where there is an oil and raw materials boom and again salaries are rising significantly and the demand is very, very strong. And then the third area is the China, India, subcontinents in Asia where they are going through consistent economic growth between 8 and 10% a year and as a consequence salaries are rising but from a very low base. So in China or India a MBA might still expect to only be earning $25,000 USD a year but it could quite easy be the case that salaries will increase to $30-$35,000 a year over the next 12 months because the level of inflation is very high.”

For more information, advice and to register for your weekly MBA podcast, visit mbapodcaster.com. I’m Janet Nakano, and this is MBA Podcaster. Thanks for listening and join us next time on another topic to help you in your MBA application process and life beyond.