Would an MBA Help You Come Out on Top in a Recession?

During the Great Recession, a record number of graduate management programs reported an increase in applications, according to the Graduate Management Admission Council, an association of graduate business schools.

And now, many economists say the writing is on the wall for another U.S. recession. Those considering a Master of Business Administration degree and its higher earning potential as a hedge against today’s economic uncertainty may be on to something.

Inflation is still putting a strain on the economy. More than 94,000 U.S. tech workers have been laid off so far this year, on top of the more than 140,000 tech workers who lost jobs last year, according to Crunchbase News, a business publication.

To sweeten the deal, top business schools like Kellogg School of Management and Tuck School of Business are waiving GMAT and GRE exams for recently laid-off workers — increasing the incentive to go back to school.

But a looming recession doesn’t make an MBA a no-brainer.

If you’re wondering whether now is the time to head to business school, here are a few things to consider.

Employers are still interested in MBAs

The 2022 Corporate Recruiter survey from GMAC found 97% of recruiters expect demand for MBA hires to remain the same or increase at their organizations.

This reinforces what has been a generally positive trend over the last 15 years, says Maite Salazar, chief marketing officer of GMAC.

Even with the economic uncertainty brought on by the pandemic, hiring trends for MBAs remained stable from 2020 to 2022. Employers leaned into MBA hires for their leadership and problem-solving skills and their ability to scale up and expand globally, Salazar says.

The cost of an MBA is still a deterrent

Roughly 60% of global prospective MBA students say cost could moderately impact their decision to attend graduate business school or prevent them from going altogether, based on a 2021 GMAC survey.

In the U.S., the average cost of an MBA is $225,605, according to a 2022 report from BusinessBecause, a graduate management education website. This is a 3.7% increase from 2021, and the cost of tuition and fees has been trending upward globally.

Though scholarships, fellowships and grants are the best way to pay for an MBA, they likely won’t cover the full cost. MBA student loans can cover any gap in expenses, but the more you borrow, the more interest payments will eat into the return on investment of your MBA degree.

On average, MBA graduates say it’s worth it

Over 85% of graduates believe their investment in a graduate management degree was worth it, according to a 2022 GMAC survey of 3,600 MBA candidates at more than 700 business schools around the globe. Respondents completed their graduate business education between 2010 and 2021. Increased employability, greater earning power and a broader professional network were the biggest returns on investment for survey respondents.

Nearly two-thirds of graduate students advanced one job level after obtaining an MBA. Those who were in more junior roles pre-MBA saw even larger jumps in their careers, the survey found.

And 2022 GMAC data still shows that U.S. MBA starting salaries are $40,000 higher than starting salaries for those with a bachelor’s degree alone — even though salary growth has remained flat over the past three years.

However, MBA outcomes can differ based on race, gender and other factors. For example, the GMAC study shows Black, Hispanic and Native American graduates were less likely to report career advancement than graduates who are white, Asian or of other race/ethnicity.

An MBA is not the only path to economic success

If your goal is to sharpen your business skills, there are alternatives to an MBA, such as business graduate certifications, professional certifications and mini-MBAs.

Business graduate certifications are credit-based programs offered by colleges or universities. They tend to focus on a specialized field and require fewer courses, so they can be a smaller time and financial investment than an MBA.

Professional certifications are offered by companies or national organizations and are typically sought out by those looking to be certified in a specific skill, role or software program. Some certifications can include a number of courses, while others involve passing an exam. Costs will vary by program.

A mini-MBA can come in many forms. Universities may offer a mini-MBA program that functions similarly to a business certificate program — you can earn credits that count toward an MBA degree in the future. Other organizations — like Abilitie, a leadership development company that offers a formal 12-week mini-MBA — have non-accredited programs focused on sharpening specific business skills.

A mini-MBA program can make MBA-level skills accessible to those who otherwise might not have the opportunity, says Luke Owings, vice president of product at Abilitie.

Mini-MBAs and other business certifications are not the same as an MBA degree. How employers value these programs can vary by company.

Trea Branch writes for NerdWallet.

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Collapse of SVB, Signature Bank: What You Need to Know

Two banks have collapsed since Friday, the federal government swooped in to save the day, and there’s still a lot of uncertainty about what comes next.

Depositors at Silicon Valley Bank — which failed Friday after a bank run — and New York-based Signature Bank — which collapsed Sunday — will see their money guaranteed by the federal government. In a joint statement Sunday, the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. said all deposits at both banks would be guaranteed — but not at the expense of taxpayers. Depositors were told they would have access to their money Monday. The move was an attempt to alleviate systemic risk to the banking system and shore up public confidence, according to the statement. In other words, the federal government hoped to ward off the potential for a contagion of collapses that could destabilize the banking system and cause an economic crisis akin to the Great Recession, in late 2007 to mid-2009. Since 2001, there have been 563 bank failures, according to the FDIC, but these are the first since Kansas-based Almena State Bank in October 2020. SVB and Signature Bank’s collapses were the second and third largest in history, with Washington Mutual — which fell during the 2008 financial crisis — still No. 1. The markets responded to SVB’s collapse with a swift decline Friday. On Monday morning, after the Fed’s joint announcement, markets were jittery, indicating high volatility in an uncertain financial climate. Bank stocks, especially regional bank stocks, have plunged.

How SVB and Signature Bank Collapsed

In the joint news release, the Fed said: “The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.” But not all reforms have stuck. In 2018, under then-President Donald Trump, Congress rolled back Dodd-Frank Act regulations for regional banks with under $250 billion in assets. At the time of its failure, SVB had $209 billion, according to the FDIC. Senate Banking Committee Chair Elizabeth Warren, D-Mass., cited the rollbacks as a contributor to SVB’s collapse, saying the decision reduced “both oversight and capital requirements.” So how did it happen? The simplest answer is a bank run, which happens when depositors withdraw their money simultaneously out of fear of insolvency. On Wednesday, CEO Greg Becker sent a letter to shareholders telling them that SVB had lost $1.8 billion on the sale of U.S. Treasurys and mortgage-backed securities. Becker indicated the bank planned to raise $2.25 billion to bolster its finances. This announcement sparked a panic among its customers, who collectively withdrew $42 billion from their accounts Thursday. By Friday morning, SVB had a negative cash balance of $958 million. The FDIC said it had taken over SVB and established the new Deposit Insurance National Bank of Santa Clara. (Disclosure: NerdWallet also banked with SVB before its closure.) Then on Sunday, New York state regulators closed Signature Bank, a lender primarily serving real estate and law firms that recently started focusing on the cryptocurrency industry. A similar bank run happened at Signature. The FDIC took over the same day and established a new Signature Bridge Bank N.A. Without government intervention, the collapse of SVB could have been catastrophic for depositors with large accounts. Deposits are FDIC-insured only up to $250,000 regardless of whether the account was individual or corporate. More than 90% of SVB’s deposits were not insured by the FDIC, according to a Bloomberg analysis of recent regulatory filings. SVB was known as the bank of choice for startups, venture capitalists and tech companies. Its collapse Friday raised questions for some companies about whether they would be able to meet payroll.

Was this a bailout?

Calling this a bailout or not is semantics. Either way, the federal government wants to make sure you know that the burden is not falling on taxpayers. In the joint announcement, the trio of government agencies indicated the Deposit Insurance Fund would cover the money in depositor’s accounts. The Deposit Insurance Fund is funded through fees assessed on financial institutions as well as interest on government bonds. President Joe Biden, in a televised address Monday morning, repeated this sentiment: “No losses will be — and I want — this is an important point — no losses will be borne by the taxpayers. Let me repeat that: No losses will be borne by the taxpayers.” The Federal Reserve Board also announced it will make additional sources of liquidity through the creation of a fund that would safeguard deposits. The new Bank Term Funding Program will offer loans of up to one year to banks, savings, associations, credit unions and other eligible depository institutions that pledge U.S. Treasuries, agency debt and mortgage-backed securities as collateral. The program will have an initial $25 billion available made possible by the Exchange Stabilization Fund.

Will the Fed still raise interest rates?

The bank failures may soften the Fed’s stance on interest rates. The hawkish tenor of Fed Chair Jerome Powell, in his Senate testimony last week and with the February rate hike, indicated a 50-basis-point increase was likely for the March rate decision. But the SVB and Signature failures have clouded that outlook. In a widely reported analysis of the failures, Goldman Sachs said it no longer expects the Fed to deliver any rate hike at the March 22 meeting, adding they had “considerable uncertainty about the path beyond March.” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., was widely reported saying he expects a 25-basis-point hike at next week’s meeting. As of Monday, the CME FedWatch Tool indicated the probability of an increase next week is between no hike and a 25-basis-point hike.

What happens next?

On Monday, Biden’s message aimed to assure Americans of the safety and strength of the U.S. banking system. He indicated management of these failed banks would be fired and investors in those banks would not be protected, and he called for a full account of how these failures happened. Finally, he called on Congress and banking regulators to strengthen the rules for banks to lessen the chances of additional failures. The FDIC will facilitate buyers for SVB and Signature Bank. It will also sell off SVB’s assets to be used for future disposition.