What If There Is A Recession?

Oooof! The inevitable question every person is bound to ask themselves- student, or not.

 

Graduating from undergrad during the recession of 2007-2009, I immediately enrolled in a graduate program. It seemed to be one of the most logical ways to ride out the recession. My biggest takeaway was that immediately enrolling in a graduate program with no work experience leads to pursuing a degree you may never use. Honestly, I even wonder if things could have turned out differently if I worked for a few years, discovered my true passion and then went to grad school- so shoutout to MBA programs for requesting applicants have at least 4+ years of WE before enrolling!

 

But I digress.

 

What if there is a recession when you graduate with an MBA that likely sunk you six figures into debt? On the one hand, a recession is all but inevitable at this point. The economy has been red hot for a while and a dip/correction/downturn is going to happen in the future. Is it Coronavirus going to push us into a recession? Is it years from now? Too hard to tell, BUT Billionaire Bill Gates and renowned PE firm KKR are both predicting one.

 

There have been quite a few questions about this on GMAT Club and Reddit, so I'll try to consolidate answers.

 

Generally speaking, it would suck. There is no doubt that the expectation with an FT MBA is that you will increase your earning potential and/or pivot into another career. If a recession strikes, it is very likely that employers at large firms will be looking to cut costs so the idea of paying a freshly minted MBA $150k isn't the most appetizing.

 

However, the news is not all bad.

 

In fact, Business Insider analyzed the 5-year average salary of MBA graduates from the class of 2008 (can you believe some of the brand new bankers had to RETURN their sign-on bonuses?) and found that at top 10 programs, graduates were clearing over $200k in 2013. My favorite reassuring quote: "And the MBA alums at 59 of 70 ranked U.S. schools and 22 of 24 ranked international schools are all in six-figures." It is important to note that earning $100k is very different than earning $200k even though they are both 'six-figure' salaries. When you factor in the opportunity cost of an MBA, personally I am looking to clear at least $150k upon graduation.

 

Ok so now there is a context for an MBA candidate who graduates right just as a recession begins. What if a recession strikes just as your degree starts?

 

Lucky for us, CNBC took a peek at MBA graduates from the class of 2010. An incredible 94% of graduates from the world's top 100 MBA programs (51 programs are in the US) achieved the pay raises they had hoped for when they began their MBA! That's awesome! This was a pretty surprising quote, "Although substantial, today's salary increases are a far cry from the glory days of the mid-1990s, when MBA graduates from the top US schools saw salaries triple during the same five-year period. Many of those have gone on to lead some of the world's top corporations." The article even refers to pursuing an MBA as recession proofing, which I honestly had never heard, but am certainly emboldened by.

 

So what's the takeaway?:

 

  • Look at your potential MBA program employment reports!! I think this is the most important thing you can do

    • In the same way, you need to remember that just because Goldman Sachs recruits at your campus does not mean they recruit for IB, you should remember that every school reports data differently! Look at any appendices or asterisks noted next to recruiters and salary data.

    • Go back in time! A program should have published reports from the previous recession so take a look. Notice that there is an inevitable dip (yes, even at H/S/W). Is it focused on industries you are targeting?
       

  • Before putting down the deposit ASK QUESTIONS

    • You're about to drop six figures and devote 2 years of some prime working years to a degree, they better be able to explain what happened during the last recession to their program graduates. They should also be able to share lessons learned, proactive actions and any precautionary measures they're taking now.
       

  • Read. A lot! Subscribe to newsletters and check the news frequently, to better understand the state of the economy and its impact on your target industries. Of course, I am partial, but I have a whole host of my daily reads that provide me with a great deal of information every morning.

 

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