When salaries fall after MBA

The economic slowdown has dashed the big-buck dreams of many masters in business administration (MBA) graduates. Even as business school placements and salaries offered by companies slide, many graduates are settling for packages that are even less than those they were getting before quitting their jobs to pursue management degrees.

Take the case of Ritesh Raje (name changed on request), a Bangalore resident who two years ago secured an admission in one of the Indian Institutes of Management (IIMs). At the time, the electrical engineer from the Indian Institute of Technology, Delhi (IIT-D) was working with a semiconductor company for a cool annual package of Rs 8 lakh. What he’d expected after an MBA degree from the prestigious IIM was a minimum 30-40% jump in salary.

But now, after completing the rigorous two-year course that cost him Rs 8 lakh in fees, all Raje can expect from his new job in the marketing section of an education company is Rs 7 lakh, less than what he spent on the MBA and what he earned before joining IIM. “MBA has added no value to my credentials,” says Raje.

The plight of management graduate Rajita Mehta from Mumbai is no better. Presuming that an MBA degree would double her salary, as it had for her brother, she secured admission in a top business school in Mumbai after four and a half years of working with an information technology (IT) firm in Bangalore. The 28-year-old was earning Rs 7.5 lakh at the IT firm but now has to settle for a Rs 5 lakh package.

“My reasoning is that it’s quite good in these tough times, but no way comparable to what I used to get,” Mehta says. Had she continued working, annual increments would have pushed her package above Rs 8.5-9 lakh. “I’ve lost two years on work experience. Maybe later the MBA will be of use, but right now it’s quite a demoralising feeling,” she says. Like these two, many others grads are rethinking their decision to jump the MBA bandwagon.

On an average, this year’s placements across the top management institutes in India, including the IIMs, have seen a 20-25% dip in pay packages and a 30-40% drop in the number of offers.

Bhupesh Gupta, business manager at Bangalore-based recruitment firm CareerNet Consulting, said several management pass-outs are distraught that the packages they are getting now are 10-20% lower than those they were getting before joining management programmes.

“If a person was getting Rs 7 lakh per annum when he was working, we should add 12-15% as increments in the two years that he spent studying. He did an MBA in the hope that he will get 30-40% more than the Rs 7 lakh. But now due to the situation, he ends up getting not even the Rs 7 lakh he earned earlier,” says Gupta.

Some staffing experts, however, see the situation improving ahead. Going forward, MBA degrees will help the grads get a competitive edge over others, they feel.
Rajesh AR, vice president at Bangalore-based staffing firm TeamLease Services, says, “MBA opens up career opportunities and makes people multifaceted. Though right now some people might regret having done it, in the long run, when the situation improves, it will surely go a long way in giving them better opportunities.”