MBA Programs are Growing, But Something More Interesting is Afoot

In January, we released a detailed report on the MBA market, examining trends such as enrollments, program sizes and modalities, job postings, and earnings premiums – almost all of the most-utilised indicators used to evaluate the demand for academic programs.

I wrote it. And I’ve also done in-depth market research on this market dozens of times over the past decade. And I appreciate the opportunity to share some headline findings and analysis, as well as a data point that may have been overlooked in the coverage more broadly.

Key Finding: MBA Enrollment Growth Resumes

The most notable finding of our research is that, after a decade or so of declines, enrollments in MBA programs are growing again, growth that we predict will continue for at least the next five years. The most common question we’ve received about this reversal is, why?

The first thing to understand is that the peak in MBA enrollments around 2010 wasn’t just a recent peak; that was likely an all-time high for MBA enrollments in the United States, the data gets a little murkier the further back in history you go, but I’d say that’s a sufficiently supported fact. So, when we talk about the recent decline in MBA enrollments, just keep in mind that we’re talking about a short term pull-back from all-time highs.

Factors Driving the Uptick

So, why has this temporary pull-back period seemingly ended, and growth resumed? In my view, a few factors are converging to drive this uptick. First and foremost, is that all higher education enrollment numbers have begun trending upward lately, and “rising tide lifts all boats”. The second is a general increase in the availability and acceptance of online education programs in general, a trend that has also boosted online graduate programs such as the MBA. As adoption of online learning has increased, acceptance of online learning has also increased, causing a larger share of the potential, and then actual student populations to increasingly shift towards online. At the same time, job postings for MBA holders are increasing and the wage premium for an MBA has remained on a consistent (albeit small) growth trajectory. All of this is happening during a tightening overall labor market, meaning that potential MBA students have fewer opportunities for career growth other than pursuing an MBA. This means the MBA has value, contrary to some of the recent media coverage. And as a general rule, as value remains, abundance increases, and opportunity costs go down, purchases (enrollment) increase.

The Shift to Online MBA Programs

Another attention-getting finding from our report is that a majority, about 58%, of all MBA students are now in exclusively online programs. The question this induces is what this means for students and, correspondingly, what this means for schools and MBA providers.

For students, the trend is largely beneficial as online programs offer more flexibility and access (and frequently lower cost). And, as more students choose online options and more online MBA programs enter the market, competitive forces are likely to keep the number of opportunities high and relative cost low.

Implications for Educational Institutions

For Colleges, an increase in MBA online enrollment share may be enticing, but it’s not easy. As online programs enter the market, their per-program sizes are shrinking, even though overall numbers are rising. Additionally, as mentioned, cost pressures in a competitive market are real, which can drive revenue down and make startup and marketing costs feel relatively more significant. In other words, moving your MBA program online is no longer a “differentiator.” It is the norm. Institutions still have to go through the basic process of differentiating their offerings via labor market alignment, leveraging internal strengths or expertise, etc.

Opportunities for Traditional On-Campus Programs

At the same time, on-campus MBA programs may feel threatened, but also face opportunities.

Consider the example of small local boutique stores. Walmart and Amazon came along and absolutely crushed that market, but not every small boutique died. The successful ones succeeded by not copying Amazon, but by being recognised and trusted by a smaller, more captive local audience. Likewise, on-campus MBA programs need the self-awareness to understand their strengths and develop a true reputation for excellence, or refinement.

Additional Drivers of Online MBA Growth

While we’re on the topic of online MBA programs, most people may assume that their growth is due to their most general advantages of cost and access. That’s true. But in the MBA space specifically, two other, admittedly smaller, trends are also driving a swell in online interest.

One is that a small number of schools have shuttered their on-campus programs, fully committing to online only. This is a market signal and also serves to slightly limit the number of seats in traditional programs, while the number of seats online continues to grow. Two is that the workforce trend of “education as a benefit” continues to show stability and growth. MBA programs are popular, even dominant in education benefit programs and many, nearly all of these programs, offer only online options, probably owing to their standardisation and lower costs.

The Role of Admissions Testing

Finally, though it’s featured well in the report, trends of MBA admissions or assessment tests were, for the most part, is missing in the coverage. That’s understandable. MBA or graduate school admissions tests are a sub-set of a sub-set in higher education. Nonetheless, what’s going on in the testing space, and how that’s driving MBA enrollments and interests, is fascinating and potentially important.

Only about 30% of prospective or actual MBA enrollees take either the GRE or the GMAT, the two most popular tests. Generally, most online MBA programs don’t require such a test. So most of the interested students (70%) are opting out of testing because it’s not necessary to access or complete the largest portion of the MBA market, the 58% of enrollments that are online. If you don’t need to take a test, why would you? That’s not too surprising.

A Bifurcating Student Market

What is surprising is that taking the GRE or GMAT is becoming a very strong indicator for program modality, prospective students who take admissions assessments strongly prefer on-campus programs. Those who don’t, don’t.

As of 2023, 65% of those who took the GMAT wanted a traditional, on-campus MBA program. For the GRE, the on-campus preference is a lopsided 86%. What’s even more remarkable about these preferences is that since 2018, for both the GMAT and the GRE, test-taker interest for online only programs has gone down. In 2018, 13% of GMAT testers said they wanted an online program. In 2023, it’s down to 11%. For GRE test-takers, the online preference dwindled from 8% to just 3%.

At the same time, from 2018 to 2023, preferences of those who did not take the GRE or GMAT went in the opposite direction. In 2018, not quite one in three (32%) of non-test-takers said they wanted an online MBA. In 2023, that percentage ballooned to 60%.

Those are clear signals that the pool of MBA students is bifurcating along easily recognisable lines, a large and growing pool of non-test takers lining up for the online only programs that don’t require them and a small but still significant pool of people who take admissions tests and increasingly want the on-campus MBA experience. It’s a trend that schools, and perhaps also hiring managers, may wish to understand.

The MBA’s Bright Future

I’m not sure the MBA was ever pronounced dead or canceled, even when we were seeing year upon year of diminishing interest and enrollments. But our report shows the MBA is not dead at all. In fact, it may be poised for a long and steady climb, or even a rebirth as interest in and availability of online options grow, prices continue a relative decline, and the degree retains market and wage value.

By Brady Colby is the Head of Market Research for Validated Insights.