The Value of MBA Education in the Japanese Labor Market

Abstract

In this article, the authors analyze master of business administration (MBA) education, which now accounts for a major portion of advanced professional studies and has gained an important place as the education of choice among those in the white-collar business world. Traditionally, Japanese companies have provided all education internally through on-the-job training, creating little demand for specialized business education by institutions external to the corporation. However, since the establishment of a professional graduate school system, MBA programs have begun to proliferate. An analysis using data from an independent survey conducted by the authors in 2006 revealed that, on average, students who received an MBA had a greater return on investment in terms of higher wages over and above their undergraduate counterparts regardless of whether the students paid the tuition privately or were company-sponsored. The degree also brought additional nonmonetary benefits. The reasons companies cited for investing in the education of workers were: (1) to ensure the availability of talented human resources to draw upon; (2) to provide incentives for younger workers; (3) to use as an alternative to promotion; and (4) to utilize the skills that the graduate acquired. However, because of a rising tendency of people to leave the company after acquiring the degree, the reason stated in (4) above often goes unsatisfied, prompting many companies to scale back on the number of people they commit to MBA programs. As a result, now roughly 70 percent of people who pursue an MBA finance their education by borrowing funds and seeking scholarship or grant opportunities. This has not only caused the demand for educational funding to increase, it has placed a significant financial burden on the individual pursuing the degree. Given these conditions, we can presume that the current level of investment in MBA education is probably lower than the true level of demand. In order to ensure that the content of MBA programs serves the needs of the market, a system of public support and funding through scholarships and financial aid should be made available, particularly through means that provide direct support to individuals. Furthermore, it is essential that corporations, in order to fully enjoy the benefits from sending employees to achieve MBA status, provide the salary and job specifications that are appropriately aligned to the efforts and abilities of those employees. Unfortunately, this is not usually the case, prompting people to quit, eliminating any opportunity for the company to capture benefits from the degree. Furthermore, because loyalty to the company sponsoring an employee may be high, and if the individual is especially ambitious on the job, dissatisfaction may be even greater when he or she returns to the sponsoring company, prompting some to seek employment elsewhere. By better assessing the value of an MBA and by utilizing those abilities attained through MBA studies, the adjustment costs from employee turnover can be avoided, thus yielding significant social consequences. Compared to programs overseas, MBA programs offered in Japan are cheaper to obtain given the familiarity of the geography, language, and environment; however, the post-MBA benefits are more significant when achieved overseas. No significant post-MBA education effect could be determined when study occurred in Japan. One reason for this may be that the needs of industry are not being fully reflected when it comes to the selection of students and course content of MBA programs in Japan, and not all graduates are highly regarded. The MBA programs in Japan should really be geared toward developing the curriculum and training human resources in a manner aligned with the labor systems and environment in Japan—an aspect that overseas MBA programs cannot achieve. By providing the venue or means by which good information can be exchanged, allowing for the appraisal of MBA programs by outsiders, we can develop a system that services educational needs in accordance with demand.