If Your Boss Has an MBA, You Might End Up Earning Less Money

U.S. executives with a business degree are more likely to oversee declining pay at the businesses they run, yet tend not to deliver an increase in profits or sales, according to a new paper circulated by the National Bureau of Economic Research.

Wages at companies that hired managers with business qualifications fell by 6% within five years of their appointment, while the labor share of profits dropped 5 percentage points, the paper, by economists Daron Acemoglu, Daniel le Maire and Alex He, showed.

“Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, whereas business managers do not. But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities.”

The paper suggested the schools themselves played a big part in this outcome:

“We estimate that most of the wage and labor share results we present can be explained as the treatment effect of business education rather than a selection effect.”