The Value of an MBA: A Comparison of Human Capital vs. Signalling
When discussing whether an MBA degree has value, we are really debating two different theories in labour economics. Michael Spence's signalling theory claims that credentials signal pre-existing ability to employers in situations where an employee's ability cannot be directly observed. Gary Becker's human capital theory states that education boosts actual productive skills independently of any signalling function for that degree. Currently (in 2026), the changing value of MBA degrees is best understood as a real-time test of which theory currently dominates — and the evidence suggests the answer is shifting.
Signalling Values Decline
Historically, an MBA degree has primarily acted as a signal to employers regarding candidates' basic business knowledge, ambition, and the ability to complete a difficult academic program. Because it has been so hard to verify these attributes during the interview process, a candidate's MBA has been a valuable indicator to employers regarding their potential performance in the job. According to Spence's model, as long as the costs and difficulties of obtaining an MBA are high, and as long as employers can only identify a candidate's true ability through high-cost methods, the degree retains its signaling value.
The value of the MBA's signalling aspect is slowly eroding due to the increased availability of cheap and abundant MBA programs and the fact that many employers now possess improved tools for assessing skills, including references, work experience, portfolios, and skills tests. As the signalling function becomes less reliable and employers acquire better evidence of a candidate's capabilities, signalling theory states that employers will begin to place less emphasis on the MBA degree as an indication of a candidate's skill level.
The Growing Value of Human Capital
At the same time, the human capital value of an MBA appears to be growing. According to GMAC's 2025 Corporate Recruiters Survey, the most valued skills employers seek in business school graduates continue to be problem solving and strategic thinking. Furthermore, there has been a 5 percentage point increase (from 26% in 2024 to 31% in 2025) in the demand from employers for candidates who have a good understanding of the use of AI tools is consistent with skill-biased technological change. As AI absorbs many routine analytical tasks, the comparative advantage of human managers shifts toward judgement, cross-functional reasoning, and the ability to interpret what automated systems are doing to the business.
This creates a clearer distinction between MBA programmes that develop transferable, firm-specific judgement and those that convey only title and prestige. A program that teaches students to connect the dots across finance, operations and strategy to understand that the weak sales demand, rising finance costs and delayed supplier deliverables are not three separate problems but part of one interdependent system in Stress that serves as genuine human capital in Becker's definition.
The Working Adult & Return Calculation
This difference is particularly important for working adults trying to balance the costs of an MBA and the potential Return on Investment (ROI). If the value of the MBA credential were strictly for signaling purposes, ROI would be driven only by prestige and recognition alone. Since both credential value and human capital now drive returns, the calculation must be based on curriculum fit, relevance to current and future professional challenges, and flexibility for employed professionals.
As a result of these changes in return, location and the structure of MBA programs have become more relevant than they were in the past to the choice of an MBA. For example, a person evaluating an MBA in Germany is implicitly valuing their decision based on the Human Capital they've received, as a result of the proximity of Germany to the major industries in Europe, including Finance, Manufacturing, Technology & Logistics. Therefore, the knowledge and skills learned can be immediately applied to the real-world challenges of their respective businesses, rather than primarily as a credential to be redeemed somewhere else.
A Transitioning Market
Becker and Spence were both attempting to describe benefits from the Credentials Market — the Credential Market is made up of both Signaling & Human Capital Effects, which have varying levels of relative importance tied to labour market conditions. The changes in market value occurring with the MBA marketplace between now and 2026 are a good illustration of this shift. As AI reduces the value of routine signals and increases the value of demonstrated judgement, the overall value of education credentials will increasingly depend on what they teach rather than what they signal.
This reframes the central question for prospective students. It is no longer simply "is an MBA worth it?" but "is this MBA building capability that the labour market is currently repricing upward?" That question can be most effectively answered using human capital theory, rather than signalling theory.
