The Accounting Talent Shortage - Accounting Graduates
In recent months, the United States has been facing an unprecedented talent shortage across many job markets. The causes of these shortages have been present for many years but reached a boiling point because of the effects of COVID and the related changes in economic and company policies. Professional accountants and CPAs are no exception to these talent shortages, and the provision has been feeling a strain on both entry-level staff as well as experienced workers. Today, we are going to talk about some of the causes of talent shortages that affect entry-level staff and college graduates looking for positions.
In the last five or so years, students graduating with accounting degrees and students graduating to pursue the CPA certification have declined in numbers. Different schools have been affected differently depending on their typical enrollment status, but in general the enrollment numbers are down across the nation. I have gathered that this decline could be due to any combination of the following factors:
The 150 credit hour requirement - in many states, a CPA license requires that you have 150 undergraduate course credits to be licensed, which is the equivalent of 5 years of college education. The problem with this is that students can complete all the other course requirements for the CPA exam in 120 credits or less, which is the benchmark took burning a bachelor's degree. With the rising costs of education and the extra effort that would be needed to complete another year's worth of schooling, many students will shy away from pursuing an accounting degree or the CPA license.
Professional certification requirements - the CPA exam is known to be one of the hardest professional exams out there, and passing it requires an immense amount of effort on the part of the candidate. Many college students hear about this exam and immediately cringe at the thought of taking an exam after they're done with school. The difficulty of the exam is compounded by the fact that many people will need to take the exam after they start working a full-time job when studying for the exam can be a full-time job by itself. While some people are fortunate enough to take some or all the exams before they start working, this isn't always the case for everyone and there are plenty of horror stories of aspiring CPAs who could never pass their exam while juggling work responsibilities.
Starting pay - so let's say you've taken the time and effort to become CPA eligible with 5 years of education and pass the CPA exam, what do you think your starting salary would be? If you guessed less than someone with a computer science degree that only took four years and did not require the huge sacrifices involved with passing the CPA exam, you would be correct! (Quick research on www.payscale.com shows that entry level auditors average in the mid $50,000s, while entry level CS people average in the high $60,000 across the nation). Especially once you have your CPA license, careers in accounting have great salary potential, defined progression, and plenty of paths to choose from. The issue is that starting salaries in the profession have not kept up with other competing professions in recent years. Fun fact, after adjusting for inflation, accounting new hires in 2021 at some firms are making 11% less than those hired in 2016.
When You Combine These 3 Factors Together, You Get:
A career that requires extra education before you can obtain a well-respected professional license that also requires you to set aside time and effort to take a rigorous exam (sometimes while working full time) which pays less in the beginning than a job in a different field that requires less education and no professional exam.
There is a good number of students who are not going to consider the long-term benefits of the accounting degree and CPA licenses when the short-term differences are so large compared to other degrees, which will create a shortage of talent for new graduates.
How Can It Be Fixed?
The core problems that lead to these issues in the accounting student pipeline come from many sources. Correcting these core problems may be difficult, and will certainly require major changes from firms, universities, and the state boards of accountancy that issue CPA licenses. To get more students interested in accounting, one or more of the following measures should be taken:
Decrease the barriers to entry by allowing students to become licensed with only 120 college credits. The benefits and costs associated with this requirement have been discussed at length by others and many believe that having an extra year of philosophy classes does not meaningfully contribute to the prestige of the CPA license. For those worried that a change of this nature would make getting the credential too easy, changes could even be done by having an alternative to the education requirement with work experience: if a student does not have the 150 college credits, then just require an extra year of work experience. This way, the students don't have to pay more money or go into more debt for the license. Or just lower the 150 credit hour requirement to 120 credit hours and be done with it.
Decrease the burden of taking the CPA exams. I don't think that the CPA exam should be made any easier because it should maintain its status as a well-respected and difficult to obtain professional credential. However, some aspiring CPAs could be helped by having more support and time to study for the exam before they start their first job. Firms that help their people pass the exam by offering time off and other support to ensure the successful completion of the exam outside of peak busy times will be far more attractive than other firms that don’t
Pay people better / rework busy seasons - when comparing the effort that is required to become a CPA with other options, it doesn't stand out as one of the better options in the first few years of someone's career when considering the starting salary and quality of life. Fewer people are willing to endure being overworked and underpaid for a few months out of the year for a few years before they move on to greener pastures. By increasing the starting salaries and reducing the number of hours worked, students will be more attracted to these entry-level positions. If a change of this nature requires significant changes to the ways firms approach staffing, compensation, and job pricing, so be it. Sooner or later the lack of qualified candidates will force firms to make these changes anyways.
How Does This Affect Me As A College Student?
While the information that I've shared might paint a bleak picture for firms looking to fill their talent pool, the aspiring CPAs reading this can only benefit. Anecdotally, there have been plenty of perks provided to the most recent start class depending on what firm was recruiting them. Some firms had provided higher salaries then they have before, signing bonuses, and sometimes more favorable remote work arrangements. Additionally, because firms are having a harder time filling out their full time and internship classes, recruiting season has been going on longer than it has in previous years, allowing more students the opportunity to apply. If you were a student who was looking for a job or internship, be sure to keep applying because there are likely more spots available than you think.
Even though I talked a lot today about how an accounting talent shortage has been affecting campus recruiting, there is still more to talk about. Talent shortages have been affecting experienced hires too and with the current distribution of CPAs, firms may be in even more trouble when looking for experienced personnel. Be sure to check back next week where we will discuss how talent shortages are affecting the experience hires and higher ups.