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150 Hour Rule: Let’s Keep Arguing About What Color the Drapes Should Be While the House is Burning Down

everyone arguing meme

Amanda Iacone at Bloomberg Tax has written the accounting niche’s 1,735th article about the accountant shortage and this time, as is often the case, the focus is 150 hours. Rather, how dueling factions within the profession are fighting for and against keeping it as the only option to CPA licensure. Let’s note here quickly that many of the “anti-150” folks aren’t lobbying to abolish it completely but to offer alternative pathways such as Minnesota’s proposal to create a second pathway to licensure that would require 120 units of education and two years of experience. Apparently South Carolina has joined them.

To summarize most of the article: barrier to entry, US workforce hemorrhaged 334,000 accountants and auditors in two years, pipeline pipeline pipeline, blah blah. Scrolling down we get to the important bit:

First-year audit associates can expect to earn $59,000 on average this year, up from previous years, while entry-level corporate accountants can bring in $65,500 on average, according to Robert Half salary data.

Wages rose quickly in the last two years, although growth has slowed this year, Britton said.

Companies, not just CPA firms, are struggling to fill senior accountant roles and jobs for accountants with three to five years of experience. The staffing shortage has driven up market rates, pushing typical salaries for senior accountants to $100,000, said Frances Moreno, managing partner of staffing firm Vaco’s Los Angeles office.

Despite recent pay increases, salaries haven’t kept up with the high cost of college tuition and wages for roles in competing fields such as finance, data analysis, or computer science.

Surgent’s Castonguay dismissed the recent raises, calling them a “temporary blip, not a correction.”

“How you improve the brand is by improving the work experience,” he said. “That’s getting rid of the 150 hours so people come into the profession, and paying them more.”

Professor Castonguay isn’t getting invited to any AICPA dinners any time soon.

Over at Financial Times, Stephen Foley delivered his own article on the pipeline topic, this one packed with juicy quotes from various Chicken Littles* warning that the sky is falling. Except it actually is and by the time the king does something about it, it will probably be too late.

Here’s Bob Cedergren, chair of the Minnesota Society of CPAs:

“The Deloittes and PwCs of the world have the masses, they have offices everywhere and the ability to draw on overseas talent,” he said. “We needed to take some action.”

And Julie Blaha, Minnesota state auditor:

“This is now a severe shortage, and it is causing a tsunami of problems. It’s a shallow pool, and we have to do something about the leak.”

And some Big 4 people who didn’t want to be named:

“The 150-hour rule has prevented many talented folks from joining the profession,” said one Big Four audit executive. “The cost of an extra year of school is prohibitive and isn’t necessary to succeed in public accounting, or business in general.”

At another Big Four firm, one executive pointed out that many states do not require that courses taken in the fifth year of education have anything to do with accounting. A senior partner involved in recruiting there asked: “Is there an alternative, such as learning on the job, which is as good as or better than learning in the classroom?”

Representing the king is longtime Going Concern favorite Sue Coffey (hey Sue, I know you are reading this 😘) of the AICPA:

[She] said having the equivalent of five years of higher education remains a good idea, and removing the requirement is no silver bullet for dealing with a talent shortage. It took about two decades of work to align all 50 US states around the current standards and get agreement to recognise each other’s licences, and trying to repeat the feat looks daunting.

“What exists is a very delicate system of agreement and trust,” she said. “This has been my challenge with Minnesota. It just takes one to upset the applecart and that could upend mobility across the country.”

Alright so if the profession can’t agree on 150 that leaves salaries as the next problem in need of solving. That one should be easy.

*I did not intend to imply any of the people quoted in this article are “yo-yo wielding simpletons

17 thoughts on “150 Hour Rule: Let’s Keep Arguing About What Color the Drapes Should Be While the House is Burning Down

  1. Accounting has the lowest average starting salary of any major in the business school I work in. I’m a fan of the masters and 150, but there’s no point in having that argument. The pipeline is busted before you even get to that decision because there are easier majors that pay more.

    Fix the salaries and you’ll fix the pipeline.

    All the 150-hour argument does at this point is help those already in the profession that would get licensed if it didn’t exist. It doesn’t do anything to drive more people to accounting.

    1. Bullshit. Half of the kids graduating business school with non-accounting majors can’t even find a job right out of college, much less a well-paying job.

    2. I disagree. The extra year of school is scaring people away. To anyone who says there is no study that proves that, I say it’s amazing what you can not find when you don’t look for it.
      We are already paying $60K plus OT for new grads who need (at least) a year’s worth of hand-holding before they can carry their weight. Telling me to increase that is telling me I need spend even more to subsidize an inefficient process.

    3. Hello Old Accounting Fart,

      I see why you might think that, but I disagree with you. I do not think its likely that starting wages will ever rise enough to justify a third of the average starting salary of the position to go back to school and also the time involved with that while working a full time job to obtain another superfluous 20 credit hours. Given the cost of education, I think the profession needs to pursue alternatives to higher education to obtain the standards it desires. As a younger person I am being asked to do these things at the point I also need to be starting a family, obtaining housing in a ridiculously under supplied market, working a job, etc… while money will do something to alleviate these pressures, there is a limit to the efficacy of simply increasing salary.

      More thought needs to be put into when you are asking these young people to make this investment of about a third of their starting salary, and then the time, to go take classes that MAYBE you use in your career. Not every accounting group has the resources of the Big 4 ether, so even if it works out for them, the rest of the profession suffers.

      I have been working as an accountant for about 11 years now, and hold down a corporate senior role currently. The reality is there is a perfect storm of factors going on here. You have increased complexity, large changes to the tax laws, and codifications in a relatively short period (Trump, 606, 842, etc). These things all have an effect on young people. Ultimately, people don’t want things to be stupid hard without a good reason and if they can do something less hard for money they will.

  2. @Big4Veteran
    Wait until placement rates for the 2023 class are available from schools (may be 90 days after summer graduation since that’s a standard reporting end).

    Maybe our institution is just amazing. I think our accounting department is, but if I post the name here you wouldn’t think of it as a national business school powerhouse that’s going to outperform the market.

    Last update we received internally was 90% undergrad placement across all B-school majors. $70k average starting salary across all majors. % is down from last year; $ is up.

    The numbers in the article above are great for accounting compared to previous years, but still lag behind other business majors.

    With starting salaries so low compared to other majors, you lose them at orientation. Not because of 150 hours.

    1. @Old Accounting Fart
      Let’s see how all those marketing majors do next time there’s a recession. The good lookin’ ones will probably be able to get a job on a stripper pole, but all the others…

  3. Salaries are the problem, all the way out to ~10-12 yoe. Basically anything that isn’t a partner isn’t worth it and we know only a couple of percent of people ever make it. Students see that and opt for another major from the get go. Fix that and you’ll fix the pipeline.

    1. I think the issue is that accounting has an image problem. The perception is that it’s boring, has no greater purpose, you’re a cog, and the hours are long. People comfortable with a ‘cog’ job want a 40 hour work week. The ladder climbers aren’t interested because we don’t pay like investment banks or law. The visionaries aren’t interested because we don’t make a difference or change society like a start-up or biotech. The run of the mill professional isn’t interested because there are much easier ways to make a decent living like computer engineering.

      I’d suggest the profession figure out what it wants to be and who it wants to attract. Then we can develop a strategy that caters to them.

      I am anti-150 but I have a hard time believing it is the issue unless we are after the people who want a job rather than a career. The 150 has to be one of the easiest “barriers” to entry to overcome. More than half of my starting class did it in 4 years. The credits can be in literally any topic and don’t even need to be in courses that affect GPA. Most (if not all) colleges charge by the semester and allow students to take 18-20 credits for the same price as 15. Just take one BS class on a pass/fail basis every semester. That’s 144 credits. Can pick up 6 credits at a community college summer/winter class or through AP credits. Anyone who thinks taking a class pass/fail is too much work probably should not go into public accounting…

      1. What you’re saying is true but the point is the 150 hours is a barrier with a significant cost that adds 0 value to the workforce. Students make rational decisions on what to major in. All other things being equal, if one major requires an extra year of schooling and tuition, and another one doesn’t, employers need to increase pay above the norm to attract them to the profession despite getting no extra value.

  4. The quote from Sue Coffey above … ” It took about two decades of work to align all 50 US states around the current standards” I suggest, if it were a good idea, it would not have taken two decades. The AICPA needs to own up to the fact that it was a bad idea that needs to be reversed. There is absolutely NO evidence to suggest the 150 hour requirement was a good idea. There is a lot of evidence to show otherwise.

  5. Production pay will solve many of these problems. Give the staff a good base salary and then incentivize for production over a pre-determined amount. The top performers will love it because they either have a great work/life balance or they get paid handsomely for working extra. However, to work them to death and then complain they aren’t productive is purely a function of big firm/old school mentality. Teach them to think like owners and learn the trade, pay them well to do the high quality work, say no to non-ideal clients and stop taking on low value work. The new generation loves a challenge and to see they are providing value to clients and their teammates.

  6. Break up the big 4. They each pass clients to each other and churn employees around like cattle. In addition to it some are government clients so it’s all conflict of interest as they cry for shortages to Fed.

  7. “A senior partner involved in recruiting there asked: “Is there an alternative, such as learning on the job, which is as good as or better than learning in the classroom?”” In most states, it used to be two years experience to get licensed before the push for the Uniform Accountancy Act. I think we should raise the standard back up to where it used to be.

  8. I would much, much rather have someone with 120 hours, CPA eligible and a year of public accounting experience under his/her belt than someone with 150 hours and no experience. Whether it is the main problem or a lesser evil is irrelevant, if it only slightly increases the pipeline it should be done. The only people who can say with a straight face that the other 30 hours are necessary are ones employed by the universities, or shockingly, the AICPA who are royally screwing up on this issue. A round of applause to the state boards who have told all the 150 hour enthusiasts to pound sand.

  9. one of the things no one wants to talk about is how much sacrifice is required family sacrifice of peak hours. In a world where both parents work why would anyone want to make a career out of job that requires an absent partner for months on end for no real premium paid for such sacrifice? I would think one clear answer for this is paid overtime. No one wants to hear it but it needs to be done. Either you fix the work life balance issue, or the compensation issue gets fixed.

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