The Bloomberg headline is “There are 340,000 Fewer Accountants, and Companies Are Paying the Price” but the real headline here is “There are 340,000 Fewer Accountants Because Firms Wouldn’t Pay the Price.” The price of competitive starting salaries, that is. Public accounting is a playground where the future accountants of industry cut their teeth and with the herd of fresh faces thinning out every year since 2016, the effects of missing cogs in the machine are now observable in capital markets.
Let’s check out what Bberg said before I inject too many unrelated metaphors into this:
Mistakes continued to pile up this earnings season in the wake of Lyft Inc.’s market-roiling typo: Planet Fitness Inc., Mister Car Wash Inc. and Rivian Automotive Inc. all had to correct their quarterly earnings statements. These types of errors shake investor confidence and in extreme cases can result in heavy fines from the US Securities and Exchange Commission.
While it’s unclear what exactly led to the mistakes in each of these cases, one major risk factor has reached crisis levels: a shortage of certified public accountants.
Seasoned practitioners are retiring while the profession isn’t drawing the next generation of workers entering the labor market. The lack of help means current accountants’ hours and workloads can be grueling, upping the odds of mistakes and burnout.
Hints of a potential problem began to emerge in 2014-ish though up until the past few years it was only us screaming into the void about a talent shortage while accounting enrollments declined further every year. Then Wall Street Journal took notice and, well, the accounting news market has been saturated with SHORTAGE! articles since. And every time one of those is posted to r/accounting, a cacophony of voices cry, “There’s not a shortage problem. IT’S A SALARY PROBLEM.” (Side note mostly to self: Don’t write blatantly sarcastic headlines about this matter as all of r/accounting except for the one person who read the article will call you a moron and jerk)
It’s refreshing that the Bloomberg article addresses the salary issue rather than asking as if the answer isn’t already known “where have all the accountants gone??” Author Jo Constantz deserves a 🫡 for that. She could have given it a sentence or two, worse she could have hand-wrung about it like the AICPA does when they come up with dozens of reasons other than low starting salaries for why the accounting profession isn’t as attractive as it once was in their regular brainstorming meetings. Instead she not only thoroughly acknowledged it, she threw some actual numbers in there, too.
For many 22- to 27-year-olds, known as Generation Z, their average student debt of more than $20,000 and the lure of higher-paying Wall Street and Silicon Valley firms means the time and effort required to become a CPA doesn’t pencil out.
Last year, the median salary for full-time entry-level accounting jobs was roughly $62,500, up from about $50,000 in 2020, according to Handshake data. The median pay advertised for entry-level management consulting and financial analyst roles, by contrast, was $70,000 and $75,000, respectively. For software engineers, the median entry-level pay was $93,000.
To attract people to accounting, the profession must “own up” to stagnant wages, Paul Munter, chief accountant to the SEC, told an American Institute of CPAs conference in December.
Note: The esteemed Paul Munter graduated from Leeds School of Business in 1978. Here are some figures from a 1982 Bureau of Labor Statistics report entitled Occupational salary levels for white-collar workers (1982 is basically 1978 right):
LOL:
$17,266 for a public accountant starting out in 1982 = $55,524 today. While demand for accountants has increased significantly since, as has the regulatory and compliance burden AND the base level knowledge expected of even the dumbest accountants, salaries have stayed…meh. It is literally not worth it for many students. Gen Z is smarter than we geezers give them credit for.
Back to the topic at hand. While we aren’t sure a shortage is to blame for all these restatements, we do know material weakness disclosures due to lack of accounting staff started appearing in SEC filings last year and there is a municipal crisis brewing as cities lose their credit ratings due to late filings and audits, too. The dominoes are falling. Too bad no one did something about it back when there was still time to turn it around.
Alps Mutual Funds Services is looking for an experienced professional that has direct mutual fund experience.
I’ve never understood why anyone thinks the shortage of accountants is a “crisis”. The firms willing to pay competitive salaries and benefits will always be sufficiently staffed. The firms that are cheap or who do not value accountants (or accounting), will not survive. This is basically textbook “Survival of the Fittest”, which is what our capitalist economy is based upon. So, again, what’s the problem?
If BODs, management and investors are concerned about the accuracy of their financial statements, this is something that can pretty easily be fixed.
Collateral damage. A couple of Enron/Worldcoms at minimum impacting thousands of employees and pensions, or at worst setting off a recession all because the cheap companies didn’t value their accountants which causes people to lose faith in the financial reporting of all companies because it’s impossible to differentiate.
Darwinism = Capitalism
The cool thing about recessions is that companies still need accountants.
We need to get rid of the 5th year, it is damaging the profession. The salary levels might be more palatable if people could start working / get paid after 4 years and not need to pay for a useless 5th year. Telling me as an employer I need to up compensation levels is telling me I need to pay more to subsidize an inefficient system. We already pay more per hour than Big 4 for new grads, and we pay for OT.
This is a good point. I hadn’t looked at the five-year rule from the private industry employer perspective before.