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Accountants Have an Economic Problem
Companies can’t find accountants and it’s causing a problem.
What’s the problem?
The Accounting field is facing an economic problem. There is a shortage of accountants and it is starting to impact businesses. Colleges are graduating fewer accounting majors and accounting positions are left empty for extended periods of time. Empty positions mean a decrease in productivity and firms are left to file for an extension on their tax returns. This extension is an extra cost, one that would not be as likely to occur if accountants were not scarce. This is a problem, and one that needs to be addressed. Why is there a shortage of accountants?
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Why is there a problem?
When I went to college in the early 2000’s, Accounting was a highly sought after major. It was a stable job, and had a high starting salary. It still has both of those things, but the market has changed in other ways.
Preferences- fewer students are choosing accounting as a major due to availability of more desirable options. Matt Levin at Marketplace sums it up nicely, “Accounting has never been sexy, especially to young people not yet aroused by the thought of a nice 401(k) match.” There are other jobs out there that are similar and have better work conditions including less hours and a better work culture.
According to the CPA Journal, the voice of the profession, “The long-term success of CPA firms is tied to accommodating client needs. Doing so often means CPAs must work long and strenuous hours. The compressed busy season in public accounting can be especially difficult, as accountants can find themselves working very long hours for weeks on end under stressful situations.”
Barriers to entry- successful public accountants need to sit for the CPA, which requires the completion of 150 credit hours compared to the typical 120 credit hours as required by other majors. Stephenson and Meehan (2021), in an article published by The Center for Growth and Opportunity at Utah State University cite Carpenter and Stephenson (2006) “requiring 150 hours for licensure could serve as a substantial barrier to becoming a CPA because it requires the equivalent of an additional year of college education. Four-year colleges typically do not provide financial aid for a fifth year, so potential CPAs would incur increased costs of entering the profession unless they are able to obtain an employer reimbursement.”
Opportunity cost- the extra year of schooling required to earn the 150 credit hours likely means giving up a year of working full time and earning a salary. We talked to I Dr. Lee Kersting, Chair of Accounting, Economics, and Finance at the Haile College of Business who is working hard to help find solutions to the shortage of accountants and accounting majors. According to Dr. Kersting, “The implementation of the 150 credit hour rule meant that aspiring accountants need an extra year of college to become eligible for the CPA. This creates a double-edged sword for accounting… an additional year of costs and the opportunity costs of a missed year of earnings. While accounting firms have been increasing the starting salaries of new hires to offset these challenges, there are other business degrees that offer relatively similar starting salaries.”
In 2006, Carpenter and Stephenson published an article detailing the impacts of states implementing the 150-hour rule. As seen in the graph below, the five states that implemented the rule in 1998 when it was passed saw a severe decline in CPA candidates while three states that did not implement the rule experienced their usual trend of candidates. In the three years that followed, the five states which implemented the rule continued to experience lower than average numbers of candidates.
To alleviate the market shortage, employers will have to adjust to the changes. With the decrease in the supply of accountants, achieving equilibrium requires either an increase in compensation (the sum of wages and benefits) or a transformation in the work environment. After enough time struggling to fill positions, it is common for firms to begin raising salaries. However, in today’s environment where Gen Z prioritizes enhanced work culture over salary, companies are more likely to achieve greater success by prioritizing employees’ work preferences.