The Accounting Talent Shortage Isn’t New, You Guys

Although the accounting talent shortage seems like something that just popped up out of nowhere and couldn’t have been predicted, oh ten years ago I feel compelled to remind everyone that we here at Going Concern saw it coming. I’m not saying that in a “hurr durr I’ve been talking about this for ten years and no one has listened” way, I’m saying the writing has been on the wall for a long time so the profession really shouldn’t be surprised that we are done here.

While working on an unrelated article today, I was digging through our archive of over 15,000 posts dating back to 2009 and came across something I wrote in 2012 about an upcoming talent shortage. It’s oddly prescient now, which is amazing considering how inebriated I was at the time. Granted, we said a lot of nonsense back then, so maybe it’s just a stopped clock situation, who knows.

Anyway, the starting point for the old article was a Buffalo Business First article about Freed Maxick having trouble finding entry-level grunts. Not necessarily a “sky is falling” situation, as non-Deloitte-EY-KPMG-PwC small businesses have always struggled to find talent against the recruiting Goliath that is the Big 4. But as and as you get to the bottom of the post you see something was brewing (other than the Flying Dog Raging Bitch I was greedy for when I wrote this).

Picture this: university accounting programs were rejecting folks back then, that’s how strong the pipeline was. Remember, it was just a few years after the Great Recession when people piled into accounting, as it was one of the few industries to reliably hire in 2008-2009. The word “oversaturated” comes to mind. Is there really a shortage of entry-level accountants? published here on December 3, 2012:

With billions of articles about the quality of accounting, record numbers of people taking the CPA exam, and around 3% unemployment in accounting, you’d really think there would be a huge backlog of fringe newbie candidates. desperate for work and not enough positions to stuff their hot bodies into.

Companies have always competed for the best talent, otherwise there wouldn’t be recruitment events and seminars for recruiters with advice like “treat them like pampered pets”. You might recall Crain’s article last year about the company hosting steak dinners and Becker courses to attract new talent, Aronson making it rain with iPads or even the squeak-worthy display of teeth of generosity Price Is Right by Plante Moran. This is old news.

So where exactly is the disconnect? There should be tons of accounting grads drooling for jobs right now and plenty of jobs to do, right?

OK, ready for the prophetic part?

The AICPA’s 2011 report on trends in the supply of accounting graduates and the demand for public accountancy recruits showed record numbers of accounting students and graduates but also hinted that the demand for new talent could eventually exceed the supply:

A total of 226,108 students were enrolled in undergraduate or graduate accounting programs in the 2009-2010 academic year, up 6% from 2007-2008, the last time the AICPA conducted its investigation. A record 68,639 students earned an accounting degree in 2010. Nearly 4 in 10 accounting graduates hired by CPA firms last year had a master’s degree, up from 26% in 2008. In contrast, 43% of graduates hired had a bachelor’s degree, compared to 56%. In 2008.

Unfortunately, many accounting programs are currently rejecting qualified applicants, which the AICPA says is likely on the rise due to poor economic conditions at universities and a shortage of qualified faculty. In the report above, the AICPA reported that 13% of AACSB-accredited business programs each rejected an average of 165 qualified students, up from 6% in 2009.

Compare these numbers to the 2021 AICPA Trends report: the total number of accounting degree graduates from 1994 to 2020 peaked in 2015-16 (79,854) and for 2019-2020, which are the years covered by the 2021 Trends report, we had combined 72,923 bachelor’s and master’s degrees. graduates. This is a decrease of 2.8% and 8.4% at the bachelor’s and master’s levels respectively compared to the Trends report two years earlier.

Compared to the 2011 report, the numbers from the 2021 report look great. But as I had drunkenly predicted it would happen in 2012, the demand far outstripped the supply, which is how we ended up where we are now. In fact, I guess the AICPA predicted this, which makes it even more amazing that we’re here all these years later and no one has figured out how to fix this problem.

Two years after the publication of the text quoted above, the AICPA noticed that a gap was growing between accounting graduates and those taking the CPA exam. In other words, while accounting enrollments have yet to hit troubling lows—on the contrary, in fact, accounting enrollments were breaking records in 2014—not all of these people were going to pass and pass the CPA exam as expected. Something that has persisted to the present day and has undoubtedly led to many zolpidem prescriptions for benevolent CPA licensure lords over the years.

The 2012 article then references Robert Half’s 2013 salary guide and here Bob is like the guy from End is Nigh waving a sandwich board at the profession:

Accounting firms are hiring again in response to increased business demand for accounting, auditing and tax services. Companies of all sizes are looking to expand their areas of practice and conquer new market segments. Demand is particularly strong for audit and tax professionals. Specialty areas that are seeing greater hiring activity include IT auditing, business valuation, and forensic accounting. Companies generally seek candidates with at least three to five years of experience, but recruiting entry-level professionals is not uncommon.

Although accounting firms have a growing demand for staff, they are competing for talent with companies that have a renewed interest in recruiting people with some of the same in-demand skills. Accounting firms are thus improving compensation, but may need to work harder, both to attract new talent and to retain experienced accountants who may be tempted to consider more lucrative or lifestyle-friendly opportunities in the private sector.

Um, yeah, so that salary thing didn’t happen. When I was in CPA review in 2007 the starting salary at the Bay Area Big 4 companies was around $50,000. FIFTEEN YEARS AGO. IN A HCOL MARKET. Sorry for yelling. For too long companies have skated on the “prestige” that comes with having their name on your resume instead of competitive compensation and now here we are. Shocked – shocked I tell you – that students choose fields with as much if not more prestige and more immediate compensation instead of committing to at least two years in the Big 4 meat grinder for the promise of a better money down the road if they can just hack a few years from hell.

Pikachu surprised meme about cheap accounting firms

At the end of the article, I dropped my favorite CPA exam plot, a plot that may or may not have a basis in reality: If the talent shortage becomes severe enough, CPA exam pass rates will experience a jump that could not be explained by a crop of better candidates to study than those who came before them.

So apparently that means the old school is retiring much faster than it can be replaced, despite record numbers of accounting graduates and CPA exam takers. If the situation is really that bad, I wouldn’t be surprised to see CPA exam pass rates approaching 60% in the next few years.

Can you watch this? In 2019, the BEC pass rate reached 60. Granted, the FAR came in at 46. Well, you can’t be right all the time.

What was the purpose of all this? Well, people who have never seen accounting as the backbone of capitalism or at all now peer into our microcosm asking “Where have all the accountants gone? as news of a shortage of accountants reaches the general public and we want to make sure these outsiders are well informed about how good we are at predicting the future the forces behind this CPA shortage. To be clear, this did not happen with the Great Resignation or the Pandemic or when they turned on the Hadron Collider at CERN. This has been going on for a very, very long time and at the root are cheap accounting firms throwing pizza parties when they should have been offering more competitive salaries and a slightly better work-life balance. As the investment bank shows, new hires are willing to work grueling hours, but they’re just not willing to do it for crap pay. And that pretty much sums up the problem. You’re welcome.

Related:
What exactly is the profession’s “pipeline problem” and why should you care?

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