Why Graduates Aren’t Hot on Accounting Careers: Low Starting Pay, Onerous Testing
Academics and recruiters say sluggish salaries and tough requirements to become a certified public accountant are damping demand for accounting degrees and discouraging graduates from pursuing accounting careers
By Anna Mutoh, published: The Wall Street Journal, May 12, 2023
Accounting majors in the class of 2023, the first to enter a postpandemic professional world, will find no shortage of demand for their services as the industry grapples with a scarcity of candidates. Photo: Thomas Wells/The Northeast Mississippi Daily/Associated Press
Graduates entering the workforce this year who are considering careers in accounting should see plenty of demand for their services as the industry grapples with a dearth of candidates. But even so, they may find what companies are willing to pay them underwhelming, particularly given the rigorous academic and testing requirements required to follow this career path.
More than 300,000 U.S. accountants and auditors have left their jobs in the past couple of years, a 17% decline in overall industry employment, according to the Bureau of Labor Statistics. Recruiters say experienced accountants are often moving into new roles in finance and technology. And the exodus is expected to worsen as baby boomers leave the workforce, with 75% of certified public accountants retiring or close to retiring in the next 15 years, according to the American Institute of CPAs.
“The need for tax accountants has never been stronger,” said Rod Adams, PricewaterhouseCoopers’ talent acquisition and onboarding leader. He attributes part of the demand to corporations facing a rapidly changing operating environment spurred by a technology boom and the attendant tax implications.
Yet even top-ranked university accounting programs are observing declining student interest in accounting careers. And even among those who enter as accounting majors, a sizable share don’t begin their postgraduate lives in accounting positions.
What’s more, while the accounting industry grapples with a labor shortage, the reality of a shaky labor market has also kicked in with all but one of the Big Four accounting giants slashing jobs this year. KPMG laid off nearly 2% of its U.S. staff in February, followed by a 1.5% cut at Deloitte and a 5% cut at Ernst & Young in April. So what can this year’s crop of graduates expect?
Modest salaries
Relative to other professions, the starting pay for graduates working in accounting can seem low. The median graduate working in accounting had a starting salary of $66,504 in 2021, compared with $97,562 in data science and $101,401 in tech, according to the Burning Glass Institute, a nonprofit that researches employment trends.
Michael Donohoe, head of the accounting department at the University of Illinois Urbana-Champaign, blames stagnant salaries for softening demand from undergraduates for accounting degrees.
“I would attribute a large portion of that national decline in accounting enrollments to the general reluctance of public accounting firms to significantly increase starting salaries,” said Mr. Donohoe, who had worked at PwC before academia. “Over the last eight to 10 years, starting salaries have not kept pace with these really cool emerging fields, like data science.”
To be sure, accounting firms have raised salaries in recent years. KPMG, for example, has adjusted starting salaries for accounting graduates by about 26% over the past five years, above historic norms, said Sandy Torchia, vice chair of talent and culture at KPMG.
Data show that median starting salaries for accounting jobs have gone up by 14% from 2010 to 2021, while median starting salaries for data science jumped by 30% and tech by 40% over the same period, according to Burning Glass Institute.
Accounting firm Ernst & Young in April said it would cut 5% of its U.S. workforce. Photo: SUSANA VERA/REUTERS
Mr. Donohoe makes the case that starting salaries for graduates with a master’s degree, if adjusted for inflation, are lower than they were 20 years ago when he started at PwC with a starting salary of roughly $52,000, which would be $85,300 in today’s dollars.
Mr. Donohoe makes the case that starting salaries for graduates with a master’s degree, if adjusted for inflation, are lower than they were 20 years ago when he started at PwC with a starting salary of roughly $52,000, which would be $85,300 in today’s dollars.
Still, few students openly admit to starting salary levels being a major deciding factor in their career choices. “Salary has not been in my consideration…it’s a marathon not a sprint,” said Garrett Prybell, 22 years old, who is graduating this month from the University of Illinois Chicago with an accounting degree and will be returning in the fall to finish the extra 30 credits needed to sit for the CPA exam.
Onerous requirements
Indeed, the 150 credit hours required to sit for and then pass the CPA exam represent a big barrier to entry for the profession, said KPMG’s Ms. Torchia. “That is a really important element of our industry, but is a barrier that other industries don’t have,” she said.
For Connor Verrett, an economics major and entrepreneurship minor at Washington & Lee University who expects to graduate this month, that roadblock was among the factors he considered in eschewing an accounting career. “It just seems like a lot of studying for a year for a big test,” the 21-year-old Mr. Verrett said. He will be starting as an investment-banking analyst for the technology, media and communications team in New York City at Lincoln International this summer.
In deciding his major, Mr. Verrett said he relied on advice from his track teammates, many of whom went into investment banking or consulting. “Working in the Big Four seems to be more limited to just like, CFO or chief finance type roles.” Investment banking was more versatile, he said. “Optionality for different careers later on was probably the No. 1 thing,” Mr. Verrett said of the deciding factor for choosing his major.
But for Mr. Prybell, who is currently an intern at accounting firm Grant Thornton, the profession’s requirements weren’t a barrier as he knew he wanted to become an accountant after taking accounting classes in high school. “I like things that are black and white where I can understand right from wrong,” he said.
Meanwhile, the head of the accounting and finance department at Washington & Lee has been trying to do his part to make accounting more palatable for students by adding more electives that would count toward a major. Yet only a quarter or so of his accounting majors actually go into accounting jobs, said Professor Afshad Irani.
One of those accounting majors at Washington & Lee, Kyle Clarke, 22, will be starting as an audit accountant for Ernst & Young in Boston after graduation. “Even if you’re not interested in accounting, it opens up a lot of doors,” he said, pointing to the fact that investment-banking interview questions are often about accounting.