Why No One’s Going Into Accounting (supply and demand are part of the story)

Pay has stagnated in a profession once seen as a sure thing, while other fields are more lucrative; ‘pretty much a death sentence for my dreams.’

By Lindsay Ellis and Paul Overberg of The WSJ. Excerpts:

"An accounting career, once a launchpad into the upper middle class for hundreds of thousands of Americans, is no longer paying off.

Salaries have risen for young people in finance, marketing, logistics and consulting in recent years. Even young teachers have seen a slight uptick. At the same time, the median, inflation-adjusted pay for young accountants has stagnated, according to a Wall Street Journal analysis of salary data compiled by the Census Bureau.

This pay disparity is a major reason why fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants. Some of the nation’s largest college accounting programs, such as Florida Atlantic University and the University of Maryland, have seen their enrollment or number of undergraduate majors decline by double-digit percentages in recent years. That has led to even greater workloads for existing accountants, and more than 300,000 have left the profession between 2019 and 2022, according to the Bureau of Labor Statistics."

"Accounting has been an especially popular major with low-income students over the years, according to industry executives and researchers. 

“These students who don’t have social capital would get the short end of the stick in another career,” said Paul Madsen, a University of Florida accounting professor whose research has found accounting majors are more motivated by pay than other students." 

"adjusted for inflation, 20-somethings’ accounting salaries stayed at about $56,000 since the 2008 financial crisis.

Some attribute the stagnant pay simply to supply and demand—in the past, when companies had plenty of students to recruit, they weren’t pressed to increase entry-level earnings. Also, some smaller accounting offices have said they are worried about their own profitability, and are reluctant to raise clients’ rates.

Higher starting salaries with other majors was the top reason why non-accounting majors who had considered the field decided against it, according to a survey of nearly 500 students this spring by the Center for Audit Quality, an industry group."

"A recruiter at the firm [Weaver, a Texas-based accounting firm] said it has raised entry-level pay for client-services graduates three times—by $12,000 altogether—since January 2022 to better compete for young recruits. By comparison, Weaver raised its starting pay by a total of $8,000 in the 12 years between 2009 and 2021."

"the University of Maryland’s business school, where the number of accounting majors fell by about 30% since 2018."

"At Florida Atlantic University, the number of undergraduate and master’s enrollees in the accounting program has been almost cut in half from about 1,500 in 2017."

"Ultimately, pay for accountants will have to rise to draw more students to the field" 

"A recent review of job postings from Revelio Labs, a provider of workplace data, shows entry-level accountant salaries have started to increase."

If there really is a shortage, then pay will rise. If it is not rising, is there some regulation preventing that? If not, maybe there really is not a shortage. If other majors are making more money, then fewer graduates will offer their services as accountants. That is one of the factors I used to talk about in labor markets. When wages are constant in job A and they go up for job B, some workers switch from A to B.