Want more On the Margins? Check out our archive.
Accountants and the 150-hour rule
I first decided to become a CPA when I was in high school. My inspiration came from my friend’s dad who had a very work hard/play hard approach to life, and that greatly appealed to me. Also, the money. Plus, I was fortunate to have an excellent business teacher in high school who offered not only accounting, but also economics and business law classes. When I set off for college, I knew I was going to get my accounting degree, pass the CPA, and then conquer the world.
It was cute! I was nothing if not focused. I don’t recall when I first learned that I would need 150 credit hours to sit for the CPA, but I didn’t give it a second thought, actually. I resolved to get a master’s to earn the extra credits I needed.
Nearly 20 years since I finished that master’s, I don’t know that it was worth it. Don’t get me wrong; I learned a lot, made a lot of new friends, and studied with some great professors. But I also doubled my total student loan debt with one year of graduate school, and that effort and knowledge did not show up in my salary or advancement compared to my peers who didn’t have master’s degrees. Oh, and did I mention that I’m not a CPA anymore? I write and podcast on the internet. So a mixed bag for sure.
These days, as wehave discussednumeroustimes, people are worried about accountants, specifically that there aren’t enough of them. There are a number of theories that explain this, but two of the most popular are:
Accounting is nerdy, and no one wants a nerdy job. Not a nerdy job that has a median starting salary of less than six digits, that is. Ergo, accounting has to do a better job of making itself cool because raising starting salaries is HAHAHAHAHAHAHA.
The 150 credit hours required to sit for the CPA exam is a barrier for too many otherwise promising future CPAs. Essentially a fifth year of college is cost prohibitive, not to mention the cost of a master’s degree. Oh, and by the way, despite the argument that the additional education is a “purposeful hurdle,” a recent study found that it does nothing to improve the quality of accountants.
Now, some firms have raised their starting salaries for entry-level accountants, but we’re not seeing this broadly across the profession. And even if those increases are enough to attract more candidates, it doesn’t solve the immediate-to-short-term shortage. There’s no quick fix, really, but at least a few states are trying to come up with new paths to become CPAs without the 150 credit hour burden:
[L]egislators in Minnesota are considering bills that would reduce credit hours needed for getting a CPA license. The move has sparked debate among national CPA groups that say states need to meet the national standard for accountants to be able to service clients around the U.S., and others who say the profession needs to be more flexible.
[…]
Ohio law has for decades allowed CPAs to get licensed without 150 hours, said Scott Wiley, president and chief executive of the Ohio Society of CPAs. In Ohio, people can obtain a license with 120 hours of college credits, four years of work experience, a score of 670 or higher on the Graduate Management Admission Test and passing the CPA exam, he said, and Ohio accountants have had no barriers to practicing nationally.
A South Carolina task force is evaluating whether the state could approve CPAs from other places to practice locally, even if those accountants have fewer than 150 college credit hours. In New Jersey, a pilot program is under way that substitutes a year’s work for the traditional fifth year of course work; students would earn college credit hours on the job.
Minnesota’s proposal, specifically, has gotten the attention of the American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA), which then resulted in the AICPA and the Minnesota Society exchanging strongly worded letters to their members. That’s about as heated as it gets in accounting, folks.
Anyway, we’ve talked about it before, but occupational licensing, generally speaking, isn’t great. Obviously, some professions should have rigorous licensing requirements in the public interest of, say, safety. I think most people would agree that licensing of doctors should be extremely thorough. Lawyers, too; the rule of law and all that.
I can even make a pretty good case for rigorous licensing for accountants, particularly auditors. If you believe that auditors carry out their services in the public interest, then, yeah, the licensing should attract folks who take that responsibility seriously and dissuade those who do not. It doesn’t always work out that way, of course. There are bad doctors, bad lawyers, bad auditors. Licensing requirements surely didn’t prevent those bad professionals from becoming professionals.
And that actually makes sense. For the vast majority of jobs that require them, studies have shown that occupational licenses don’t result in more quality workers, it discourages more people from entering those fields, and the workers don’t actually end up making enough money to justify the costs.
And we’re seeing it play out in accounting right now. Fewer people are going into accounting, and who can blame them? Who wants to take on more school debt, perhaps even get a master’s degree, only to get into the job market and make $60,000? Why not get a master’s of fine arts instead? At least then when you tell people at parties what you do for a living they won’t immediately walk away from you.
More than 20 years ago I studied accounting, got a master’s degree, passed the CPA exam, and got into the workforce so I could be a CPA. Sure, I changed my mind later, but the point is, I wanted to be a CPA, despite the 150 credit hour requirement. Many of my peers at the time also wanted to be CPAs, but many more went into accounting because they knew it would provide a decent living. In other words, it was the default setting for employment conscious students.
That isn’t the case any more. For those who do want to study accounting, they don’t worry about getting those extra 30 credit hours. They know that they can find interesting work that doesn’t require a CPA. For the employment conscious, um, well, they have lots of options right now. Not to mention that even if all the people looking for jobs chose accounting, there would still be lots of job openings for accountants!
Which underscores just how excessive the 150-hour credit requirement feels right now. It’s hard enough to get people into accounting, so given the circumstances, it seems a little silly and counterproductive to be stubborn about it. Why not come up with some options? People love options.
And now we know that at least a few states are willing to try. It certainly can’t hurt at this point.
Fresh from Gusto (and friends)
Want to help your clients save? With Guideline for Accountants, your clients get employer fees waived for four to six months while your firm gets dedicated support and an intuitive dashboard. Plus, it’s free to join. Sign up today to add clients, design their plans, and provide them with expertise. Terms apply.
Ramp can help Gusto customers manage their cash flows, access capital required to grow their business, execute vendor payments, and track accounts receivable. If SMBs have a better handle on their finances they will be able to grow their business safely and hire with confidence. Terms apply.
My friend Jim Peterson’s third article on accountants and bias, this time concerning issues in the office.
Barb Neff explains how to apply for an R&D credit retroactively.
Frederik Mijnhardt, the co-founder and CEO of our partner Secfi, explains how to include equity in severance packages.
In this video, my colleague Will Lopez discusses R&D tax credits your clients may be sleeping on.
And ICYMI: Will Lopez again on recent enhancements to Gusto’s customer service.
Webucation
Our new on-demand webinar, Grow with Gusto: Next Steps for Your Practice, is now available. If you’re new to the Gusto Partner Program and wondering what’s next, this session is for you. Editor-at-Large Caleb Newquist and Gusto representatives will discuss FAQs, considerations, and recommendations on where to go from here. Register and watch now.
Read with Gusto
The vote on the EY split will happen… when the firm’s management knows it will get approved.
People aren’t taking week-long vacations anymore.
I guess money now buys happiness up to $500K.
Apparently the Moon needs its own time zone.
Your Madison, Wisconsin snow plow name winners are Saltimus Prime, Snowbi Wan Kenobi, Seymour Pavement, and Dolly Plowton.
“I haven’t seen ‘Tár,’ but I do love Big League Chew.”
Visit Gusto Academy—your home for professional development from payroll to People Advisory—to get Certified, take electives, and earn CPE credits. Free for Gusto partners.
