Combatting a Dire Shortage of Accountants, EY Boosts Starting Salaries

Extent of the CPA Staffing Crisis

Bureau of Labor Statistics data analyzed by Bloomberg reveals that a whopping 340,000 fewer accountants practiced during 2024 across the United States compared with those practicing during the pre-pandemic year of 2019. That amounts to almost a one-fifth reduction in the number of accountants, leaving only about 1.6 million remaining throughout the industry.

The shortages resulting from these reductions aren’t exactly news within the finance community, and CPAs have known about them for at least four years. The American Institute of Certified Public Accountants pointed out that almost three-quarters of CPAs were at retirement age in 2020. Because most of the CPA baby boomers still haven’t retired, the AICPA now predicts that within the next 10 years, about 70 percent of the profession will be set to retire.

Meanwhile, the sparse talent pipeline can’t replenish the vacancies quickly enough. For example, the number of bachelor’s and master’s graduates with accounting degrees fell 7.4 percent in 2022 to only 65,305. At the same time, Uniform CPA Examination registrations have plummeted. They’ve now fallen to their lowest level since 2006–18 years ago.

In 2022, only 67,336 students sat for the exam, a 6.8 percent decline from the previous year. Although CPA Examination pass rates have for decades been much higher at the best accounting programs like those at the University of Texas at Austin or the University of Illinois at Urbana-Champaign, since 2006, the average national pass rate has generally hovered around only 50 percent. That would amount to the equivalent of only one new CPA—working two-thirds time—for every one of the 52,200 CPA practices that operate across America.

With a 340,000-accountant deficit and as many as 70 percent of CPAs retiring before 2034, there’s no way that a single new CPA hired part-time each year by each firm could even come close to making up such an enormous labor shortfall throughout the industry.

The staffing deficits are so severe that errors increasingly appear on financial statements filed with the Securities and Exchange Commission. A Hudson Labs analysis determined that in 2023 more than 720 firms blamed insufficient numbers of staff in accounting and related departments for causing possible errors, a 30 percent increase over 2019 levels. Those errors can lead to substantial fines from the SEC—which ironically also faces its own shortage of accountants and auditors. In one famous 2019 case, the SEC fined the car rental firm Hertz $16 million for misstating data on its “audited” financial statements.

EY Bets Big on a Billion in Raises

A prime reason for accounting’s staffing crisis is that since the 2009 Great Recession, the industry has offered lower starting salaries than other sectors like technology, finance, or private equity. But that situation might be about to change.

In June 2024, the London-based Big Four accounting firm Ernst & Young announced a surprise pledge to boost starting pay for CPA-track employees and other early-career accountants by 10 percent. EY plans to spend $1 billion between 2025 and 2027 to “revolutionize the experience of early career accounting professionals” as part of a commitment to attract and train new accountants over the next three years for the artificial intelligence era.

Lower starting salaries for new graduates with accounting degrees have been repeatedly cited as one of the industry’s most formidable competitive disadvantages in efforts to attract top talent. The May 2024 Accounting Talent Solutions Draft Report released by the AICPA provides the latest survey containing such findings. It shows that about 85 percent of both accounting professionals and students agreed that boosts in starting salaries are one of the most effective means to reduce the shortage of accountants.

Gone are the days of the 1980s when undergraduate accounting majors ranked among the best-paid college graduates at most universities. The AICPA’s sobering report shows that the 2022 average starting salary for accounting majors was $60,698.

However, the top-paying undergraduate major that year wasn’t in a business discipline—it was in engineering. That major was computer and information science, annually paying $86,964 on average—a 43 percent increase over the accounting graduates’ average salary.

The EY initiative intends to significantly close that gap for about 2,600 incoming audit and tax staff employees. The firm claims its billion-dollar investment will place accounting degrees “on par with other business majors,” and position EY as a compensation leader in an increasingly competitive United States labor market for accountants.

According to Bloomberg Tax, EY’s investment in compensation mirrors wage increases by competitors that include targeted boosts for new hires during the past few years. The plan also accelerates efforts among the Big Four public accounting firms to close a second wage gap. This latter gap falls between the salaries offered to recent accounting graduates as compared with the substantially higher salaries offered to business school grads with finance and management degrees.

What’s more, the larger paychecks from a dominant market leader like EY appear to be intended to pressure midsize and smaller regional accounting firms to boost their entry-level pay so they can maintain their labor market competitiveness. So far, that strategy might be paying off. Two months later, in August, an Alliant Talent survey of 250 top managers at small- and medium-size CPA firms found that 56 percent planned on boosting salaries by 14 percent on average.

In a statement, EY Americas Vice Chair for Assurance Dante D’Egidio added that:

Accounting is the language of business, and it’s time to put accounting graduates on par with other business-degree holders. By increasing the starting salaries of CPA-track professionals to market-leading compensation levels, we are continuing to recognize the trust placed in the profession, reward the valuable skills accountants bring, and ensure a strong pipeline of CPAs for generations. Our investment in the profession will continue for years to come, including upskilling our professionals in advanced technologies like AI.

Moreover, D’Egidio told CFO Dive that EY planned on the 10 percent increase in starting salaries to launch late in 2024 and intends to follow it with additional increases during the next 36 months. However, he did not provide specifics on the sizes of the salary increases starting in 2025. Nor did he provide any data on EY’s average starting compensation packages, claiming that factors like work experience, academic background, and the employee’s location impact pay.

D’Egidio also offered additional remarks during the interview with Bloomberg Tax. He said the firm’s initiative goes beyond efforts to stave off a shrinking pool of accounting graduates. He explained that EY wants to attract the best students from American business schools to provide the skilled staff necessary to manage a workload that’s increasingly complex.

“Over the last several months, we realized that we needed to make some big investment here to move the needle quicker,” he said.

Along with the increased salary, the firm also announced the 2025 launch of a new program for early career professionals branded as “360 Careers.” Although details were still sketchy at press time, this experiential program aims to add a competitive advantage to employment at EY by training campus recruits in the essential skills they need to build their networks and become well-rounded business leaders.

D’Egidio added, “We’re looking to build future leaders and that means giving people broad experience when they come to the firm. That requires investment.”

EY’s Pay Still Isn’t Competitive, Says Dr. Jack Castonguay

Reaction to EY’s announcement was mixed. Steve Saah, the director of the finance and accounting placement group at Robert Half, told Bloomberg that EY’s boosting wages for new hires amounts to “a gigantic step in the right direction for all firms. The talent shortage is impacting all businesses, and dedicating financial resources to draw more people to the profession and retaining them there for a long career is a must.”

But Dr. Jack Castonguay, a CPA and an outspoken associate professor of accounting at Hofstra University on Long Island in New York, argues that EY’s plan didn’t go far enough. In a scorching op-ed he wrote for Bloomberg Tax, Dr. Castonguay complained that EY’s 10 percent plan still isn’t enough to be competitive in the labor market.

If accounting and auditing firms wanted to be aggressively competitive in going the “extra mile” to bring students back to the profession, what does he believe that effort would entail? He says:

The extra mile would require raising salaries above other business fields instead of only matching them. It also would require a commitment to work-life balance and limiting hours during busy seasons, even if that means needing to hire even more staff.

Dr. Castonguay also complains that the partners at big accounting firms have stubbornly refused to raise starting salaries for more than a decade. He argues that they’ve been rigidly intransigent about holding those wages down even while management consulting firms, banks, and even law firms have all raised their starting salaries—and so have plenty of other businesses that hire entry-level business graduates who majored in marketing and finance. He concludes:

Accounting firms see the salary bumps as placing the firms as “market-leading compensation,” but data tells a different story. Median accounting salaries have been negative in real terms over the last decade, while [employees] such as financial analysts and marketing specialists have seen their real wages—raises beyond the rate of inflation—rise 5 to 7 percent.

The proposed wages are a good start but don’t put accounting firms ahead. They can’t match the starting salaries for other business majors—they must exceed them. Firms need to compensate accounting hires for the added education, work hours, and skills they demand of new hires.