CPA Licensing and Economic Inequality in the Accounting Labor Market

Abstract

The additional education required by the 150-hour rule for CPA licensure has disproportionately affected Black representation in public accounting. An implication is that Black workers could be choosing non-public accounting jobs or avoiding the accounting profession. Using U.S. census data, we investigate Black representation within the accounting industry. We find lower (higher) Black representation in overall accounting (other accounting-related) positions after state-level adoption of a 150-hour licensing requirement. Regarding income consequences, we find that Black workers entering the accounting profession are less likely to be in high-paying jobs in terms of entry-level pay, wage growth, and career compensation after the 150-hour rule. Further analysis shows that Black workers receive relatively less compensation for accounting related positions, which is the job field experiencing relative growth in Black workers. Overall, our findings support the view that public accounting’s increased occupational licensing requirements have negatively affected Black accountants, with potential consequences for economic inequality.

Keywords: CPA Licensure, Diversity and Inclusion, Higher Education, Minority Representation, Occupational Licensing, Public Accountants, the 150-hour Rule