insight magazine

Edging Closer: Preparing for the Labor Cliff

For years, accounting leaders have been sounding the alarm on a major labor force shift expected to take a toll on the already weakened CPA pipeline. Here, experts share what firms can do now to prepare. By Cloey Callahan | Fall 2024


In the last half-decade, the accounting profession has become all too familiar with the many shifts to the labor force, ranging from widespread early retirements brought on by the pandemic, massive worker exits during the Great Resignation, and continued declines in the accounting major and CPA pipelines. But now, another major labor market shift is edging closer and is expected to compress the accounting talent pipeline even further—the “labor cliff.”

Comprised of three parts—demographics, retirement, and enrollment—the so-called labor cliff is projected to cause acute worker shortages across all industries. What, if anything, can firms and companies do now to prevent or lessen the impact?

Navigating the 3 Cliffs

Demographic Cliff

One of the main drivers of the labor cliff has arisen out of what’s happening with demographics in the United States. For about 17 years, the nation’s birth rate has been declining, and in 2023, it reached its lowest level in history, according to the Centers for Disease Control and Prevention. Overall, experts say this trend is a result of the 2008 recession.

“Individuals who were thinking about planning for children put that off because they just didn’t have enough money at that time,” stresses William “Bill” Bailey, CPA, JD, LL.M., associate professor of accounting at Bradley University. “Following most recessions, when the economy gets better, you see a bounce back in birth rates. But the U.S. didn’t see a bounce back after 2009.”

Additionally, observers have warned that low fertility, in combination with the aging population that it generates, implies fewer workers per capita and significant headwinds to economic growth, according to a May 23, 2024, White House brief.

Retirement Cliff

Another factor leading the U.S. toward a labor cliff is the significant and historic rise in the number of Americans at retirement age. Dubbed the “silver tsunami,” more than 11,000 baby boomers turn 65 each day, and this year, 4.1 million Americans will turn 65.

“It’s getting harder and harder to replace retiring talent because there just aren’t as many people coming into the profession,” says Laura Huggett, CPA, president and managing partner of Truity Partners. “There hasn’t been the ability to shift the work downward because employers can’t find enough people to do the work.”

With a growing number of people aging out of the workforce, more efforts are being made to convince people of retirement age to continue working longer, including solutions like offering “flextirement” or part-time working hours. However, these solutions may prove difficult, as Axios recently reported that the number of years Americans expect to continue working has decreased by 9.5% since March 2020, and only 46% of workers under 62 currently expect to continue working past that age.

Enrollment Cliff

Of course, rounding out the impending labor cliff crisis is the number of students enrolling in college. It’s predicted that the college-age population will shrink dramatically between 2025 and 2037. That, combined with fewer international students coming to the U.S., means the pipeline of new talent isn’t what it used to be.

At the university level, Bailey says they’ve been sounding the alarm, trying to help companies understand the later effects of this: “Remember, the kids that would’ve been born in 2008 or 2009 during the Great Recession, would’ve been enrolling in college around 2026.”

Now, some experts estimate that the number of 18- to 22-year-olds will be significantly lower over the next two decades, with a shortfall of 400,000 to 1 million students annually. This could lead to a 15% decrease in college-bound students over the next decade, starting with a loss of more than 400,000 students between 2025 and 2029.

The Labor Cliff’s Impact on Firms

In looking at the full picture of the labor cliff—demographics, retirement, and enrollment—Huggett says it’s not surprising that CPA firms are feeling the pressure, and they have good reason to worry about the profession’s future.

“It’s a cloud over the whole profession, specifically for public accounting firms,” Huggett says. “While there’s been a lot of initiatives, they haven’t been enough.”

Of course, among the initiatives are pay-based ones, which Huggett warns end up being costly and won’t work long term. Notably, Huggett says she’s seen firms—even those traditionally steadfast in their old ways—suddenly change course and find themselves in bidding wars to incentivize the few candidates that are available. In fact, she’s seen sign-on bonuses of up to $2,000 just for accounting interns.

On the flip side, when firms can’t expand their talent pools, other workers within the firms must take on the burden of increased workloads, which leads to burnout and, in the worst cases, turnover. Huggett sees this issue as a domino effect, citing a recent client situation she’s dealt with where three people gave notice because they were overwhelmed.

This negative impact is especially true at the leadership levels. According to the 2023 Insight Special Feature, “Righting Retention,” just over 67% of employers have seen workloads increase for staff at the leadership level when turnover happens, while 65% have seen workloads increase for remaining staff at similar levels. For public accounting firms, about 77% reported increasing workloads on firm leaders.

Katie Norman, recruiting manager of accounting and finance at LaSalle Network, says she’s seen significant issues with retention: “We’re seeing folks that went to school for accounting enter the profession and then look to get out of it pretty quickly. Part of this appears due to the historically long hours required of many accounting positions, but also the realization of the cyclical nature of what accountants do day in and day out isn’t the challenge they were looking for.”

How Firms Can Prevent or Lessen the Impact

Experts say firms can lessen the labor cliff’s impact, but it’ll take significant changes and work on every front, ranging from promoting the industry in new ways to allowing for more flexible options nearing retirement.

When it comes to enrollment, Huggett stresses that just educating students about accounting career opportunities won’t be enough. Instead, the profession might need to widen its candidate-type search, such as approaching business and finance students to get them interested in a switch to accounting.

Huggett also says that targeting even younger students might be the way: “While internships used to be an opportunity for just seniors, it’s beginning to shift to include juniors and, in some cases, even sophomores.”

Bailey says that universities are acknowledging the enrollment cliff by working on attracting three other cohorts: first-generation students, international students, and working adults.

Overall, Bailey says it’s about rebranding the accounting profession to be an attractive one that people are excited about: “I think we do a very poor job as an industry explaining what accounting actually is and the many opportunities careers in accounting offer. Until that gets fixed, we’re going to have these problems regardless of what’s happening with demographics.”

One way to help with this, Norman says, is leveraging “peer interviews” where someone who’s been in the profession for a few years can explain what it looks like on a day-to-day basis. This can be especially effective at campus recruiting events.

“I think there’s a lot of value in hearing from a peer,” Norman stresses. “Whether it’s a younger professional who’s been at the firm for a little while or a fresh grad that can more closely relate to the students, someone that can talk through the different projects they’ve taken on is going to be the best example to showcase the positives that can happen to someone when they join your firm.”

Norman says that firms also need to do a better job of offering unique career paths. For example, having a role that’s half accounting and half finance might be more attractive to new graduates. Additionally, firms might want to consider positioning and marketing accounting roles differently. For example, mindfully changing a position’s title can call attention to specific aspects of the role, like “accounting analyst,” which emphasizes that the analytical skills will be a key aspect of the position and may help attract more candidates seeking careers in analytics.

Further, Norman suggests that firms open up their candidate pool by looking at people who are career changers or people that show promise but might need some additional training to make them a perfect fit for the firm.

“There may be candidates who have a degree in accounting but started in more of an entry-level, accounts payable or receivable role—consider training that person, Norman says. “It’s creative solutions like this—offering continuing education or financial support for additional classes or training—that can help firms secure the talent they need.”

To help with the retirement cliff, Huggett says flexibility will be the ticket: “Most people considering retirement don’t want to suddenly stop doing everything they used to do consistently. They might be open to working a few hours a week or even operating on a structured part-time basis.”

However, Huggett cautions that this solution is more complicated than it seems on the surface. It’ll require altering job descriptions, navigating what’s equitable, and looking at structural changes to phase them out gradually.

Bailey says firms are seeing more success in prolonging workers’ careers by offering greater work-life balance. However, he warns, “Just marketing work-life balance can create cynicism—the firm has to actually show work-life balance exists.”

Of course, financial incentives can also help attract (and retain) more accounting professionals. Bailey says that the profession has largely used an apprenticeship model where you learn a lot for little pay but then end up seeing a jump in salary over time. He argues that firms need to change that, paying their professionals for time and not just experience. But as Huggett mentioned, that also isn’t so easy to do without major structural changes to a firm—if you bring in new people and pay them more, you need to adjust the salaries of those who’ve been there for a lot longer.

Overall, Huggett reminds firm leaders that companies are resilient to crises, and the labor cliff will be no different: “Lots of things have happened over the years to create business challenges, and somehow, we’ve always seemed to figure them out. That said, navigating the labor cliff is going to take some thinking that challenges the accounting profession’s traditional mold.”


Cloey Callahan is a New York-based writer, who specializes in topics related to the future of work, spanning from workplace benefits and flexibility to technology and office design.

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