The public accounting premium: an investigation of aggregated earnings for accounting professionals

Abstract

The public accounting industry faces a critical shortage of professionals, which could negatively impact the functioning of capital markets. By analyzing the relationship between public accounting experience and aggregated earnings among accounting graduates, this studyexamined whether earnings outcomes associated with public accounting careers contribute to this shortage. The study used longitudinal earnings data to measure the difference in aggregated salary for individuals with and without public accounting experience and investigated how this relationship varies with firm size, firm location, and employee gender. Additionally, a separate analysis measured the difference in aggregated salary for individuals with public accounting experience based on the size of the public accounting firm, with a focus on Big4 firm experience. I found that individuals with public accounting experience enjoy a significant increase in aggregated earnings relative to their peers without public accounting experience. This relationship is strengthened for individuals at large firms, in urban areas, and among males. In addition, individuals with Big4 public accounting experience exhibit higher aggregated earnings than those with non-Big4 public accounting experience. Using a unique, secondary longitudinal dataset that tracks the earnings of accounting graduates in Minnesota from 2006 through 2024, this study provides new evidence on the long-term earnings consequences of public accounting careers, offering relevant insights to accounting firms, educators, and prospective accounting professionals.