Analyzing the Difference

When I read “Hiring Generation X” ( JofA, Feb.00, page 55), I wondered whether Gen-X expectations are really that different.

Gen-Xers do want more and will apply the leverage afforded them by a very strong economy and favorable demand vs. supply. So do I—just as I did when I got out of college 17 years ago.

My first accounting job paid $21,000 annually—average at that time. Assuming that starting pay has increased at a rate of 3% for 16 years, the equivalent today would be $33,700, almost exactly the mean average salary for a staff accountant 1 (as shown in exhibit 3, “CPA Job Levels and Compensation,” page 58, of the article).

One expects to be paid a premium for experience: The 3% annual increase is needed just to keep pace, but it would take twice that to compensate someone with even average experience. If you distinguish yourself by talent and very hard work, you’d probably average three times that for the first 15 years of your career. This has been a reasonable expectation in the past, and seems to be in line with current thinking as well. The numbers in the article (exhibit 3) appear to support this analysis.

To have achieved an audit or accounting director or controller position with an $85,000-to-$100,000 salary, with 15 to 17 years experience, means you’ve had to average about 10% in annual increases. Indeed, for a high achiever, increases with promotions totaling 15% to 30% annually in the first five-year period, averaging 10% to 15% annually in the second five-year period, and 7% to 10% in the next five have probably been the norm for 25 years.

Therefore, the article’s assertion that professionals with three years of experience can command the same salary you worked 12 years to attain doesn’t seem right unless you have been demonstrating remarkably mediocre performance for the past decade or unless the time value of money is ignored.

Perhaps perspective is the key difference. When I graduated, unemployment was 13%. Competition for jobs was fierce. Now that times are good, I still remember when the opposite was true. For anyone who thinks the demand for CPAs and the traditional work they do will always exceed supply, the inevitable downturn in the business cycle and redundancies created by technology may be tougher to accept.

Nicholas W. Stanger, CPA
Roanoke, Indiana