What sparked your curiosity?

Companies increasingly emphasise diversity in their hiring practices, yet minorities remain underrepresented in many high-paying professions like accounting. We wanted to understand whether licensing requirements contribute to these disparities. The CPA profession was ideal for studying this because every state adopted additional education requirements at different times over 35 years, and we could track all licensed CPAs using public records. The 150-hour rule effectively added an additional year of college education to become a CPA, creating financial barriers that could disproportionately affect minority candidates due to differences in socioeconomic status.

What did you discover?

The 150-hour rule significantly reduced minority entries into the CPA profession without any evidence of improving professional quality. CPA entries declined for everyone after states adopted the rule, but the decline was much steeper for minorities—26% versus 14% for non-minorities. This difference likely stems from socioeconomic differences.

Why do these findings matter?

Our research reveals an unintended consequence of well-intentioned professional standards. While the 150-hour rule was meant to improve CPA quality, we found no evidence of improvement in exam performance, professional misconduct, or employer perceptions. Instead, the rule created barriers that prevented talented minority candidates from entering the profession. Over 10 years, we estimate the rule resulted in 1,390 fewer minority CPAs. These findings likely extend beyond accounting to law, medicine, teaching, and other licensed professions. Policymakers and professional organizations should consider whether additional education requirements actually improve service quality or simply limit diversity and economic mobility. As firms struggle to diversify their workforces, understanding and addressing these structural barriers is important for creating inclusive professional opportunities.

Literature:

Sutherland, A. G., Uckert, M., & Vetter, F. W. (2024). Occupational licensing and minority participation in professional labor markets. Journal of Accounting Research, 62(2), 453-503.