Wednesday, July 18, 2012

Old accountants never die, they just lose their balance

(Preamble: While this topic may be relevant in other industries, I've written it from the perspective of public accounting, which is all I've known for 30 years.)

Mandatory retirement age is not a new concept, but seems to be receiving renewed attention lately. Perhaps, as I approach age 58, I'm just paying more attention to it. Perhaps people are living longer.  Perhaps, because of the economy, people need to work longer.

In public accounting, the "Big 4" have long mandated retirement at a certain age, at least for partners. That age seems to currently be set at 60 to 65, with an occasional mandate at 55. I presume second-tier firms also have retirement age triggers.

For young accountants just entering the profession, that mandate is important. They must think there will be room for them at the partner's table at some point - otherwise the 60-80+ hour work weeks required of new hires won't last long. Most new hires at a Big 4 firm either burn out or leave for an industry job after a few years anyway, but the promise of partner does seem to work in the short term. The beginning salary is nice, too, until you figure out that, on an hourly basis, it isn't. Many are grateful to just have a job. About 1.5 million, or 53.6 percent, of bachelor's degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. 1 Also, the big firms are very vocal about new partner appointments, dangling that carrot at every opportunity.  For example, Grant Thornton recently announced the addition of 27 new partners. However, rumor has it that they let go of 60. 2 In fact, the down economy has produced a recent blood bath of partner terminations, sometimes for the simple reason that the senior partners weren't making enough money. But, for the sake of employee morale, that sort of thing is not discussed quite as prominently

What about the old partners/employees bumping up against mandatory retirement age? Interestingly, Ernst & Young released a study 3 which found “Older workers aged 65+ have the highest productivity and motivation levels, yet they are on the lower end of the salary scale”. In other words, they are motivated by something other than money. China, a country in alarming short supply of accountants (with all those people? go figure), is looking to older accountants to fill the gap, and their reasoning sounds, well, reasonable. “The partners are still full of energy in their mid-50s, so what is the point of asking them to retire early?” 4  Why indeed, when the average older employee is on the top of their game professionally.  More often than not, it's not that they have to work, it's that they WANT to work.  To be productive.  To be relevant.  To be needed.  And if you think the average older employee sits around all day goofing off, think again.  The days of warm bodies just filling space at work are over, regardless of the color of your collar.

So, what is the answer? Jobs are in short supply for everyone, regardless of age. Older employees are looking to their 401(k), probably worth much less now than they had envisioned, and wondering what they will do. Wal-Mart Greeter? ("Welcome to Wal-Mart - get your shit and get out") And the recent college grads, 1.5 million instances of "failure to launch", still living with Mom and Dad?

The answer is simple, at least in accounting. The Big 4 machinery requires a constant supply of new blood, and top students at recruited campuses will always have a chance. As to older workers who want or need to continue working, the market will take care of them. Their next job may be at a regional or local firm, but there is always opportunity for talent.

At least, that's what I think.  What do you think?


Lucy Merrill said...

Better not count on that Wal-Mart greeter gig. I don't think that greeting would please Mr. Sam.

Alan Rutherford said...

Lol! That's actually Walter from a Jeff Dunham comedy routine.

Alan Rutherford said...

Chuck Till said...

On a serious note, the whole notion of retirement presumes cash flow from a pension, Social Security, or savings (pre-tax or post-tax). Many pensions are underfunded or are being truncated to the extent the law allows. Social Security probably won't be able to pay out 100% of projected benefits starting 10-15 years out. Savings have been hit by falling equity and real estate markets -- and even if someone held nothing but cash, forward-looking returns appear to be miserable.

Bottom line, retirement is rapidly becoming a myth. Either folks will have to get accustomed to a lower standard of living, or folks will have to migrate to locales where the cost of living is lower, or folks will have to keep working longer than they had expected to.

I wonder how much strife we will see in coming years as the under-35s battle with the over-60s for jobs.