Some traders on Wall Street will be getting much smaller bonuses this year. Even with that pay cut, though, they're still making way more than your typical brain surgeon or four-star general. After ten years on Wall Street, merger bankers make about $2 million, a salary that's ten times bigger than that of an equally-veteran cancer researcher, Bloomberg's Danielle Kucera and Christine Harper report. Even after the financial crisis in 2008, when traders began getting more of their bonuses paid in stock and restricted cash, "there's little sign the gap with Main Street is narrowing."
The pay gap between the financial industry and pretty much everyone else narrowed for years after the Great Depression, but it's too soon to tell whether that will happen in response to this recession, Kucera and Harper report. For now, though, the incentives to work on Wall Street are so high that it attracts the most talented people. Naturally, the blogging world has a few things to say about this.
- Blame Wall Street for Cancer, New York's Nitasha Tiku writes. "If earning potential reflects a profession's worth in society, then we as a whole value creating wealth off of beefing up corporations and perpetuating our dependence on fossil fuels more than we value the ability to provide health care for intractable illnesses. Another way to look at it would be that it's all Wall Street's fault that there is no cure for cancer."
- Interesting Timing, Dealbreaker's Bess Levin notes.
As we've discussed at length, bonus expectations this year are not very good, should you be employed by a bank. Even those at hedge funds and private equity firms, where numbers aren't expected to be nearly as bad, will likely have something to complain about ... A week or so ahead of numbers being officially communicated, Bloomberg has whipped up a chart comparing the pay of traders and M&A bankers to those of some totally randomly selected professions (brain surgeons, cancer researchers, aerospace engineers, 4-star generals with thirty-four years experience) where employees make less and told the former group to 'take solace' in the disparity. It almost seems as though some sort of message is being sent!
- This Is What's Wrong With Society, San Diego Reader's Don Bauder writes. These statistics are "like a fever thermometer registering 107 degrees. ... Despite the yawning gap, you can hear Wall Streeters complaining about declining bonuses. The Bloomberg story did not mention that the big Wall Street houses paying such lavish compensation were bailed out by U.S. taxpayers. Nor did the story mention that many on Wall Street--such as those arranging mergers and leveraged buyouts--actually DETRACT from the economy, and others add nothing to it. This is just more evidence that the U.S. has moved from product engineering to financial engineering--a one-way ticket to economic perdition."
- This Is a New Pattern, Naked Capitalism's Yves Smith adds. "In the stone ages of my youth, top earners in investment banking were on a par roughly with top heart surgeons and when someone became a partner at Goldman, his cash compensation fell sharply. The old line was that partners lived poor and died rich." In addition to sucking the most ambitious into finance, "One of the perverse elements of the pay escalation in finance is that more dollars are being thrown at social signaling. Anthropologists would have a field day. To a significant degree, top end goods have been repriced upwards to reflect competition for the same assets (paintings, luxury goods, prime residential real estate), with admittedly some new creature comforts now on the list (private jets)."