On Wednesday, the New York Comptrollers office said that the average bonus paid to New York bankers, traders, and others employed on Wall Street was $172,860 last year. That was up by just 2% from the year before.
That might sound like a modest increase for the Masters of the Universe, until you consider this: Wall Street profits, according to the Comptroller, fell in 2014. That is in part because of all the multi-billion dollar fines that the New York banks have paid. But those fines appear to have had little impact on bonuses. So much for making Wall Streeters pay. New regulations, too, don’t seem to be limiting how much Hampton acreage the average Wall Streeter can afford.
Take a look at Wall Street pay over time versus the average worker. The average Wall Street bonus last year was nearly four times as large as the total pay of the average American worker. And this is just the bonus. Wall Streeters also receive base salaries, which have been growing over the years, and stocks options and other forms of deferred compensation that are not in the Comptroller’s numbers.
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It’s worth noting that outsize Wall Street pay is a fairly recent phenomenon. In 1990, the average Wall Street bonus was just 75% of the total salary of the typical American worker. But within the next decade, pay took off, and, except for brief pullbacks, it has never really gone through a reset.
One explanation for this is that Wall Street has become much more productive over the past 25 years, and that productivity has grown faster than the rest of the economy. And, indeed, for better or for worse, the financial sector is a much bigger part of our economy. Also, companies in other sectors have not rewarded workers as much as they could—or perhaps even should—have over the past two-and-a-half decades.
Then again, Wall Street profitability has dropped by more than half since the financial crisis, and bonuses haven’t followed suit. Of course, at least one of the reasons for Wall Street’s profit woes is pretty clear: Wall Streeters are simply overpaid.