Dear Wall Street: Stop complaining about your pay.
Five years after Occupy Wall Street protesters took over Zuccotti Park in downtown Manhattan, spawning a national discussion about the divide between America’s highest and lowest earners, the pay gap has only gotten wider. Now, even as bankers bemoan their declining bonuses and job prospects, it’s helping fuel the campaigns of Donald Trump and Bernie Sanders.
The spread is even more pronounced over the past 25 years. When adjusted for inflation, wages for investment bankers and securities-industry employees, including salary and bonuses, increased 117 percent from 1990 through 2014, according to U.S. Bureau of Labor Statistics data. Over the same period, wages for all other industries rose just 21 percent, to $51,029 in 2014, about one-fifth of the $264,357 that bankers and brokers earned that year.
Presidential candidates have been quick to capitalize on the gap. Front-runners for both parties -- Democrat Hillary Clinton and Trump, the billionaire Republican -- have targeted a law that allows financial managers to have their income taxed at a lower rate. Sanders, a Vermont Senator, has proposed taxing Wall Street speculators to pay for his proposal to make public colleges free. Texas Senator Ted Cruz has mocked Manhattan money and said he’d let big banks go bankrupt.
“This wage differential is right at the top of both Trump’s and Sanders’s agendas as one of the issues that most resonates with the public,” said John Challenger, chief executive officer of Chicago outplacement company Challenger, Gray & Christmas. “The end result is in the anti-Wall Street current that’s been rumbling around the U.S.”
The gap is even bigger in New York City, according to data compiled by State Comptroller Thomas DiNapoli based on income-tax records. The average annual wage in the securities industry in the city in 2014, including salary and bonus, was $404,800, almost six times as much as the $72,300 average for all other private-sector jobs, the data show. That’s wider than the margin in 2011, the year of the Occupy protests, when average wages in the securities industry in New York were about five times as much as those for all other non-government employees.
One change since the financial crisis has led to grumblings on Wall Street: Firms have curbed bonuses for New York City securities-industry employees by 35 percent from their peak in 2006, adjusting for inflation, according to the comptroller’s data. Wall Street’s average bonus fell to $146,200 in 2015, a 9 percent drop from the previous year.
Despite the increase in total wages, attracting talent is a problem. Securities-industry employees are leaving to try their luck in Silicon Valley, and banks have failed to halt a decline in popularity among business students. At Columbia and Harvard business schools, the median base salary for graduates entering investment banking rose to $125,000 last year, a 25 percent increase from 2011, data compiled by Bloomberg from school reports show. During the same period, the percentage of students entering the industry fell to 16 percent from 27 percent at Columbia and to 5 percent from 10 percent at Harvard.
“Are people going to hold a charity benefit for Wall Street? That’s probably not going to happen -- you’re not going to buy those raffle tickets,” said Alan Johnson, managing director of Johnson Associates, which designs executive-compensation programs for financial firms. “But business school graduates are not wanting to go into financial services. They’re wanting to go do something else. We’re below an equilibrium. If pay does not increase in certain parts of financial services, the industry will not get the right talent. It will not be as competitive.”
For now, though, it doesn’t look like the public has much sympathy for the investment-banking industry, the second-highest-paying in the U.S. in 2014 behind only portfolio management, according to the BLS, which compiles information from quarterly reports filed by almost every U.S. employer.
“You had that heyday of Wall Street, where it was excess and craziness, and that’s been gone for a while, but it’s like the financial crisis was the final hammer,” said Patrick Curtis, founder of the online forum Wall Street Oasis, which maintains a compensation database on major financial institutions. “There’s almost like a hangover from the financial crisis, and the perception has changed pretty dramatically since then.”