Wall Street bankers took home a 20% increase in average bonuses in 2021 to a record $257,500, but the number of people that worked in the industry failed to keep pace, according to a closely watched annual pay update on the Big Apple’s financial deal makers.
Total employment in New York City’s securities industry fell to 180,000 in 2021 from 180,600 in 2020 and 183,500 in 2019, according to the New York State Comptroller.
With an average securities industry salary including bonuses rising 7.7% to $438,370 in 2020—the latest annual data available—that’s nearly five times higher than the $92,315 salary average in the rest of the private sector. In 1981, the average wage in the city’s securities industry was only about two times the rest of the private sector.
The disparity between banker pay and average New York salaries has been fueling criticism about overpaid Wall Street workers.
Former Labor Secretary Robert Reich cited data from Inequality.org on his Twitter account: “If the minimum wage had increased at the same rate as Wall Street bonuses since 1985, it would be worth $61.75 today.”
Citizens Financial Group Inc.
CEO Bruce Van Saun told MarketWatch the higher bonuses for Wall Street bankers reflect a “war for talent” in the banking industry.
The high salaries also came about because of 2021’s flurry of M&A and initial public offerings activity and higher profits on Wall Street.
“You should recognize that compensation levels depend on deal activity,” Van Saun said. “If the macroeconomic environment cools off, their variable bonuses may drop. It’s all about pay for performance in banking.”
While bankers recognize that they make more money than many other people, the job remains demanding with 100 hour weeks and skipped vacations to get deals done.
“There’s a lot of hard work,” he said. “The job marketplace is efficient for paying for skills in demand.”
So far 2022 is looking weaker for bankers in the arena of equity issuance and underwriting, but overall M&A activity is expected to be mostly robust, he said.
State Comptroller Thomas P. DiNapoli said New York City’s February 2022 financial plan assumes that the 2021 bonus pool for securities industry employees will increase by 15.7%, less than the 20% increase in 2021.
“Markets are turbulent as other sectors’ recovery remains sluggish and uneven, and Russia wages an inexcusable war on Ukraine’s freedom,” DiNapoli said. “In New York, we won’t get back to our pre-COVID economic strength until more New Yorkers and more sectors—retail, tourism, construction, the arts and others — enjoy similar success.”
Eric Schiffer, CEO of Los Angeles-based private-equity firm The Patriarch Organization, said the pressure on Wall Street to compete with other banks and boost profits currently outweighs criticism about unequal pay in the overall economy.
“Wall Street is aware of the bad optics, but given the choice of bad optics or losing revenue opportunities or market share to the competition, it’s an easy decision for Wall Street to make,” Schiffer said.
Last year, cheap debt and plentiful capital fueled IPOs, M&A and other banking activities, amid inflation and a labor shortage for bankers.
All that added up to large increases in pay off an already lucrative 2020.
“You have less talent available which also then creates an escalation of what that talent is able to get, with many companies vying for it,” Schiffer said.