Off the Deep End: The Wall Street Bonus Pool and Low-Wage Workers

Businessman with a briefcase full of moneyWall Street banks handed out $28.5 billion in bonuses to their 167,800 employees last year, up 3 percent over 2013, according to new figures from the New York State Comptroller. These annual bonuses are an extra reward on top of base salaries in the securities industry, which averaged $190,970 in 2013.

To put these figures in perspective, we’ve compared the Wall Street payout to low-wage workers’ earnings. We’ve also calculated how much more of a national economic boost would be gained if similar sums were funneled into the pockets of the millions of workers on the bottom end of the pay scale.

For full sources and methodology, download the full report [PDF].

Wall Street Bonuses v. Minimum Wage Earners

The $28.5 billion in bonuses doled out to Wall Street employees is double the annual pay for all 1,007,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour. Wall Street bonuses rose 3 percent last year, despite a 4.5 percent decline in industry profits. The size of the bonus pool was 27% higher than in 2009, the last time Congress increased the minimum wage.


Wall Street Bonuses v. Low-Wage Service Workers 

Wall Street’s bonus culture, we learned from the 2008 financial industry meltdown, creates an incentive for high-risk behaviors that endanger the entire economy. A large share of low-wage earners, on the other hand, spend every workday meeting basic human needs, such as providing food services and taking care of the disabled and elderly.

Low-wage workers in many sectors have united around a call for “one fair wage” of a minimum of $15 per hour. A few cities, including Seattle and San Francisco, have already adopted $15 minimum wages. While this is more than double the current federal minimum wage of $7.25, the size of the Wall Street bonus pool puts these figures in perspective.

The bonus pool is so large it would be far more than enough to lift all 2.9 million restaurant servers and bartenders, all 1.5 million home health and personal care aides, or all 2.2 million fast food preparation and serving workers up to $15 per hour.

Chart: Wall St bonus pool is so large it would be enough to lift millions of low-wage workers to $15/hr

Wage Increases Would Create Bigger Bang for the National Buck

Wall Street bonus season may coincide with an uptick in luxury goods sales, but a raise in the minimum wage would give America’s economy a much greater boost. To meet basic needs, low-wage workers tend to spend nearly every dollar they make. The wealthy can afford to squirrel away more of their earnings.

All those dollars low-wage workers spend create an economic ripple effect. Based on standard fiscal multipliers established by Moody’s Analytics, every extra dollar going into the pockets of a high-income American only adds about $0.39 to the GDP. By contrast, every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy.

These pennies add up considerably on $28.5 billion in earnings. If the $28.5 billion Wall Streeters pulled in on bonuses in 2014 had gone to minimum wage workers instead, our GDP would have grown by about $34.5 billion, over triple the $11.1 billion boost expected from the Wall Street bonuses.

Chart: Minimum wage increase would give economy a bigger boost

Wall Street Bonus Reform is Long Overdue

While workers’ wages stagnate, the Wall Street bonus culture is flourishing—in part because of regulatory foot-dragging. Nearly five years after the Dodd-Frank financial reform was signed into law, regulators have still not implemented Section 956 of that law, which prohibits financial industry pay packages that encourage “inappropriate risks.”

The proposal regulators released in 2011 ignores key lessons from the last half-dozen years of financial scandals. It would only apply pay restrictions to top executives, leaving off the hook traders and other employees whose activities could put the financial system at risk. The only specific pay restriction relates to the timing of bonuses. Bankers would have to wait three years to collect half of their annual bonuses, which doesn’t amount to much of a disincentive to short-term recklessness.

The European Union now limits bonuses for key bank staff to no more than 100% of their base salaries, or up to 200% with shareholders’ approval. Americans for Financial Reform has put forward detailed proposals for strengthening the proposed U.S. regulation.

For full sources and methodology, download the full report [PDF].


Report infographic:

Off the Deep End Infographic

Sarah Anderson directs the Global Economy project.

  • Sullyy

    Let’s compare college teachers to low wage workers. Liz Warren made $350,000.00 per year teaching college. If she and her cronies hadn’t gouged the student body so badly we wouldn’t be drowning in student debt.

    She is a %1 from way back. Where does she get off criticizing anybody? What, is she gonna give the money back and join the rest of us in the %99?

    • Jake

      The point she is making is that the $200k bonuses these institutions hand out to their bankers and traders who engage in risky, tax-payer collateralized financial activities only encourage the risky behavior, have a minimal effect on economic activity (outside of luxury goods), and cumulatively, are equal to double the full-time salary of over 1 million people. Warren is also one of the only vocal advocates for consumer protections, enforcement of financial regulations, and easing the student debt burden. She was paid $350k per year because she was a tenured law professor at Harvard (endowment $36 billion) and was one of the most cited law professors in the U.S. I don’t think her being paid well takes away from what she is trying to accomplish.

      • Sullyy

        Oh? You say she has bonafides that justify her exorbitant salary. Ah, no kidding. I wonder if any of the MBAs on Wall St. have bonafides from Harvard.

        You want to say her outrageous salary is worth it but someone else’s is not. You are rather arbitrary in which %1ers you let off and which you condemn, no?

        Oh, not to mention, she took a minority spot from a true minority at Hahvahd. We can expect selective outrage from a hypocrite and a cheat, but we don’t have to join them.

        • JoMama

          350K is chump change compared to the salaries + bonuses these clowns pull in. Keep arguing for them though, that’s exactly what the 1% wants. Sheep.

          • Sullyy

            Granny Warren is a %1er, dearie. I do not think
            $350K is chump change compared to anything. It is not about comparison.
            Comparison is how those ignorant of free economics justify class warfare and govt controls.

          • JoMama

            I know she is yet she’s the only one wanting to change things on The Street. It’s called integrity and no one in the GOP leadership has it – it’s too bad too as I’d love a socially liberal (i.e, normal), fiscally semi-conservative candidate.

          • Andy Kinnard

            So, you guys are inventing new “One True Scottsman” terms for your point of view to lend it credibility now, huh? “Free Economics”, LOL

          • Sullyy

            “free economies” ol pal. Message sent via tablet device. Please excuse all hippos.

          • Andy Kinnard

            Investment markets are hardly the best examples of “free economies”, Sully.

        • Jake

          This isn’t about condemning individuals based on their paychecks. It is about condemning the negative impact these bonuses are having on the larger economy and highlighting the stark contrast between those raking in millions and those at the bottom making starvation wages. This is a systemic issue, especially when the economy has recovered and a large majority of all new income goes to those already at the top.

    • guest

      If it’s what the students are willing to pay, it’s not gouging, it’s what the market can bear….capitalism?

      • Blackula

        that is how it was before, it isn’t now, the government took over student loans, one of the first things obama did, interjecting government into the situation is the main reason for the explosion in debt. You never hear democrats reminding people of that factoid.

        • drklassen

          The federal student loan blame is bullshit.

        • Andy Kinnard

          Please, demos rate how the government taking over administration of student loans increased the quantity or size of those loans (beyond pre-take over levels) such that it created a new market bubble. Go ahead, we’ll wait.

    • drklassen

      Faculty salaries are NOT the reason tuition has skyrocketed, ergo they are not gouging the students. Look to the admin and the coaches.

      But the #1 reason tuition has gone up is state dis-investment. 35 years ago or so 75–80% of state college budgets were from state appropriations. Today it’s more like 20%. There’s your gouging.

      • Sullyy

        Excuse me? Do you not know of the massive money engine that is a university? Salaries, administrations, ENDOWMENTS, and pensioned tenures. Oh, and Hahvahd is not a state college chum.

        • drklassen

          The privates increased in order to maintain their “exclusivity” relative to the state schools. State disinvestment started the ball rolling.

          Most state schools don’t have pensions, they have 403b/401k plans; administrative salaries, and positions, have ballooned beyond all reason—I give you that one; faculty salaries have NOT gone up any more than those of any other professionals. Endowments actually *reduce* costs to students.

          • Sullyy

            FORCED to increase to maintain exclusivity? Are you kidding? No business is forced to raise prices by competition. They may be forced to REDUCE prices. But they raise em because they can. As much as they can.
            If you ever raised your hand in an economics class and suggested a business could force other business to raise their prices via competition you would be laughed out of the room. Whether Hahvahd or Bunker Hill Community. No offense…
            All colleges, ALL, raised prices because demand went through the roof in response to govt subsidizing (Pell grants) and crazy loans. I did not realize a single person on Earth did not know this.

    • Andy Kinnard

      Definitely don’t argue the point; a spurious ad hominem attack is SO much classier .

  • Sha-ron ShockJock Purvis

    Imagine that.

  • Blackula

    The article is incredibility deceitful. Saddly i bet very few if anyone bother to check its sources. The problems are many. First all of these full time workers aren’t really full time. Every minimum wage calculation is using less than a 40 hour work week. Every one. Another thing is this farce compares apples to oranges, cherry picking different data from different years. For instance the 1.21 and .39 cent stat is from a few years ago when there was the 2 percent payroll tax holiday. That doesn’t even apply anymore as it has expired. The 1.21 is because of expected government assistance which doesn’t add net value. Just moves money from one to the other. The .39 cent is derived due to the time period. Because the dollar is tracked for a year only it shows lower because high income earners are less likely to spend that dollar in the year it was made. From the cited Moody’s methods.

    Emergency UI provides an
    large economic boost
    , as
    stressed unemployed workers spend any
    benefits they receive quickly. With few other
    benefits are
    spent and not
    The multiplier from a payroll tax cut
    while sizabl
    is smaller since some of the
    benefit is saved or not spent quickly, particularly
    the portion
    going to higher


    • Blackula

      Occupation Average hourly wage Average hours worked per week Number of workers Waiters and waitresses 10.04 25 2,403,960

      Bartenders 10.46 25 555,560
      Home Health Aides 10.60 31 806,710
      Personal Care Aides 9.71 31 734,720 Food preparation and service workers 8.69 25 2,118,090

      notice not one of these groups sited in the “study” actually averaged anywhere close to either 7.25 an hour or 40 hours a week? It should be illegal to lie like this article does. Ironically the same gruber iddddiots that blindly believe this think that fox is the lying news.

      • JoMama

        Funny, you are voting against your own best economic interests yet you have no clue. Keep watching the “news!”

        • Blackula

          Ironic that because the article tells you what you want to believe you ignore the article’s own sources. I didn’t make up the numbers, these came from the links in the article. Only difference is instead of just reading the article I read its source material as well. FYI, i haven’t had cable since Bush was president so I don’t watch any cable news. I just happen to have an education that includes economics. You should try that.

          • Andy Kinnard

            Lemme guess, you’re Chicago “school” (of economics), right?

      • Mrstein04

        Oh my lord….I’m not even going to get into how fraudulent fox news is. I could post hundreds of videos proving the bold face lies of ALL mass-media channels on television (CNN, MSNBC, FOX, etc.). However, there are political and economic agendas formulated within every station, and they paint a picture that suits their own interests… And it’s the same principle that this article is implementing. So don’t discredit the article for attempting to bring to light a LEGITIMATE issue that continuing to cripple American society. Please don’t bring that garbage into the discussion here. I am willing to bet you aren’t even aware of who is at the top of those commercial news schemes or how they actually function TOGETHER. You are quite obviously a more fortunate individual, defending his position in the upper-class. So go ahead, continue to support the oligarchy we live in today…but it’s neither democrats or republicans at fault, it’s individuals like you with such a closed-minded, narrow perspective, who actually believe its the middle-class that needs the rich. And I don’t even need to explain to you why that is irrefutably wrong…Just take a history class and study the romans. At the end of the day, the one thing every empire has in common, is their reign is only as powerful as their control on the masses…once that control ceases to exist, those at the top will fall the farthest.

      • Andy Kinnard

        The 40 hour standard you’re using is arbitrary. These figures reflect the reality of the working class economy and the jobs available (many of which make it dangerous [via risking losing the first job] to take a second that might bring the other 15 hours).

    • goobs231

      The article has several fatal flaws (like suggesting moving money from corportions profits to minimum wage is an option, that’s utter nonsense) but some points are sound. There are problems when such a small pocket of society own so much of it, and that there is weak regulation to ensure that lower income folks trying to break the mold aren’t taken advantage of. It’s also true, regardless of what year it is spent in that more people with more money is better for the economy than fewer people with much more money. The gap between Rich and poor has been much wider (even just 100 years ago) but it’s been smaller too, and it is starting to grow. That’s a problem that needs addressing.

      • Blackula

        A couple of problems with your idea, first regulation is getting stronger but the gap keeps growing. Perhaps the regulation is part of the problems? Why is it a problem if some are rich and others not? One fundamental problem with the premise of eliminating the income gap is that a middle class needs rich people. If a middle class person goes to buy a car they finance it. Where does the bank get the money to loan (aside from QE)? They get the money from people who have enough to save, wealthy people. If you eliminate the extra money that would have been saved, like the article suggests .39 because savings isn’t being spent *which is false, someone else is spending that via loans* then the bank can loan that money out for our middle class person to buy something they would not otherwise be able to afford. (cars, homes, credit cards, vacations) It is a basic lack up economic understanding underpinning this entire article. The idea is to grow everyone’s part of the pie, not redistribute it.

        • Pepe the liberal

          Where does the bank get the money to loan? Definitely not from all the rich people that are investing in stocks or stashing their money in tax heavens. They get it from all the poor suckers that they charge ridiculous fees to, old people that (still) leave their money in CDs, and the rest of us with mortgages.
          I’d love to see a study (even one you are willing to endorse) that shows how giving huge amounts to rich wall street employees increases the amount of money banks have available to make loans to poor people.
          I’m sick and tired of people like you justifying the rip-off that is going on in this country. Either you are one of the lucky few getting these bonuses, you are in some similar situation (like executive management of a company stashing earnings abroad), or you are an idiot that has been brainwashed by FOX news and the like.

          • Blackula

            as mentioned before i don’t have cable. The banks in a normal world would be getting money from rich people or at least those with enough money to put money in the bank. Right now the returns are lower than the rate of inflation. You can thank the fed. Why do you think they have a liquidity problem? Why do you think the fed has to prop up the banks? It is because the interest rate is too low for rich people to put money in the bank. Contrary to propaganda, not everyone with 2 nickles to rub together has a tax haven. I didn’t make up the numbers, they came right out of the ‘study’ in the article. That is the most ironic. I knew no one would listen, just had to prove that to myself yet again. Even with the information presented in the article itself people still won’t open their eyes and see past their jealousy. i am middle class not rich. You think your mortgage is filling the banks coffers? They loaned you money to buy the house, not the other way around. Yes they make money on the interest rates but where did they get that money to loan you in the first place. Think about it.

          • Pepe the liberal

            You are right about the mortgage (my bad). The rest I still think is mostly correct. In any case, what I meant to say is that people like you still defend the ultra rich getting ultra richer as if it was due to their being smarter or better than us, when the reality is that they have bought the government and created laws that benefit them and screw the rest of us.
            When anybody talks about redistribution and all the right wing people scream murder, they are (in most cases) shooting themselves in the foot. The truth is that there has been a blatant redistribution of money the other way around, from the bottom to the top, and we are past due for a redistribution down to start fixing things. Do you disagree with that? Why? Do you think that things should stay the way they are, with low taxes for the rich and fewer things for the poor?
            The main point of this article was that the money being carried in huge truckloads by the rich does nothing for the country, while money in the pockets of the poor helps everybody.
            BTW, I’m high middle class, can’t complain about my income at all, and would gladly take a tax increase if that meant my tax money gets invested in the community and it makes things like health insurance and education cheaper.

          • Andy Kinnard

            Again, fractional reserve…it’s a thing, dtauzell already mentioned it.

            Second, in a functioning economy, the middle class has savings that, collectively, out sizes that of the few wealthy people (which refutes your entire thesis). That becomes the pool of money lent at about 10:1. The money isn’t cash; it’s marks on a ledger, bits in a data stream, endebtedness. They don’don’t have to “create money”, they just have to have sufficient reserves.

          • dtauzell

            The banks essentially “create” the money to end. The federal reserve allows a bank to loan out something like 10x the money that it has.

        • JohnnyD

          Oh, yes, regulation is getting stronger. Pity enforcement of said regulation is getting weaker at the same time, because that means all those strong regulations amount to exactly shit in the real world. Funny you didn’t mention that.

          I figure if my bank uses my “secured” bank assets in their investment division to make money, I am obliged to receive a cut of that money, AT THE SAME RATE THEY RECEIVE. They ARE investing MY MONEY, after all, it doesn’t become theirs just because I deposited it.

          If I take my suits to the cleaners, do they loan out my suit and just say “sorry”, when it comes back missing a sleeve? How about if I take my car to the garage? If they loan it out for profit without asking, and allow it to be wrecked, how is any of that the responsibility (and therefore the liability) of the owner? Why do the owners no longer have a claim to the wrecked vehicle, just because it was wrecked by someone the garage loaned it to? Without asking? Or submitting to any requirement to replace it if it was wrecked? And why, in the face of all that, are WE required to pay the loss?

          Why do we allow this insane shit with our money, when we would never allow it for anything else of value? Because the banks write the laws, and make sure we can’t live our lives without their “help”. The reality is they can’t live their lives without our free money. They will NEVER admit that, of course, because it destroys that whole “master of the universe” image they have of themselves.

      • drklassen

        Profits should go to the workers first. This idea that the investor class “created” anything and is therefore entitled to the return on all the wealth created by labor is messed up. Corporate charters (and we should go back to explicit chartering) should force them to have a fiduciary responsibility to all stakeholders, not just the shareholders.

        • Andy Kinnard

          Stakeholder not to exclude the larger community in which they operate, not just workers, management, and ownership.

          • drklassen

            Oh, agreed!

    • haveanissueheresatissue

      i get the feeling you are on the receiving end of a wall street bonus every year. Am I wrong? Please answer honestly

      • toni harmon

        i would agree with you haveanissueheresatissue…and i wonder who has checked blackula’s sources.

        • Andy Kinnard

          He has no sources offered, but does spend a lot of effort to try to cast FUD at the well-established processes for estimating financial multipliers. The 2% payroll holiday has nothing to do with multipliers; so, that’s just a bald faced red herring, and his ONLY argument with the 1.21 figure is that it doesn’t satisfy an ideological requirement (he has) that all economic activity should add value.

          Guess what, market pseudo-genius? Investment activity doesn’t add net value either.

          Blackula, what’s your BS argument against an investment market transaction tax (on the order of 1% or less)?

      • Guest

        You’re really that upset about a god damn bonus? Sounds like somebody has some issues they need to work out.

        • haveanissueheresatissue

          Hey moron, I think your comment is more idiotic than his. Shut your stupid mouth

        • TNC2

          When My tax money is spent on those bonuses, Yes, I’m that god damn upset.

    • Rich Starr

      You sir are doing more cherry pickin’ than the author. You make me sick and totally miss the point. It still remains thar 167,000 Wallstreet employees made MORE IN BONUSES than over a MILLION MIN. WAGE EARNERS MADE IN A YEAR. TWICE AS MUCH , You can’t justify it, you can only count yourself lucky that you were born into a good situation instead of poverty or the working poor of society. Who of these two groups actually did more work ? Don’t tell me you realy “EARNED” those bonuses. They were a gift from your fellow taxpayers who bailed your sorry butts out of your incompetence in the banking scadasls of the mid-2000s. You happen to work for a big bank or broker that took advantage of a Republican president and House and scared stiff Dems in the Senate. The vast MAJORITY of Americans were against your bail-out and that majority is even larger now in retrospect. Crawl back into your cubicle and crunch some numbers. We know who the true DEADBEATS are !

      • Andy Kinnard

        What’s worse is that TBTF Banks and the financial markets of Wall Street are not JUST main already rich people ridiculously rich for doing nothing, but both institutions are failing at their broader purpose, to be a source of liquid capital to American business. What little they do in that regard just serves large corporations. Credit and capital is still very difficult to get for small startups and existing businesses (unless you want to sell your soul to venture capitalists [who will run your business with different goals from you]).

        The (now predatory) financial system has failed the American People, and we should have let it collapse and rebuild (cough….free market solutions…cough) in 2008.

        • Hannah

          Yes, most minimum wage earners work less than 40 hours a week because they HAVE to. their company won’t allow them to make any overtime. (*cough* Yum Foods you greedy bastards *cough*) To only include a select few that actually do work on average over 40 hours a week drastically brings the size down to what i assume to be negligible. Just because my coworkers work 39.5 hours a week does not mean that they don’t work full-time. And 40 hours is just the cutoff for time and a half, there is no set amount of hours considered full-time or not. it depends on the company. For example at the lovely fast food place I’m working part time, full-time is anything upwards of 32 hours a week.

          • Hannah

            I meant my reply to go to blackula.

          • Another Thought

            Get a different job, they are out there unless you want to be dependent.

  • Cesira

    Why is it that every time that there is a minimum wage discussion the target is always Wall Street?
    There are so many other industries where people make exorbitant amounts of money but for some incomprehensible reason nobody questions that ( movie stars, athletes, singers, pharmaceutical companies, insurance companies etcetera etcetera !!) I know many people in the banking industry who work 60 hours weeks, whose salaries have been cut ( since the 2008) and whose job is constantly on the line! There is a political agenda behind using Wall Street as an escape goat . I am all for raising minimum wage but we need to look at the whole picture, not just Wall Street

    • Andy Kinnard

      Apple as and oranges: Wall Street is not the people you know in banking.

  • EdZachury

    In related news: Studies show Wall Street workers are much smarter than minimum wage workers.

    • RooftopNation

      But are they tougher, stronger, enjoyable to even be around, and effective at their job? Or do they need a bailout?

  • Another Thought

    Check Seattle, minimum wages raising to $15.00 and hour, small restaurants and businesses closing right and left, so what is anybody gaining?

  • strongerthandirt

    Just 910 baseball players in the major make about $3.5 billion. Sounds like people with rare, sought after skills make a lot of money.

  • Cjones1

    Low wage workers could become actors, athletes, or lawyers and pull down some huge salaries and bonuses. It is unfair to include only bonuses for Wall Street personnel. Besides many of the other occupations are subsidized by tax exemptions, deductions, etc., such as for advertising expenses.

  • Aaron68

    According to the BLS, there were only 895,000 Full time (35+hour) minimum wage earners in 2014. Where did the 1 million workers number come from?