Wall St Bonus Pool Dwarfs All Minimum Wage Earnings

Adam Taggart
By Adam Taggart on Tue, Mar 17, 2015 - 11:16am

A sign of the extremes of income inequality within the US. The New York State Comptroller recently revealed that this year's Wall Street bonus pool of $28 billion, paid to 167,800 employees, is nearly 2x larger than the total income earned by the 1.03 million full-time workers paid the federal minimum wage (estimated at $14-15 billion).

All You Need to Know About Income Inequality, in One Comparison (New York Times)

The New York State Comptrollerreported on Wednesday that the size of the bonus pool paid to securities industries employees in New York City was $28.5 billion. Dividing this total among 167,800 workers yields an average bonus of $172,860, which seems plausible enough. For sure, some received much, much bigger bonuses, and many received nothing.

What about the total earnings of full-time workers at the federal minimum wage? The Bureau of Labor Statistics reports that there are 1.03 million full-time workers paid an hourly wage of $7.25 or less. These people tend to work around 40 hours a week on average. If they all earn $7.25 per hour and work 50 weeks per year, the total earnings of this group come to nearly $15 billion. Ms. Anderson, whose report usefully shows all her work, prefers an estimate of 37 hours per week — which looks too low to me based on other data — and 52 weeks per year, so after rounding, she gets to a total of $14 billion.

Read the full article here

18 Comments

Jbarney's picture
Jbarney
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Eye Opening

Wow...I almost don't know what to say.  How can anyone not see the income inequality obvious in these stats.  Amazing.  Adam, thanks for posting this.

Mark Cochrane's picture
Mark Cochrane
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How about....?

Gee,

If half of the Wallstreet 'bonus' pool is donated we can double the minimum wage! Not holding my breath...

Mark

Dini's picture
Dini
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What are their salaries?

If their bonuses average $167K, what are their average salaries?

davefairtex's picture
davefairtex
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if they added value...

If these guys actually added that much value to the economy, I wouldn't mind.

The fact this is all skimmed by the various shenanigans I watch every day is what bothers me.

Next time around, nobody is going to rescue them.  I hope.

Mark Cochrane's picture
Mark Cochrane
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So they are a tax?

Dave,

Since they are just skimming the system would it be fair to characterize their activities as a tax on the system that benefits no one but themselves?

Otherwise known as parasites...

Mark

davefairtex's picture
davefairtex
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a tax

Mark-

Yeah.  A tax.  Friction.  Etc.

In a normal economy, they'd be making money by executing the job of capital allocation, which really is an important task.  But right now, they are mostly extracting rents and adding no value.  The whole business with "Flash Boys" (front-running large trades and adding a few pennies to the price of each share) is a great example.  No value added, no liquidity added, just rent extracted.

If we got rid of much of the (private) debt, that might help.  Proper sizing of the finance sector is about 1.5% of the economy.  Right now, they're 4.2%.  And that number doesn't include the salaries paid to the workers at the companies since that number is profit rather than a bottom line figure.

More profits and more revenues as % of GDP = larger influence on Washington = they can write laws to increase their own profitability.  Large influence = "no position sizing" for futures markets = they can wang around those markets to generate more profits for themselves the expense of the fundamental participants without adding any value or taking much risk.

See chart below - shows how increase in debt roughly paralleled the increase in finance profits as a share of GDP.

 

Mark Cochrane's picture
Mark Cochrane
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Interesting correlation

Dave,

Thanks for the explanation.

That's certainly an interesting graph. In effect we are taking out loans (debt) to pay the finance sector to rip off the economy even more. It seems to me that instead of including the activities of the finance sector (at least in this unhealthy economy where they don't perform their intended function - capital allocation) as a 4.2% portion of GDP that they should be posted as a -4.2% impact on the economy.

Mark

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Until they aren't
Mark Cochrane wrote:

Dave,

Since they are just skimming the system would it be fair to characterize their activities as a tax on the system that benefits no one but themselves?

Otherwise known as parasites...

Mark

Mark -

They're only parasites until the host dies.  Then they're known as dead.

Dogs

davefairtex's picture
davefairtex
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not debt, interest payments

Mark-

I'm less sure its debt.  I think it may be about cash flow based on the amount of debt that exists - somehow, they get their fingers on a chunk of the interest payment flow.  Or a percentage of assets under management.  Or a skim of the total amount of the debt market.

Now I'm just judging from effects here, but my sense is, the bigger the pool of financial assets, the bigger the total skim, regardless the size of the underlying productive economy.

If I were constructing the income statement of the economy, asset allocation would be an expense.  So would interest payments, insurance, national defense, homeland security, etc.  Expenses are stuff you try to minimize, not maximize.

Who maximizes bank charges, late fees, or fees for assets under management?  Nobody.

Interest charges are a tax too, the measure of our servitude to the creditor. 

So does finance add value?  I think some of it certainly does.  I'd say VCs add value, by picking, funding, and (more or less) helping along startups they think will succeed.  Having participated in the process, I can testify that it really helps founders refine their vision.  If you can't get someone else to fund you, its a clue you likely don't have an interesting product.

So do standard "relationship bankers" - theoretically they supervise the creation of credit to facilitate reasonable economic activities, such as the standard 20% down loans for home purchase, or regular business activities.  Business insurance allows the spreading of risk across a group of businesses.  These are all good things, and help faciliate money going to a place where it might conceivably do some good.

But that's not what the big guys on wall street do.  Flash boys, Goldman Sachs and their muppets they stuff full of bad deals, "financial advisors" who trade against their customers, endless trading scams skimming profits with no risk.  Gah.  They are a dreadful tax, mostly useless parasites skimming from the national product and returning nothing.

The only thing of value they do is taking companies public, and helping companies to obtain debt financing from the market.  (What companies do with that money...these days that's more dubious, but that's on the Fed, not Wall Street.)  The rest - if most of them were suddenly swallowed up by the Atlantic Ocean, we would lose nothing from our national productivity.  Arguably, we'd gain.

Just my two cents.

Thetallestmanonearth's picture
Thetallestmanonearth
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Ah yes, but how much real

Ah yes, but how much real wealth do they hold?  They may have a unfair position on the financial capital, but I feel bad for what they will go through when they learn that is not all that is needed to succeed in the emerging paradigm.

Arthur Robey's picture
Arthur Robey
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St. Bonus?

Who is he? I've never heard of St. Bonus. 

Time2help's picture
Time2help
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St. Bonus?

I would posit that St. in this case is short for $atan.

Thetallestmanonearth's picture
Thetallestmanonearth
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Posts: 324
St Patrick and St Bonus

St Patrick scared all the snakes out of Ireland and now they're all writhing around in a filthy pit of sin in New York being fed by the ever benevolent St Bonus who takes from the poor to keep the pit seething with reptilian flesh.

A little over the top? Maybe. I'm feeling dramatic this morning.  :)

Time2help's picture
Time2help
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St. Patrick vs St. Bonus

Nice wink

KugsCheese's picture
KugsCheese
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davefairtex wrote: If these
davefairtex wrote:

If these guys actually added that much value to the economy, I wouldn't mind.

The fact this is all skimmed by the various shenanigans I watch every day is what bothers me.

Next time around, nobody is going to rescue them.  I hope.

That's all the American economy has left: skimming and fleecing.

Dick's picture
Dick
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Friction

Over a decade ago Warren Buffet said 'if a mechanical model was made of the economy, finance would be represented by friction.' [I think I got the idea if not the exact quote.] Just a drain on the system and this was around 2000 when he thought finance was too large a share of the GNP - much worse now.

I may not think much of the Koch brothers but at least they create tangible products. The Emmanuel Goldsteins of our day. [Emmanuel Goldstein is a character in George Orwell's dystopian novel Nineteen Eighty-Four. He is the principal enemy of the state according to the Party, depicted as the head of a mysterious (and possibly fictitious) organization called "The Brotherhood" and to have written the book The Theory and Practice of Oligarchical Collectivism. He is only seen and heard on telescreen, and may be a fabrication of the Ministry of Truth. - wiki]

Jbarney's picture
Jbarney
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The Retirement Gamble (Frontline)

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

I just watched this tonight.  Just a couple of thoughts.  The money talked about here between Wall Street bonus amounts and minimum wage is staggering....but this Frontline episode lays out some interesting math which actually parallels some of Chris and Adam's thinking in their development of the Crash Course. 

Martin Smith, the reporter for Frontline, does the math on just how much money "financial advisors" are able to siphon away from workers saving for retirement.  The fees add up to 1% or 2% a year and last the entire time of a worker's employment...it adds up to tens of thousands of dollars per employee over decades.

A friend who is not a prepper saw this Frontline episode and decided to plant fruit trees.

Martin Smith:  Wall Street has taken as much as $10 Trillion from workers/retires to "manage" their retirement accounts over the last couple of decades.

Makes you understand why Chris strongly recommends physical metals.

God....the system we live in is so broken.

bj-brown's picture
bj-brown
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Minimum wage is just the tip of an iceberg

So this calculation misses one key reality.  Many huge retailers refuse to give minimum wage earners full time work.  When WalMart talked about raising pay, workers complained that they wanted more hours first.  Maceys hires three part-time workers instead of 2 full-time for base (non-holiday) store staffing.

The original comparison looked at only full-time workers.  There are also many working 2-3 part time jobs at minimum wage, trying to get 40 hrs/wk.  Their plight is even more dire.  

This also doesn't look at the real hourly wages for the dwindling middle class who are classified as "exempt" and therefore do not get paid for the hours they actually work.  The whole idea of "exempt" workers is that you don't have to pay them for the overtime that you require.  Many of these people would beg you to also use some of the bonus funds to hire enough staff to actually do the work in a 40-hr week.

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