If your primary concern is the income inequality between the .1% of income earners and the remaining 99.9% of people, you should be pleased that the situation appears to be rectifying itself:
Wall Street traders, who typically receive the fattest year-end bonuses among bank employees, are poised to suffer the biggest pay cuts as revenue at their divisions dropped an average of 12 percent so far this year.
Goldman Sachs Group Inc., the New York-based bank that makes most of its money from trading and set a Wall Street pay record in 2007, slashed average compensation 26 percent in the first nine months. By contrast, Charlotte, North Carolina-based Bank of America Corp., which employs branch managers and brokers as well as bankers and traders, raised average pay 10 percent.
While some compensation consultants say traders’ pay will rebound as soon as revenue recovers, new regulation and capital requirements may lead to sustained reductions in the multimillion-dollar awards that sparked popular outrage and spurred investigations by politicians and regulators after the 2008 financial crisis, analysts say.
“The industry will be significantly less profitable going forward, also significantly less risky,” said Douglas J. Elliott, an economics fellow at the Washington-based Brookings Institution and a former JPMorgan Chase & Co. banker. “The lower profitability means there will be less net revenue to distribute between the shareholders and the employees. I do think there will be a squeeze on compensation over time.”
There’s a table at the link showing total earnings, number of employees, compensation, and compensation per employee. When you exclude the minimum wage and other modestly paid clerks and other workers at the large commercial banks, compensation is clearly still pretty high.
Note that as incomes decline at the big banks incomes at the top law firms are likely to decline right along with them.
I must interject that I’m wholly with Joseph Stiglitz on this:
Legal penalties for financial fraud in the U.S. have become “just a cost of doing business,” Stiglitz said. “It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”
“We fine them, and what is the big lesson?” said Stiglitz. “Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you’re still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards, but look small compared to the amount that you’ve been able to cash in.”
Taken together, Stigliz said, this system of widespread fraud, lax regulation and non-deterrent enforcement, created a system of skewed incentives that rewarded criminality, gambling and other bad behavior, and left American workers, investors and homeowners holding the bill.
When the take is in the billions or even in the trillions, penalties in the millions are chicken feed.
If, on the other hand, like me you’re equally concerned about the income inequality between 4.9% of income earners just below that topmost .1%, whose earnings are roughly equal to those of the top .1%, and the rest of us, you’ll still be worried. Far, far too many of those, hundreds of thousands and millions, are rent-seekers of various different stripes. When income becomes less a matter of effort, talent, and creativity and more a factor of getting the rules made in your favor is it any wonder that the economy isn’t performing as well as it should?