Morning Coffee: The sad truth about most Wall Street pay packets. And the new lowest paid jobs at Goldman Sachs UK
Investment banking is one of the best paid jobs in the world, the American investment banks pay much more than the Europeans, and the top jobs in the US banks are all in New York, right? Right, by and large. But this is only true on average, and the averages can hide a lot of variation, particularly in a winner-takes-all industry. The latest official data from the New York State Comptroller’s office is a reminder that most people on Wall Street are well paid, but not mindblowingly so.
The average income (including salary and bonus) for the securities industry in New York City was $422k in the latest annual data. But in the next sentence, the Comptroller goes on to say that “24 per cent of securities industry employees earned more than $250,000”. So slightly less than a quarter of the workforce managed to reach a level which was itself a bit more than half of the average! In order to earn the average compensation, you might have to be quite some way into the top decile; that’s a really skewed pyramid.
It’s skewed by the top earners on ten times the average or more, of course. But another implication of the Comptroller’s data is that 76% of securities industry employees in New York City earn less than $250,000. There will be some downward skew here as well; the securities industry employs janitors and receptionists like any other, but it also employs 'operations' professionals on a lot less than the average.
This means that even if it were possible to clean up all the data to the greatest extent possible and to focus only on the annual income of front office employees – the kind of people we mean when we talk about 'bankers and traders' – it very much looks like the halfway mark of the ladder is going to be quite a bit below $250k, base salary plus bonus.
That’s … well, it’s not exactly a bad wage to be earning. It’s slightly more than three times the average for private sector employers overall in New York City. If you have two people in a household each on $250k, then you can live a very comfortable middle class lifestyle in New York City and raise a family, although you may end up complaining that once you’ve bought a house, set up a 401k plan and taken three holidays a year, there isn’t much left.
But $250k isn't really the kind of income that is going to allow you to retire in your forties and follow whatever dream you had before you came to Wall Street. For most people a Wall Street Career is a long hard grind without even coming close to earning the $422k average. Worse, there's this layer of highly paid people above you, reminding you of what you're missing. It might be a lot better for the mental health to compare your position to the economy as a whole.
Elsewhere, the importance of selecting the right baseline for comparison is being illustrated by Goldman Sachs in the UK, who have sent a recruiting team to a location where it’s pretty fair to assume that no GS recruiting team has ever gone before. It’s not to a prestigious university campus, or to a business school, or to a university at all; Goldman will be unrolling banners and handing out business cards at the Milton Keynes Job Show.
They’re looking for forty team leaders, customer service agents and similar staff to work in a call centre for Marcus, their retail banking brand, in a business park next to Caldecotte Lake on the outskirts of town. The office space that they’ve leased has space for an eventual 250 employees, providing backup to the London based Marcus team which launched last year. Hopefully the provincial nightclubs and bars of Buckinghamshire will soon be full of youngsters in shiny suits telling potential romantic partners that they “work for Goldman Sachs”. And hopefully both employer and staff will be able to take advantage of the cost of living arbitrage; you can live a pretty good life in Milton Keynes on a lot less than $250k.
If you fancy supplementing your income, keep an eye out for any reportable wrongdoing. Two whistleblowers at JP Morgan just got awarded $50m under the SEC program that gave them a share of a $267m judgement in 2015 over conflicts of interest in their wealth management business. The better-rewarded (louder?) whistleblower got $37m, which would be quite hard to achieve even over a period of years at the very top of the current earnings pyramid. (Bloomberg)
Or if you want to try a bit of wrongdoing yourself, Evaldas Rimasauskas managed to steal $121m from Google and Facebook by setting up a company with a similar name to a computer supplier and sending them fake bills over a period of years. (Bloomberg)
Sharon Persia has been promoted to “Chief of staff” (a strategy and COO-type role) for the investment banking division at UBS. Her predecessor in the role, Emma Molvidson, is to become “Global Head of Investigations”, which probably indicates the importance of minimising compliance fines in the economics of the modern industry. (Financial News)
How do you afford a New York penthouse on a civil service salary? The Consul-General of the UK, the official in charge of negotiating trade deals, is being bought a new official residence which looks absolutely spectacular and well worth the $16m cost. It is meant to be a venue for entertaining and holding official functions, but the job holder will also be living in it. (Guardian)
A bit of a shock at Barclays as Tim Throsby, one of the JP Morgan veterans, has been “delayered” as head of the investment bank, shortly before the arrival of Nigel Higgins as chairman (FT)
News from Qatar suggests that the state investment company (which owns 6.1% of Deutsche Bank) is not happy about the Commerzbank merger proposal and might need to be offered other industrial deals by the German government to bring it onside. (Bloomberg)
And there is something of a stark contrast between the two banks’ top management pay; the total bill for the Commerzbank management board fell 24% last year while Deutsche’s nearly doubled. (Reuters)
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