Wall Street Bonuses Dwarf Your Salary

Banking Bonuses Dropping But Still Large

Wall Street Bonuses Dwarf Your Salary
January 21, 2016

Did your festive shopping end with you racking up more debt than planned? You had been looking forward to a Christmas bonus to help pay some bills, or perhaps to buy those special presents for your loved ones. Unfortunately, 2015 was not a good year for the company, so your bonus was down by 5% to 10%. Any bonus is better than none, and you were grateful for what the company could give you. However, if you were employed on Wall Street, a 5-10% drop in your bonus could have added up to quite a chunk of change.

According to Johnson Associates, a compensation-consulting firm, that is exactly what was expected to happen on Wall Street this past holiday season. The Dodd-Frank restrictions, increasing regulations, and slow economic growth kept bank profits relatively low last year, thus bonuses dropped on Wall Street as well. It's the first drop in Wall Street bonuses since a greater than 20% drop in 2011.

Don’t cry for these bankers, though. Reduced Wall Street bonuses would still be a windfall for the average American. The reduced bonuses were estimated to be between $155,574 and $164,217 — approximately 3.5 times the average American's 2014 salary of $44,569. Using Census Bureau data, the average Wall Street bonus is above the average income of all but 10% of America's households. Keep in mind that the 10% includes Wall Street employees!

This imbalance has been going on since 1991 and has increased in most years. It was not uncommon in the 1980s for a typical Wall Street bonus to equal the average American salary, but after a crossover point in 1991, the difference between average American salaries and Wall Street bonuses has continued to increase.

The discrepancy reached an all-time high in 2005 when Wall Street bonuses averaged $191,360 — approximately five times the average American salary. After a slight drop in 2006, the Great Recession dropped the multiple to a bit over two, but bonuses have rebounded since then while average salaries have slowly increased.

Not all Wall Street workers were destined to be disappointed in their bonuses, according to the Johnson Associates report, as there was a significant difference between sectors. Advisory investment bankers saw their bonuses increase by 15% to 20%, and those in private equity saw an increase of 5% to 10% in bonuses. Commercial/retail bankers saw up to a 5% increase. Everybody else saw no bonus increase or saw decreases.

Fixed income managers took the biggest hit at a 10% to 20% drop in their bonuses. Underwriting investment bankers saw a drop of 5% to 15%. Hedge fund managers, the group everybody loves to hate (unless your 401(k) contains hedge funds), experienced a 5% to 15% drop or beyond. Senior management and staff positions were expected to see 5% to 10% less in their bonus.

Keep in mind these are bonuses, not salaries. It is unlikely that many Wall Street employees are experiencing salary decreases; they are just dealing with fewer profits within the banking and investment industries and therefore less bonus money to share.

Few people would sympathize with a Wall Street banker losing 5% to 10% of their bonus, and some would question why it is not 100% of their bonus. Still, bankers are simply doing their jobs and were expecting a typical percentage bonus, just as you were. The problem is not that they make too much; the problem is that you do not make enough. You may not reach Wall Street standards, but we hope that this year brings a positive change in your salary — and your bonus.


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Steffanie | 01.21.16 @ 18:01
No bonus here this year. Maybe next year? It's nice that some of those people got some nice ones.
Erin | 01.21.16 @ 18:02
Another case of the rick getting richer. I'd feel bad for them for taking a hit, but there are just too many people who could use the help and just don't get it. I can't feel bad over them losing out on any part of their bonus.
Nancy | 01.21.16 @ 18:02
I find those numbers to be disgusting. The average is 3.5 x the average salary in America? Disgusting!
Beverly | 01.21.16 @ 18:02
Wall Street bonuses are crazy.. As long as They are earning it though, but in this market I'm not sure they are.
Carla | 01.21.16 @ 18:03
I have never been in a position to receive a bonus of any kind. I'm sure these people are grateful to have it to fall back on.
Andrea | 01.21.16 @ 18:03
That is disgusting that their bonuses are more than my yearly gross. But, I am thankful that I have a job.
Brittany | 01.21.16 @ 18:04
We were drastically cut on the bonuses we usually get at the end of the year this last year. It was beyond sad and unexpected. Moreso because they took taxes out on it, which they've never done before.
Meredith L | 01.21.16 @ 18:05
My last 3 years in corporate America yielded NO bonuses. In fact, we had pay freezes, more work, and no overtime...and I brought home less money each year I was there because they kept increasing taxes and health care fees. So, do I feel bad about a decrease in their bonus? Um...NO. And I don't feel bad about banks' decrease in profits either. Any institution that can legally charge $35 overdraft fees for a $1 overdraft does not have an ounce of my sympathy.
Chrisitna | 01.21.16 @ 18:05
So much money for bankers, when teachers, police and firefighters do much more meaningful work and get squat. It's disgusting.
$commenter.renderDisplayableName() | 11.24.20 @ 06:30