Wall Street’s 2013 Bonuses Were More Than All Workers Earned Making the Federal Minimum

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Trader Peter Tuchman reacts as he looks at the numbers during the closing bell on the floor of the New York Stock Exchange, Friday, Oct. 19, 2012. (AP Photo/Mary Altaffer)

This post originally appeared at Other Words.

Purveyors of Ferraris and high-end Swiss watches keep their fingers crossed toward the end of each calendar year, hoping that the big Wall Street banks will be generous with their annual cash bonuses.

New figures show that the bonus bonanza of 2013 didn’t disappoint. According to the New York State Comptroller’s office, Wall Street firms handed out $26.7 billion in bonuses to their 165,200 employees last year, up 15 percent over the previous year. That’s their third-largest haul on record.

That money will no doubt boost sales of luxury goods. Just imagine how much greater the economic benefit would be if that same amount of money had gone into the pockets of minimum-wage workers.

The $26.7 billion Wall Streeters pocketed in bonuses would cover the cost of more than doubling the paychecks for all of the 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

And boosting their pay in that way would give our economy much more bang for the buck. That’s because low-wage workers tend to spend nearly every dollar they make to meet their basic needs. The wealthy can afford to squirrel away a much greater share of their earnings.

When low-wage workers spend their money at the grocery store or on utility bills, this cash ripples through the economy. According to my new report, every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy. Every extra dollar a high-income American makes, by contrast, only adds about 39 cents to the gross domestic product (GDP).

And these pennies add up.

If the $26.7 billion Wall Streeters pulled in on their bonuses last year had instead gone to minimum wage workers, our economy would be expected to grow by about $32.3 billion — more than triple the $10.4 billion boost expected from the Wall Street bonuses.

This immense GDP differential only speaks to one price we pay for Wall Street’s bonus reward culture. Huge bonuses, the 2008 financial industry meltdown made clear, create an incentive for high-risk behaviors that endanger the entire economy.

And yet, nearly four years after passage of the Dodd-Frank financial reform, regulators still haven’t implemented the modest provisions in that law to prohibit financial industry pay that encourages “inappropriate risk.” Time will tell whether last year’s Wall Street bonuses were based on high-risk gambles that will eventually blow up in our faces.

Low-wage jobs, on the other hand, endanger nothing. The people who harvest, prepare and serve our food, the folks who keep our hotels clean, and the workers who care for our elderly all provide crucial services. They deserve much higher rewards.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is the author of the new report “Wall Street Bonuses and the Minimum Wage.”
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  • Harry Minot

    Here’s a salient quote from the article:

    “And yet, nearly four years after passage of the Dodd-Frank financial reform, regulators still haven’t implemented the modest provisions in that law to prohibit financial industry pay that encourages “inappropriate risk.” Time will tell whether last year’s Wall Street bonuses were based on high-risk gambles that will eventually blow up in our faces.”

    I know a couple of people who participated in the creation of the Dodd-Frank provisions. One of them has carefully followed up on the lack of enforcement. The other one, possessed of special expertise regarding risk, is actively monitoring the behaviors of the big financial institutions. So there are at least two giant brains at work.

    And I do still believe that a solution to The Disparity Problem is drawing nigh. When it comes, most people will regard it as other-worldly.

  • Andrew Berg

    Perhaps everyone thinks this is too radical, but i really think that we need to simply “get rid of” wall street. By that, I mean restricting Capital markets to just that, no more futures trading, no more derivatives and no more buying and selling of anything past its real-world current value. It literally does not provide our economy with anything useful at all. In fact, taking the “economy” to be made up of people, trying to live, produce and consume in a way that keeps pace with population size and provides opportunity without requiring massive disruption, Wall street is a parasite. The only wealth that it creates is extractive and it’s high time we get rid of it. It’s like we’ve let the engineers in the engine room to become the captains of the ship.

  • Anonymous

    Of course. Because nobody should be mitigate risk by hedging against price spikes in oil or wheat or interest rates, right?

  • Anonymous

    And the biggest single contributor to the Obama campaign was…..

  • Pat Riot

    I think it is time to rid ourselves of the parasites that the Democrat-Republican Party has become. I think that average Americans are best suited to lead other Americans, and I think it is a big mistake to cast even one more vote for a D or an R in 2014 and 2016. I think we will be pleasantly surprised when people like us take control of Congress, rather than the professional politicians who have raped our coffers for decades now.

  • WisdomSeed

    It is time for workers to own their own businesses. Not in that ‘owe money to a bank, depend on a venture capitalist’ was we’ve come to think of entrepreneurialism, but more in the way of worker cooperatives, like the kind that had been established in Mondragon Spain. And there is still room for investment in that realm, but it would be by the purchase of bonds, not shares. Shares can only be owned by workers and each worker owns the same amount as the other workers. They would hire management from inside the pool of workers, which is much better than the multiple layers of middle management that is currently operating in our corporate structures (and there would be much fewer levels of management) allowing for workers to be paid more, while also earning the kind of wealth that comes with owning a business.

  • IpseSenex

    Absolutely. It’s as immoral as the top 85 owning as much wealth as the poorest 3.5 Billion on the planet.
    I have no problem per se with people earning their wealth, but the system that exists today is obscene.
    It’s totally apparent that nothing has changed since 2008 and the top echelon is still looking after its own.

  • Worker

    They bought the forest, the rivers and the sunshine! And they bought 99% of the population. What are you going to do about it? Play video games? Drink? Yeah that’s a good American…..go get drunk and watch football advertisements!

  • Worker

    I would like to be pleasantly surprised but I’m betting the lazy slobs will out number all of the ambitious people that want change. This is America. We do what TV tells us!

  • Worker

    Tax Wall street! What are you talking about? You have to steal from them if your wanting to get your vittles!

  • Worker

    But what about capitalism? It’s totally awesome and bodacious man!

  • Aurumir

    Worker, you are rather pessimistic. You make the obvious negative observations quite well. What are you doing to promote your ideal? Have you any positive comments that could inspire people to create the better world you must be imagining? In other words, quit whining and do something to create the change you want to see.

  • Aurumir

    do you mean that nothing has ever changed? 2008? this type of behavior has existed for centuries, the greed of the elite usurping and enslaving the very people that actually created their wealth. It’s history repeating itself ad nauseum….

  • URAdouche

    This is not necessarily just a whine. Sure it’s wise to promote Positve problem-solving ideas but they are often difficult to promote. This frustration is a fair observation. Telling someone to “quit whining” is way more polarizing and counter-productive…though in spirit I agree.

  • Worker

    My voice is only loosing it’s power to the mighty Idiot box. And for shame on me for criticizing the first generation of people “Duped” by the television. DUPED sir, the first generation of TV watchers have been DUPED! Your great grandfather would’t have paid hard working money to let an advertisement machine into his home! Politicians and corporations have Duped us all with the TV! Now go be happy and drink a rum and cola!

  • Worker

    Racism is over then, racism didn’t create the all black ghetto in the north side of my city in St. Louis Missouri. I’m delusional! I should quit whining about it. Hell lets just talk sports or the holocaust. Agreed?

  • Anonymous

    One measure that would go a long way to fixing this mess is to take away the privilege of FDIC insurance from Wall Street banks that engage in investment banking and derivatives trading. Without FDIC insurance these banks would shrink in size naturally because no one in their right mind would put their savings at risk with these goofs. If the large Wall Street banks want to engage in really risky ventures and have FDIC backing, then they should submit to be regulating like all public utility that have an explicit taxpayer guarantee.

  • Anonymous

    Just take away taxpayer guarantees like FDIC insurance and this stuff will come to a screeching halt.

  • Anonymous

    You don’t have to get rid of Wall Street, but we have to do away with Wall Street’s asymmetric payoff arrangement with U.S. taxpayers, i.e. “Heads we win, tails you lose.” Wall Street doesn’t have enough skin in the game.

    No more guarantees for them. If they want to engage in risky ventures like derivatives trading and investment banking, then take away FDIC insurance and the other guarantees they get from us taxpayers.

  • Anonymous

    We have to get rid of lobbying. There’s the parasite. And Americans have to stop voting a straight party ticket and start being more judicious. Look at where their candidates are getting campaign funds. Look at their voting record. Does it benefit you? Or, does it benefit Wall Street, Big Pharma, Big Insurance, Defense Contractors, etc?

  • Anonymous

    And turn the boob tube off. 99% of the news is corporate owned. 30-40 years ago you had over 1,000 independent news sources in the United States. Today, after all the consolidation and corporate takeover of our airwaves, I think it’s down to only five sources, and four are corporate owned.

  • Pk

    Not to mention the lowest tax rate on this group in many generations. It used to be we raised taxes on these folks as their sacrifice for the war effort while the rest of us got to fight and die. Now we still get to fight and die and they lowered taxes during a war. Then the charade continues with news reports saying the government is spending too much money…no, we went to war and you greedy fuqs lowered your own taxes! F-ing insane. The same crew who lobbied and bribed to lower the margin requirement on energy futures from 50% to 5% claiming it would be good for consumers…hello $4 gasoline, when, adjusted for inflation it should be $1.72. When this class and the government does not fear the populace, we have issues. We are the people they should fear. This getting out of hand.

  • ClearThinker

    Sophomoric analysis and a resultant piece.

  • AT THE BRIDGE

    The minions of wall street thank you for advertising their success……. You are helpless to affect this situation, so think again. Vote “GREEN PARTY”!

  • AT THE BRIDGE

    CHANGES NEEDED: Second choice Voting., Campaign finance reform., Amend the Constitution to deny corporate citizenhood., Vote Green Party. Outlaw lobbiests ., That would be a start! Really quite simple! But for the conflicted… .Impossible!

  • Dude

    So, is the author saying that if she was offered a job that pays say, hmm … $250k per year that she would not take it because it’s unfair that she should ever make that much money while other people get paid minimum wage? Or is she pledging to donate $7.75 x 40hrs x 52 weeks to a local minimum wage worker to raise their wage to $15 hr to “make things right”? That’s probably not what’s she is saying. She is probably saying that she would like someone else to do that for her because that would be more fair. Yes, it would be more fair if someone else was required to pay for her altruism. That way it would cost her nothing, but she would still feel good about her sacrifice.

  • david h

    That money will just buy more securities from wall street it won’t be spent in consumer goods sector wake up

  • Anonymous

    Workers of the world unite. Only unions will save us.

  • William Smith

    I as I believe most people don’t resent anyone who makes a lot of money but what I do not like is the fact that for some there is never enough big corps who pocket billions and pay low wages survive on the money their employees receive in gov assistance while the cost of such assistance is paid for by middle income earners take off the blinders America after losing a good paying union job in 2007 I have bounced between jobs looking for a decent wage with decent benefits good luck I do not desire to be rich nor do I want hand-outs I want to be able to support myself through my hard work good luck I recently became a full time employee of a profitable company earning 11.50 an hour not great money but about as good as it gets it seems then I received my health care options $259 every two weeks for a family of 3 that’s $3.24 an hour gone $40 a week for gas and I am down to $7.26 an hour before taxes with a $5,000 a year deductible, another $2.40 an hour puts me under $5.00 an hour and oh yea by the way I didn’t mention $103 a week in child support GOOD LUCK

  • Anonymous

    Perhaps one of the most vapid articles I have ever read.

  • Anonymous

    Of course. Because nobody should be mitigate risk by hedging against price spikes in oil or wheat or interest rates, right?

    (Go ahead — remove this comment again. It’s on-point, and non-abusive. But it also refutes your orthodoxy. Make your priorities clear — open debate & discussion, or suppression of contrary viewpoints.)

  • moderator

    Sparafucile,

    Your comment removed because it was repeatedly flagged. It should have remained as it broke no comment rules.

    Thanks,
    Sean @ Moyers

  • Anonymous

    Well, that’s your stable of “tolerant” echo-chamber-demanding leftists, for you. Free speech for all, so long as it agrees with their agenda — with nothing so upsetting as a contrary fact or analysis.

    They’d send (and have sent, historically) dissenters to “re-education” camps if they could.

  • moderator

    Sparafucile,

    Please keep your comments on-topic.

    Thanks,
    Sean @ Moyers

  • Anonymous

    “Simple_math”, you seem to be misunderstanding some very basic math.

    In order to “double” someone’s salary, you only need to provide enough money to equal their salary.

    If you are earning $7.25 per hour, and I give you another $7.25 on top of that, I have doubled your salary.

    So, you only need $16.4 billion to double the salaries of every single minimum wage worker. That leaves $10.3 billion. Maybe we should use it to teach math and/or manners to people who post internet comments critiquing other people’s math.

    (I’m not normally this snide on the internet — but if you are going to attack the author for a “sloppy fact check”, you should check your own facts first).

  • DJ Ethereal

    This article made me sick to my stomach. This is actually atrocious. My god.

  • Simple_math

    Well edmeese maybe you should learn some reading comprehension. For “The $26.7 billion Wall Streeters pocketed in bonuses would cover the
    cost of more than doubling the paychecks for all of the 1,085,000
    Americans who work full-time at the current federal minimum wage of
    $7.25 per hour.” Means covering the ENTIRE cost of the salary, not just the difference between what they already have and double the amount. Which would be the 32,723,600,000 I stated. But please do try again. And since we are fact checking. Lets look where these numbers came from. First of all its based on one minimum wage at $7.25. This is not accurate. Please see http://www.dol.gov/whd/minwage/america.htm. Second of the all the author is using http://www.bls.gov/cps/minwage2012tbls.htm#9 and using everyone over the age of sixteen working 35 hours or more and then “Calculated by the author based on $7.25 per hour for 37 hours per week for 52 weeks” Which is not even on the cited source. It has 35 hours or more and then 35 to 39 hours. So how did the author magically calculate the number of people working 37 hours or more which is not on the cited source? But lets keep digging on the facts. “Characteristics of Minimum Wage Workers: 2012″ is the cited source but the author is comparing it to 2013 bonuses. Lets compare apples and apples and stay in the same year shall we? Oh look attached to the author’s cited source… http://www.osc.state.ny.us/press/releases/mar14/wall_st_bonus_pool.pdf theres the number for 2012. $23.7 Billion. Theres a little note on the source as well – ”

    reflects cash payments and deferred compensation for which taxes have been withheld” There is no indication of how much of that was deferred from previous years, but the governments already got their taxes from it. The author fails to note that the securities industry that she attacks accounted for 6.0% of the entire tax revenue for New York City and 15% of the NY state tax revenue for 2012 see http://www.osc.state.ny.us/press/releases/oct13/sec_related_tax_payments_nyc.pdf. The authors cited sources do not cover data that she is trying to illustrate. You want a living wage then dont be able to be claimed as a dependent. That would be age 24 and higher. “Your child must be under age 19 or, if a full-time student, under age 24″ I use the maximum age a full time student can be claimed as a dependent because http://www.bls.gov/cps/minwage2012tbls.htm#6 clearly shows if you put in the EFFORT (I know god forbid you actually have to work for something and not have it handed to you) you wont be making minimum wage. So lets look at people 24 years and older working 30 hours or more per week per year. The 30 hours per week is the only legal definition of what a full time employee is and is found in the Affordable Care Act. The raw data that was used to make http://www.bls.gov/cps/minwage2012tbls.htm would have that data but it is not presented in that format. We however can deduce that just over 50% of the minimum wage workers (per http://www.bls.gov/cps/minwage2012tbls.htm#7) are between the ages of 16 and 24. The hours per week break down for that age group is not in any of the tables though. So yes edmeese this article is written in extremely poor taste, the methodology used is questionable at best, and the fact checking is EXTREMELY sloppy.