Wall Street Bonuses Rising?

A New York Times Dealbook post from earlier today cites a recent study by Wall Street compensation expert Alan Johnson demonstrating that pay for financial services employees will jump 5 percent this year — with some employees getting increases around 15%.

Bankers Bonus
Bankers Bonus

Earlier today I looked at a Bloomberg story about the decline in Wall Street compensation pools.

So who's right?

Meaningful data on this issue seems remarkably difficult to tease out.

Why? Mostly because it's difficult to make apples to apples comparisons based on the way banks are reporting their data. Let's engage in a little thought experiment to demonstrate how this type of analytic comparison is seriously problematic.

Data reported in the Bloomberg article today states that Goldman Sachs' per employee compensation number is $389,655. Based on the same source, J.P. Morgan Chase posts a per employee compensation figure of $91,014.

Apply the arithmetic and you'll discover that Goldman Sachs' total compensation per employee is almost exactly 4 1/4 times higher than J.P. Morgan's.

So what does that mean?

Wall Street being what it is, the competition for talent is ferocious.

People have been known to take a walk across the street for 10 percent raise.

We're looking at a data sample of people who do money for living, after all.

Bearing that in mind, what are we seeing in this data? What seems highly likely that were 'not' looking at is a discrepancy in compensation between relatively equal talent. On its face, it seems almost impossible to fathom that top traders or top bankers would simply ignore the opportunity to jump ship for 425 percent raise.

So what are we seeing? Maybe we're looking at the difference in compensation between prop traders at Goldman versus Chase bank managers in the suburbs. Or maybe what we're seeing is a larger base of clerical employees J.P. Morgan Chase versus a leaner Goldman Sachs.

It's difficult to say exactly what the data tell us — but we can't rule out the possibility that what it tells us isn't very useful.


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