Wall Street Pay Cuts Would Hurt the Financial Industry, Despite Popular Demand For Them
A number of major Wall Street firms are considering pay freezes or pay cuts in response to diminished revenues in the wake of the economic downturn. Though doing so may calm the swelling Occupy Wall Street masses, it will have a detrimental effect on Wall Street itself.
The average American sees the salaries and bonuses of Wall Street executives in the millions and is outraged. Though I understand the outrage at the compensation packages and spending habits of Dick Fulds, John Corzine and John Thain, I feel it is misplaced. People who haven’t worked in the industry can’t begin to fathom how stressful, life-consuming, and hard it is to succeed.
The average Wall Street professional works 12-14 hours a day, is practically chained to their desk, and has almost no social life for the first few years of their career. You want a lunch or smoke break? Your bosses will find someone who cares for neither and replace you faster than you can ask for either. A number of factors, not limited to the hours worked combined with the amount of revenue generated for their firm, determine how much of a bonus each of these individuals receives. They work hard for their pay, and they deserve it. Working on Wall Street isn’t a job, it’s not even a career: It is a lifestyle.
According to a report by Bloomberg, the average starting salary for a junior banker out of college is $200,000 a year and usually jumps to upwards of $250,000 in the second year and $600,000 within five years. Though starting salaries are expected to remain relatively flat, compensation and bonuses for those higher up the food chain is expected to drop upwards of 60%. This is largely due to the drop in revenues banks are able to generate since the onset of the economic downturn.
Though many believe investment bankers make their profits through deceit and lies, this is usually not the case. Lying, cheating, and stealing aren’t the only ways to make money in the financial services industry. There are IPO (Initial Public Offering) Syndicates, Merger and Acquisistion advising, arbitrage, the list goes on. Not everyone with a pinstripe suit and French cuffed shirt is a Bernie Madoff, Sam Israel or Jordan Belfort.
Many people see the perceived greed and excess and are enraged with the brazen statements current Republican presidential candidate and former Bain Capital CEO Mitt Romney has made during his campaign, about how he “enjoys firing people.” Romney’s quote was taken out of context, but the other candidates still hurt him by quoting it and painting a picture of his East coast elitism that resonated in some areas of the country.
Wall Street is the American dream for many people. The top-tier of investment banks is akin to Major League Baseball. Only a select few make the majors and are afforded the millions that come with achieving that level of success. To make it to either a top bank or a baseball team, it takes a tireless work ethic, self-sacrifice, and a commitment to something greater than one’s self.
The tide of top graduates going to Wall Street is already starting to reverse. Occupy Wall Street sympathizers are already turning their backs on the banks, and cutting the salaries of junior bankers would only add to those numbers. It would be a huge mistake.
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