Sometimes $1 Million Just Isn’t Enough
As the global economy attempts to recover from the Great Recession of 2008, many of us have overlooked the real victims of the financial crisis: the bankers. In a recent article on the U.K. site eFinancialCareers, some of the world’s bankers attempt to explain why a seven-figure salary is simply insufficient.
As Europe considers imposing regulations on the salary of bankers, it is important to first consider the plight of the banker. Gary Goldstein, co-founder of the U.S. search firm Whitney Partners, explains, “it’s really not that unusual to find Wall Street bankers who are close to declaring themselves bankrupt — some people are really struggling”. However, with only 1% of the population earning over $200,000 in the U.K., or over $370,000 in the U.S., it may be difficult for most people to empathize with the struggles that these bankers claim to face.
Louise Cooper, a former Goldman Sachs saleswoman and financial analyst at Cooper City, points out that bankers are often burdened with expensive lifestyles.
“They will always have a nanny, private schools for the children and they will have a very big expensive house. All of this has to be paid for out of taxable income,” she explains. “With a top tax rate of 45%, this means that you need to be earning nearly double what you’re spending.”
To this, an average worker may suggest that bankers simply forgo the private schools and adjust their lifestyle to match their earned income — but average workers do not understand the highly competitive nature of the financial industry.
Tony Greenham, a former investment banker at Barclays and head of finance and business at the New Economics Foundation explains that bankers are “in a peer group which aspires to and achieves a certain standard of house in a certain area, a certain type of holiday home, and certain schooling for your children.” As a result, “you just get trapped at a certain level of expenditure...”
While most teenagers will attempt to use the exact same peer-pressure argument to coerce their parents into buying them the latest pair of designer jeans or Air Jordans, these bankers seem to feel as though they are uniquely disenfranchised. In a particularly tone-deaf statement, Goldstein tries to explain why bankers are the victims of extremely dire circumstances.
“Bonuses are so heavily deferred that people are receiving very little cash,” he said. “They are living on $300k-$400k base salaries, which are halved after tax.”
Despite the fact that 99% of the population in both the U.K. and the U.S. earn less than this, the takeaway message is not that the government ought to regulate bankers’ salaries. Rather, it is the age-old question: is enough ever really enough? Are people ever truly content with what they have — or is there always a desire to one up your peers, even if that means spending more than you earn?
The desire for more in and of itself is not a bad thing. In fact, it is the arguably the crux of the American dream. But it is impractical and foolish to first create a pre-determined lifestyle with luxury cars and summer homes, and then simply hope to make enough money to support these extravagant expenditures. In what world does lifestyle dictate income?
We see this type of fiscal irresponsibility playing out on both small and large scales. If an individual becomes accustomed to such an unsustainable lifestyle, it could result in debt, foreclosure, or personal bankruptcy. If a nation continually spends more than it earns, it will eventually rack up monumental amounts of debt — say on the order of $16 trillion — and the consequences could be catastrophic.