Updated, 12:56 p.m. |
On Wall Street, profits are down and the number of workers is shrinking.
But bonuses continue to grow larger.
Cash bonuses paid to Wall Street employees in New York City rose 15 percent on average last year, to $164,530, according to estimates released on Wednesday by Thomas P. DiNapoli, the state comptroller. That was the biggest average bonus since 2007, the year before the financial crisis struck.
Over all, workers in the financial industry in the city made an estimated $26.7 billion in bonuses last year, a number that, again, was the highest level since the crisis. The bonus figures encompass everyone from the low-ranking employee to the chief executive, so high payouts to top managers can bring up the average.
That bonuses went up amid a challenging environment for the banks reflects a cardinal rule of Wall Street: Firms are willing to pay big for the top talent. This held true even as profits overall fell 30 percent to $16.7 billion, according to the comptroller’s report.
The cash haul included payments that had been granted in previous years. This was because Wall Street firms, since the crisis, have sought to keep a temporary lid on costs by deferring a portion of compensation. Some of what had been withheld is being paid out for 2013, making bonuses larger than they otherwise might be.
The comptroller’s estimate of bonuses is based on income tax withholding data, and it does not include stock options or deferred compensation for which taxes have not yet been withheld.
While Wall Street bonuses have raised eyebrows in Washington in recent years, they are an important ingredient in the industry’s pay, often making up the bulk of these workers’ compensation.
From the perspective of the city, which had expected bonuses to go down, the increase is welcome news, bolstering a major source of tax revenue. Mr. DiNapoli estimated that the higher bonuses could translate into $100 million in tax revenue for the city in the current fiscal year above what had been anticipated.
A range of businesses in New York â€" from restaurants to luxury real estate â€" pin their fortunes to Wall Street pay. While the financial industry makes up just 5 percent of jobs in the city, those jobs account for 22 percent of the city’s wages, Mr. DiNapoli said.
“Wall Street is one of the key economic indicators and engines for our city and our state,†he said at a conference in Manhattan on Wednesday. “We certainly know that the impact of the Great Recession was felt profoundly in the securities industry here in the city.â€
The aftershocks of that difficult period continue to be felt. Banks grappled with challenging markets last year, in part because of uncertainty over the Federal Reserve’s extraordinary economic stimulus program. On top of that, bank profits were dented by a barrage of legal issues stemming from the crisis.
The number of jobs in finance declined slightly last year, as firms sought to keep costs in check. The industry employed 165,200 people as of last December, a decline of 1.2 percent from the prior year and the second straight year of declines.
Wall Street compensation continues to dwarf the pay in other industries. The Institute for Policy Studies, a liberal-leaning research group, said on Wednesday that the $26.7 billion in bonuses would be enough to more than double the pay of the 1.1 million full-time minimum wage workers in the United States.
The average pay of Wall Street employees, including salary and bonuses, was $360,700 in 2012, the last year for which data are available â€" more than five times higher than in the rest of the private sector, according to the comptroller’s report.
Some Wall Street businesses proved more lucrative than others last year, as volatility in interest rates hurt bond trading. For fixed-income traders, bonuses likely fell 5 percent to 15 percent, according to a new report from the compensation consulting firm Johnson Associates. But bonuses for equities traders probably rose 5 percent to 20 percent, said the report, which uses data from eight banks and 10 asset management firms.
At big firms like Goldman Sachs and Morgan Stanley, compensation measured as a percentage of net revenue has been going down. Goldman, which in the third quarter cut the amount of money it set aside for compensation, reported a compensation ratio of 36.9 percent for 2013, the lowest level since 2009.
But deferred pay on Wall Street is helping generate higher tax revenue. The city collected an estimated $3.8 billion in taxes last year from the securities industry, nearly 27 percent higher than in 2012, Mr. DiNapoli said. The industry accounted for 8.5 percent of the city’s tax revenue.
And yet, Wall Street continues to face challenges, even with the increase in bonuses. After past economic downturns, the securities industry “is what led us out of a tough economic time,†Mr. DiNapoli said.
“That has not been the case with our current recovery,†he said.
