Wall St. Pay Tumbles After Weak Year

What the Occupy Wall Street crowd could not do, the financial sector of the economy has done. People who work at banks and investment banks will make less money this year. And why not? Investors got poor returns, as did many clients. The Wall St. pay system may cause compensation to fluctuate wildly, but it is not essentially different from most other systems when the overall economy is in trouble.

Johnson Associates issued its widely followed Financial Services Year-End Projections. Pay packages will drop as much as 30% in some departments in financial firms. Johnson says that the prediction is good unless there is a “2008-type meltdown.”

Senior management and fixed income traders will take the biggest hit. Of course, in the eyes of the average American, they will not be harmed at all. Senior bankers will still make millions of dollars in many cases. Hedge fund executives will do better at many firms. The chief executives at the largest financial services corporations probably will make tens of millions of dollars again.

Wall St. is barely different from many businesses when it comes to setting compensation. Farmers make less in years when yields are poor because weather or low demand hurt prices. Many people who run retail establishments will do poorly because holiday sales could be weak. Tens of thousands of small business owners whose operations struggle will take home less money. The same holds true for fishermen and construction workers. Industries and businesses that have not recovered much from the recession will cause incomes throughout America to fall.

Wall St. traders and executives may make more money than almost anyone else in the U.S. These bankers would argue that they create wealth. Others would argue that traders do not create any jobs. Neither side of the debate is crucial to most Americans, many of whom will suffer economically because the economy has never recovered. Compensation for many Americans works the way that Wall St.’s does. Most Americans just make less.

Douglas A. McIntyre