Wall Street's dirty secret: Pay is trending down

In a lot of ways, Wall Street work is the same as it ever was. The hours can be punishingly long, and offices are still dominated by alpha males calling the shots. But the money remains undeniably great, with the average worker making $422,500 a year, according to a report last week by state Comptroller Thomas DiNapoli.

"Finance continues to be the anchor of the city's economy," said Kathryn Wylde, chief executive of the Partnership for New York City, noting that the industry accounts for just 5% of the workforce but 20% of the economic output.

The comptroller's report also showed something surprising: Bonuses, which constitute the lion's share of most Wall Streeters' pay, went down last year, even as revenues and profits rose. Specifically, the average bonus declined by 17%, to $153,000, while earnings at the New York Stock Exchange's member firms rose by nearly $3 billion, to $27 billion, amid a 5% increase in sales.

The data underscored a dirty little secret about Wall Street work these days: For a lot of people, the pay is diminishing.

A drop in pay undoubtedly hurts less on Wall Street than it does most anywhere else. The average worker there is still making five times more than other private-sector employees in the city, and belt-tightening has been masked by the lavish sums that continue to be paid to those at the very top. JPMorgan Chase CEO Jamie Dimon was awarded $31 million last year, making him the first bank CEO to crack $30 million since the financial crisis, according to The Wall Street Journal. Blackstone Group's Steve Schwarzman took home at least $568 million, and KKR's Henry Kravis was paid $170 million.

But away from the commanding heights, the 181,300 New Yorkers who staff the city's banks, brokerage houses and asset managers are having to make do with a bit less. One sign: The average bonus last year was 20% below the peak, paid in 2006. That same year, Goldman Sachs employees pocketed 44 cents of every dollar of revenue generated by the firm. Last year that number was 33 cents, a drop of 25%.

Legacy of crisis

The decline in pay is exactly what federal authorities wanted to see after the financial crisis. In the years leading up to that disaster, banks routinely paid huge bonuses to traders who made huge bets with little consideration for the risks they were taking. The poster child for this mindset was Citigroup, which paid oil trader Andrew Hall a $100 million bonus in 2008 after years of a job well done.

A year later Citi let go of Hall and his division after receiving billions in bailout money. The next year President Barack Obama signed the Dodd-Frank bill into law, requiring banks to dial down risk and shrink or abolish their trading desks. Regulators began demanding banks pay out more bonuses in stock that vests over several years and required they create provisions to claw back pay that is later deemed undeserved. The Volcker Rule barred banks from using their own capital for trading.

"We don't have the extreme levels of pay we saw 10 years ago," said Alan Johnson, a Wall Street pay consultant. "The people making $10 million or $20 million a year aren't there anymore."

The gun-slinging traders have been replaced by people in risk management and compliance. In 2013 Dimon vowed JPMorgan would spend an additional $4 billion in those areas after paying billions to settle legal and regulatory issues. He and other bankers have also spent big on cybersecurity experts in recent years.

All the new jobs have been in areas that are not profit-making," Wylde said. "Those are not big-bonus jobs."

Even in its shrunken state, the bonus pool checked in at $27.5 billion last year. The business and personal taxes generated by Wall Street accounted for 18% of state tax collections for the year and better than a fifth of all private-sector wages paid in the city, according to DiNapoli's report.

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