Wall Street Sees the Plight of Labor

Photographer: Ozier Muhammad/The New York Times via Redux

Don’t assume the guy in the chair is any less replaceable.

Why do investment bankers get paid as much as they do? Part of the answer is that while the number of jobs on Wall Street has grown slowly over decades, the amount of money they move has skyrocketed.

But there are other industries, too, in which profits have multiplied, and employees haven’t shared in the wealth. At about 43 percent of national output, the portion of output going back to wages is the lowest since the government started counting. This is what Pacific Investment Management Co.’s Bill Gross calls “the plight of labor” in his November investor outlook. More and more money has gone to the corporate bottom line, less to workers.

The difference with Wall Street is that bankers have been much more adept at getting a chunk of the profits than employees in other industries. Highly paid as they are, all those investment bankers are still employees, and yet somehow in the tug of war with shareholders they have managed to retain more. One conventional explanation for this is that those workers have skills that are somehow especially irreplaceable.

Wall Street firms seem to be refuting that idea, with Goldman Sachs leading the way. Before the financial crisis, investment banks earmarked roughly 50 percent of their revenue as compensation (and sometimes, like in the case of Merrill Lynch, even more). Now, as Bloomberg’s Michael J. Moore and Zeke Faux report, Goldman has cut compensation to 39 percent of revenue. Meanwhile, the bank has boosted its dividend 57 percent since the beginning of 2012.

This isn’t going to send anyone at Goldman to the poor house. But it’s a sign that the plight of labor–the general shift in power from workers to owners–isn’t just a problem for those at those at the bottom of the economic ladder. Investment bankers have long had the run of Wall Street, and gotten paid as if they owned the shop. Turns out, they don’t.


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