Wall Street Bonuses Vs. Normal Wages: A Disturbing Trend (CHART, VIDEO)

It may be hard to believe but there was a time, almost 25 years ago, when Wall Street and Main Street weren't so far apart -- at least when it came to the average worker's salary and the average financial industry employee's annual bonus. Back in 1985, the average annual salary for all workers across the country was actually a bit higher than the average bonus ($19,000 to $13,970). (Note: these numbers are not adjusted for inflation)

How times have changed -- while the average Wall Street bonus soared almost 14 times higher (by 2006), the average worker's salary has essentially been stagnant sine the mid-1980s. And that increasing disparity seems fine, according to a Goldman Sachs adviser, who said on Tuesday that "we have to tolerate the inequality," reports Bloomberg News:

A Goldman Sachs International adviser defended compensation in the finance industry as his company plans a near-record year for pay, saying the spending will help boost the economy. "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," Brian Griffiths, who was a special adviser to former British Prime Minister Margaret Thatcher, said yesterday at a panel discussion hosted by St. Paul's Cathedral in London.

WATCH (around the 2:50 mark):

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Though bonuses slipped sharply in 2008 amid the financial crisis, they're rebounding this year and Wall Street firms are set to pay out record amounts to their employees, which is sure to increase the disparity.

Treasury Secretary Tim Geithner recently told reporters that banks will be making "significant changes" to the way they pay their employees, and called bonuses being paid out by bailed-out firms "deeply offensive."

To get a sense of the disparity between Wall Street and Main Street, take a look at this chart tracking the average bonus and the average annual salary since 1985:

 Average Wall Street Bonus

 Average Annual Pay

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Banks have been castigated for returning to pre-crisis pay packages -- White House spokesman Robert Gibbs recently told reporters, "Pay on Wall Street can't return to the speculative era that we saw last, specifically right before the economic collapse..."

Disturbingly, the chart shows some similarities to some of the data we've seen on income inequality. University of California, Berkeley's Emmanuel Saez put together a scathing report on this topic earlier this year. The share of total U.S. income made up by the top 10 percent of earners, according to Saez's figures, was around 35 percent in 1987. By 2007, the top U.S. earners would capture almost 50 percent of total U.S. income.

Some important caveats: the information in the chart, taken from the U.S. Bureau Of Labor Statistics and the New York State Comptroller's office, includes average bonuses for workers classified as securities industry professionals. Using an average bonus figure for Wall Street workers is somewhat problematic. For one, not every Wall Street employee gets the same size bonus -- some top executives get vast sums that can distort the average bonus figure. Also, not every financial service professional is even eligible for a bonus. It's hard to make direct comparisons between the bonus pool at Goldman Sachs, which has a relatively small number of employees, and an immense company like Bank Of America, which has a large retail banking presence.

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Comments

[Jaspatk1701]

This is what we get for 25 years of REAGANOMICS, It is fashioned TRICKLE DOWN, WHAT'S GOOD FOR BUSINESS IS GOOD FOR AMERICA, etc., etc., relabeled as SUPPLY SIDE ECONOMICS. And America has actually gotten more conservative, in agreement with it, thinking government is the cause, after Reagan and the great debt wave helped make us all house rich. For a while. KEEP VOTING REPUBLICAN AND GET MORE OF THE SAME, EVERYTHING GIVEN TO BIG BUSINESS AS OUR JOBS AND LIVES ARE SHIPPED OVERSEAS. And Clinton let it slide, he had to ride the wave of free market debt, he could do little and went along with it. NOW THAT THE HORSE IS OUT OF THE BARN, AND A WILD HORSE IT IS, NO ONE CAN TAME IT. AND IT STILL GOES ON, WITHOUT RESTRAINT, OR MEANINGFUL REFORM, WITH BONUSES AND RISK TAKING BACK AS THOUGH WE NEVER HAD A CRISIS. I hate to say it, but maybe we do need a depression to stop it all, it would be the culmination and natural conclusion of these two decades-long roaring 20s we have had. Regulation, anyone? For more, see my blog, http://www.wrathofmcgrath.com

[ReferenDem]

GET THEM OUT OF GOVERNMENT - VIRTUAL MEETING (Meeting)

at http://my.barackobama.com/page/event/detail/meeting/gpc5tq

When you sign up for this event, you are saying to President Barack Obama - we want you to stop the bankrupting of our country by the large financial institutions, with policies and programs that give them taxpayer money with which they can gamble and make record profits.

We want Geithner, Summers, Bernanke, (Paulsen, Rubin) OUT and we want you to bring honest advocates of reform such as Elizabeth Warren and Brooksley Born IN.

Please watch Frontline's "The Warning" at http://www.pbs.org/wgbh/pages/frontline/warning/view/

[ChelseaC]

Disturbing indeed. I wish Obama never bailed these ******* out.

[Harvee Wallbanger]

Obama didn't do it, Bush did it. Obama had no choice but to finish the bailout.

[TruelyFedUp]

A true story: Perception ..something to think about...

Washington, DC Metro Station on a cold January morning in 2007. The man with a violin played six Bach pieces for about 45 minutes. During that time approximately 2000 people went through the station, most of them on their way to work. After 3 minutes a middle aged man noticed there was a musician playing. He slowed his pace and stopped for a few seconds and then hurried to meet his schedule.

4 minutes later: the violinist received his first dollar: a woman threw the money in the hat and, without stopping, continued to walk..

6 minutes: A young man leaned against the wall to listen to him, then looked at his watch and started to walk again.

10 minutes: A 3-year old boy stopped but his mother tugged him along hurriedly. The kid stopped to look at the violinist again, but the mother pushed hard and the child continued to walk, turning his head all the time. This action was repeated by several other children. Every parent, without exception, forced their children to move on quickly.

[nopilikia]

Sad commentary on America then, more so now. And only the children realized the beauty of his music.

[TruelyFedUp]

45 minutes: The musician played continuously. Only 6 people stopped and listened for a short while. About 20 gave money but continued to walk at their normal pace. The man collected a total of $32.

1 hour: He finished playing and silence took over. No one noticed. No one applauded, nor was there any recognition.

No one knew this, but the violinist was Joshua Bell, one of the greatest musicians in the world. He played one of the most intricate pieces ever written, with a violin worth $3.5 million dollars. Two days before Joshua Bell sold out a theater in Boston where the seats averaged $100.

This is a true story. Joshua Bell playing incognito in the metro station was organized by the Washington Post as part of a social experiment about perception, taste and people's priorities. The questions raised: in a common place environment at an inappropriate hour, do we perceive beauty? Do we stop to appreciate it? Do we recognize talent in an unexpected context?

One possible conclusion reached from this experiment could be this: If we do not have a moment to stop and listen to one of the best musicians in the world, playing some of the finest music ever written, with one of the most beautiful instruments ever made.... How many other things are we missing?

Truly

[TruelyFedUp]

This story would not exist in a resource based economy - all basics of life including our homes, education, food, medical would be a natural right of every citizen. Technology would be used to handle most of the work. City centers would be universities. People might work one day a week to help handle work not done by machinery. Government would be of the people via their input into a central database where their idea would be analyzed and added to the solutions that benefit society. See www.thevenusproject.com for details.

Truly

[research]

Agreed. Like the Swedish system, regulated markets and capitalism with a safety net for all.

Sweden has more Billionaires per capita than the USA.

Automation makes it not just possible, but necessary to preserve liberty and democracy.

[wonkguy]

My big issue is with Dylan. Why is he making up this term "corporate communism" in order to describe the basic takeover of the financial sectors of the U.S. government by Wall Street. There's already a word for it and it's called an Oligarchy, plain and simple. Call it what it is.

[wonkguy]

I've gotta say that I don't have a real problem with banks charging customers who don't charge enough on their credit cards. It's basically a facility fee which banks charge on revolving commerical lines of credit. Unless we are willing to say that eveyone is entitled to some level of credit, which I don't think we are ready to say, it makes sense.

[bbaker2580]

these guys need this kind of money - otherwise they'd be driving towncars instead of chauffeured limos, they have country club memberships to maintain, second, third homes to pay for, house-staff to pay, the burden of exotic vacations to pay for, helicopters to forge the hudson river, health care insurance alone eats up half their income. take away these things and... what would their neighbors think?

[Harvee Wallbanger]

These people think they are entitled to make obscene amounts of money. They think they are entitled to the corporate welfare. They think they are entitled to socialize the losses and privatize the profits. They think they are entitled to their billions while at the same time deny a homeless mother a few dollars in food stamps to feed her children. They are absolutely corrupt in every sense of the word.

[WeMustSpeakOut]

Well said Harvee.

[venusvictrix]

Some of us call them sociopaths.

They fit the DSM criteria.

[Peter Noble 2]

If I were Goldman Sachs I'd spend the bonus money on a small army of bodyguards. They are the Hamas of Capitalism and deserve to be locked up in a virtual Gaza. They have now declared themselves as the true enemies of our Republic they deserve no mercy.

Congress would be well advised to tax their bonuses: heavily. If not......

[Paul Hackett]

More content-free feelgood waffle from Geithner. He is shocked, shocked! about the scale of these bonuses. But is he doing anything specific and concrete to reign in the compensation of people like Robert Rubin (his mentor and the man he allowed to run Citigroup into the ground while Geithner ran the New York Fed). Hell no, he's not about to ruin that party. Geithner is the king of nice sounding blather. Judge him from his (lack of) actions.

[guydesrochers]

I say we lobby the Obama administration and insist that they fire Geithner and that he be replaced with Dylan Ratigan. We don't need a whole battery of overpaid, bought and paid for regulators who worked at goldman sachs in the regulatory agencies of the SEC, liek the lastest 29 year old "whiz kid" that has just been appointed. While we are at it, get rid of him too.

We just need someone who understands the process of how we got into the mess, to propose sensible fixes to prevent recurrence and who has the intestinal fortitude, the vision and ethics to implement such fixes. It isn't any more complicated than that, people.......

[Coastalthinker2]

Remember, President Obama CHOOSE to surround himself with Timothy Geithner, Larry Summers and Ben Bernanke. From what I can see, he agrees with them otherwise he would have pushed really hard for major regulatory reform of financial institutions in Congress.

[Coastalthinker2]

oops... CHOSE not CHOOSE

[Viper]

The reform bill they sent to Congress is working its way through. Up for a Vote this week. The repugs are fighting any regulation... I guess they love the mess they created and feel they have yet destroyed the country.. mission not quite yet complete!

Very few times as major legislation gotten thru congress in LT 5 months..


Regards

[Paul Hackett]

Depressingly, Occam's razor would indicate that what you say is true. Despite all the masterful progressive rhetoric of Obama's speeches, all the concrete indications are that he is in absolute thrall to Wall Street and wishes to do nothing more than maintain business-as-usual for Goldman et al.

[Ken Freedom]

While that's true, it's also important to recognize that these guys are Clintonistas and the DNC approved economic wonks, Larry Summers in particular. Obama chose people in the manner of Lincoln, choosing people he doesn't necessarily agree with but who represent powerful constituencies that could fight him.

So while Obama did choose to ally with these people, he did it primarily because he's trying to build a powerful coalition government that unites the several sub-parties of the Democratic Party into a functioning whole.

[guydesrochers]

Can someone explain to me why it is goldman sachs' stratospheric exec compensation plan is allowed to survive untouched? Did they not benefit from TARP money and were they not bailed out.? How come they are getting away with this theft of our taxpayer money?

[MissVirginiaVoter]

They helped negociate the TARP - so they get to do whatever the heck they want to do. Outrageous!

[sviolette]

George HW Bush called trickle down economics Voodoo economics.