Wall Street's Youngest Employees May Be Hit With Pay Freeze This Year

Some of Wall Street's youngest workers may not be getting the pay raise they expect this year.

Credit Suisse will likely stop its practice of automatically increasing pay for junior workers such as analysts, associates and vice presidents in the company's investment banking division this year, positions often held by younger workers, Bloomberg reports. Competitors are watching other major banks like Goldman Sachs and JPMorgan Chase to see if the companies are also planning to suspend what is considered typical industry practice.

Faced with global economic worries, weak trading revenue, new regulations, concerns over falling share prices and anxiety about the public perception of bankers' pay, Wall Street firms will likely slash pay to its lowest level since immediately following the financial crisis in 2008, the Wall Street Journal reports. But unless the firms cut pay en masse, it could mean a talent drain for those who do, according to Bloomberg.

The concern is real. In response to the possibility of falling bonuses, brokerage executives at Jefferies Group, threatened to leave the company if they don't get bonuses up to par with those at other Wall Street firms.

As the Bloomberg report indicates, the pay cuts are likely to affect younger Wall Street workers most -- a trend that has has been true of Wall Street employees since the financial crisis. More than 100,000 finance industry workers between the ages of 20 and 34 lost their jobs between the third quarter of 2008 and the same quarter in 2011 -- a 25 percent drop, -- according to The New York Times. At the same time, Wall Street's headcount fell 17 percent overall.

Though many estimates indicate that banker bonuses are likely to fall, workers haven't lowered their expectations. Over half of Wall Street employees said an October survey that they assume their bonus will be the same or more than last year's.

While their bonuses may drop, bankers could still take home big overall compensation packages, which include pay, benefits and bonuses. A Public Accountability Initiative analysis of seven big banks' compensation data from the first three quarters of 2010 found that compensation is on track to hit a record and exceed 2010 levels.

Even if Wall Street pay ends up falling, banks' ratio of compensation to revenue will likely go up. At Goldman Sachs, compensation as a share of revenue is expected to rise to 44 percent from 39.3 percent this year, according to the NYT, a trend that often occurs during tough economic times. In 2009, the year following the financial crisis, Citigroup paid its employees about 31.1 percent of its revenue. In 2010, the share went down to 28.1 percent.

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Comments

[vwjan]

05:56 PM on 01/11/2012

I have not had a raise in 3 years and don;t expect one soon, but I still have a job even though the housing and commerical building is down.

[DiogenesOfAlaska]

05:19 PM on 01/11/2012

This whole thing is pretty simple.

There are only two possible reasons why pay was relatively high in finance in comparison to other sectors prior to the crisis: either it was because the sectors was building up a bubble (i.e. hiding hidden and hard-to-quantify risks under the carpet, only to make sure they will manifest later on) or it was because the whole sector was really mainly driven by a logic similar to what's happening in developing countries or at the threshold of a Kondratieff cycle transition.

The first means they (the financial institutions that is) are gambling and trying to make others pay the bill, the second means the public and the taxpayer doesn't know what to expect about the tryptych of GDP growth, the role of banking and their own very private and very personal wealth.

But in both cases the appropriate answer to the plight of the bonus addicts is the same:

Let them eat cake. Or some derivative of it.

Because they are either playing with your money without knowing or they know what they're doing. And those who know what they're doing will enhance growth and earn surpluses no matter what their bonus turn out to be. At least if their bonus is some derivative of the long-term cake they end up producing.

And there never - ever - was a reason to compensate bankers in any other way.

We've been taken for a ride. But it's over. Because THEY blew it.

[kyeshinka]

03:42 PM on 01/11/2012

Maybe this is what's needed to stop the whole born rich--attend Harvard because Dad is legacy--work on Wall Street--cycle that practically every white person on the east coast is born into. It's especially hard nowadays that since we dont' produce anything, and people are wise to foolish bailouts, that money isn't as plentiful. Maybe these people can for once in their lives actually produce something.

[Rocktopus]

05:15 PM on 01/11/2012

Flagged for abuse.

[silive]

10:37 AM on 01/11/2012

Good looking guy in the picture though! Regardless of age.

[RitaS]

04:17 AM on 01/11/2012

....stop its practice of automatically increasing pay for junior workers such as analysts, associates and vice presidents in the company's investment banking division ...

Oh you poor babies, I feel SO sorry for you.... NOT....

[Squiggie]

01:11 AM on 01/11/2012

"...Some of Wall Street's youngest workers may not be getting the pay raise they expect this year..."

Gee, I'm all broken up and beside myself.
These poor folks might even have to do with only ONE house in the Hamptons, TWO polo ponies and the unthinkable--ONLY a FEW Hundred Thousand a month in dividends...

I say we take up a collection so these poor underpaid fiscal ne'er-do-wels don't have to sell the Rolls to make ends meet...

[kamact]

12:39 AM on 01/11/2012

They are lucky not to be in jail,..

[engchina]

10:21 PM on 01/10/2012

Not only do the so called 'Predatory Masters of the Universe,' declare economic and social warfare on the 'poor schmucks' who barely scrape by with enough $$$ to pay a miserable mortgage or rent and have enough left over to feed their families .
No not content with that - the overpaid higher echelons of the financial industry fires the very people who helped their companies earn the massive profits which in turn paid to the inner sanctum of greed and corruption millions in bonuses.
My advice to those young kids being fired from Goldman-Sachs et al - Find something meaningful to do with your life whether its the sciences, education or social services - You won't make nearly the same amount of money, but you will go to your grave knowing that you were involved in something that made a difference.

[cft611]

09:39 PM on 01/10/2012

blankfein is taking their share of the bonuses for payoffs, lawyers, vacations, etc

[drwtsn]

09:37 PM on 01/10/2012

But not to worry, folks; the top executives will still get their billion dollar bonuses. In fact, this will allow them to collect even more than in past years.

[parrotfish]

07:18 PM on 01/10/2012

They should feel the pinch like everyone else is. Maybe some of those bright talents (yes there are some, not a whole lot but, some that went to wall street) will now go into much needed professions where their talent is needed to actually "make" things or "produce" something that will bring the US back to a competitive balance with countries that are eating the US lunch. Rather than where they were on wall street chasing the money by running the ponzi schemes and not "making" or "producing" anything tangible.

[mericart]

06:52 PM on 01/10/2012

This is long overdue. But is it implemented across the board? The CEOs better not be getting a fat check while their minions take the brunt of pay cut.

[Haditup2here]

06:38 PM on 01/10/2012

I guess the brain drain or talent drain "according to Bloomberg" in other sectors or industries haven't matter much.

[Barbarian At The Gate]

06:16 PM on 01/10/2012

It's been several years since the financial crisis. The recent wave of bankers hitting Wallstreet should have known what to expect. For all the guys with math, science, and engineering degrees hoping to get into the derivatives business they should have joined a company that is actually building real products to enhance people's lives.

[drwtsn]

09:39 PM on 01/10/2012

Unfortunately, even with stagnant wages and no bonuses, Wall Street pays better than an engineering job.

[yankeeairpirate]

06:05 PM on 01/10/2012

I'm really sorry, but I've been under a pay freeze for the last 2 years and it's been extended for yet another year. No promotions, no pay increases.

Costs keep going up, but not my pay.

I'll vote against anyone who has voted to freeze or cut my pay or benefits. And now, they're proposing to make changes to Social Security and Medicare.

Go ahead, talk the talk. But it's going to be hard to walk the walk when you're cut off at the knees by the voters.