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.