Op-Ed, 445 words

Wall Street Bonuses vs the Minimum Wage

Raising the minimum wage would give our economy much more bang for the buck than we get from the financial industry's yearly windfalls.

Sarah Anderson

Purveyors of Ferraris and high-end Swiss watches keep their fingers crossed toward the end of each calendar year, hoping that the big Wall Street banks will be generous with their annual cash bonuses.

New figures show that the bonus bonanza of 2013 didn’t disappoint. According to the New York State Comptroller’s office, Wall Street firms handed out $26.7 billion in bonuses to their 165,200 employees last year, up 15 percent over the previous year. That’s their third-largest haul on record.

Wall Street Charges Ahead, an OtherWords cartoon by Khalil Bendib

Wall Street Charges Ahead, an OtherWords cartoon by Khalil Bendib

That money will no doubt boost sales of luxury goods. Just imagine how much greater the economic benefit would be if that same amount of money had gone into the pockets of minimum-wage workers.

The $26.7 billion Wall Streeters pocketed in bonuses would cover the cost of more than doubling the paychecks for all of the 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

And boosting their pay in that way would give our economy much more bang for the buck. That’s because low-wage workers tend to spend nearly every dollar they make to meet their basic needs. The wealthy can afford to squirrel away a much greater share of their earnings.

When low-wage workers spend their money at the grocery store or on utility bills, this cash ripples through the economy. According to my new report, every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy. Every extra dollar a high-income American makes, by contrast, only adds about 39 cents to the gross domestic product (GDP).

And these pennies add up.

If the $26.7 billion Wall Streeters pulled in on their bonuses last year had instead gone to minimum wage workers, our economy would be expected to grow by about $32.3 billion — more than triple the $10.4 billion boost expected from the Wall Street bonuses.

This immense GDP differential only speaks to one price we pay for Wall Street’s bonus reward culture. Huge bonuses, the 2008 financial industry meltdown made clear, create an incentive for high-risk behaviors that endanger the entire economy.

And yet, nearly four years after passage of the Dodd-Frank financial reform, regulators still haven’t implemented the modest provisions in that law to prohibit financial industry pay that encourages “inappropriate risk.” Time will tell whether last year’s Wall Street bonuses were based on high-risk gambles that will eventually blow up in our faces.

Low-wage jobs, on the other hand, endanger nothing. The people who harvest, prepare, and serve our food, the folks who keep our hotels clean, and the workers who care for our elderly all provide crucial services. They deserve much higher rewards.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is the author of the new report Wall Street Bonuses and the Minimum Wage.

  • Elizabeth

    Well said. How about we close down the stock exchange which was once a marketplace for investors, but is now nothing short of a casino where speculators gamble with other people’s money?
    That probably won’t happen, but do you have any suggestions for what can be done? What can I do to begin to curb Wall Street Mania?

    • Johnny Dollar

      You can refuse to participate if that’s your choice. Problem solved. I’m not saying that’s a good solution, but if it makes you happy go for it!

      • Elizabeth

        You are somewhat missing the point, namely that my mindset, or my participation or not in the stock exchange solves nothing. If I as an individual could do something to curb the rampant greed that characterizes Wall Street, believe me, I would have done. Instead I try, by any means possible, including discussions like this, to persuade people from all walks of life that unfettered economic growth is not the solution to the world problems. There simply are not the resources to sustain the trend.

        • Johnny Dollar

          Unfettered economic growth is hardly the problem I hear descriptions of. More like tepid worldwide. Meanwhile new resources to fuel growth are being discovered all the time, particularly in the energy sector. Not so much in the human capital sector, however. I’ll concede that point to you since schools are turning out (if they even manage to graduate) crops of students incapable of being employed in anything but current minimum wage jobs.

  • Elizabeth

    To answer my own question, getting stock market reports off the news could be somewhere to start. Even NPR has a report on the DOW during every hourly news update. If you are the sort of person who cares about hourly fluctuations in stock prices, I can guarantee that you have at least one monitor on your desk running ticker tapes from all the major markets.
    For the rest of us it simply does not matter. It simply underlines the fact that the only measure of success in this country is how much money you have in the bank. We need a new mindset.

    • Johnny Dollar

      Very good. Use whatever “mindset” that makes you happy.

  • TruthSeeker

    So we should take the money from the people who actually earned it and give it to people who did not? How is that fair?

    • Joe Florida

      How much money do you really need to be happy. People like me can’t even pay for medical bills. I have a very low standard of living. People who make 50K or more a year, and especially people on Wall Street; I don’t feel sorry for. It’s called being greedy.

    • 53quicksilver53

      If businesses didn’t have employees, they wouldn’t be making all these billions of dollars in the first place! Are you saying employees don’t actually earn their money? Lol. What we had in the 40’s-70’s was people made a good wage: a hell of a lot more equitable than the lopsided mess of today. Savvy business owners knew that not being so greedy was good for business…workers had safer working conditions…they could afford to buy a home…furnish the home…didn’t have to go to the ER for medical care…could send their kids to college without mortgaging their futures…could take a vacation and later afford to buy a burial plot. The next generation was able to start it all over again. That was a healthy community. Do you want to live in a healthy community? Because the way we’re going now at a high rate of speed will turn out like some shithole similar to Mexico where literally across the street from the mansions are people living in Fridgidare boxes. The problem I have is the outrageous stupidity of the corporate world: they are SO focused on greed, they totally overlook the fact that those who make more…spend more! If someone could get their death stare fixation moved from being greedy to seeing how many more billions they could make if there was more disposable income: everybody would get a $20 per hour raise instantly.

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  • Michael Russell

    At minimum wage ($8/hr in CA) you make $15,360/yr.
    $26,700,000,000 / $15,360 = 1,738,281 jobs.

    In 2012, there were 3.6 million hourly paid workers in the United States with wages at or below the federal minimum wage of $7.25 per hour. These workers made up 4.7 percent of the 75.3 million workers age 16 and over who were paid at hourly rates. There are approximately 155.6-million people in the US Workforce, out of 340-million citizens (11.4-million unemployed).

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  • Johnny Dollar

    There is no meaningful connection whatever between “Wall Street” bonuses and the minimum wage. I have never been compensated on either end of that range. I have always had more skills than to take a minimum wage job, but never the skills or inclination to deal with other people’s money. I simply got promotions and pay raises over the years as my skill sets improved.

    Raise the minimum wage to $40 per hour if you want. Makes no difference to me because I am out of the workforce due to excessive taxation and regulation. Of course the only people with jobs would be the ones who have skills worth $40 per hour to the employer, but who cares about the rest of the unemployed?

    • SHeadius

      I am out of the workforce due to excessive taxation and regulation.

      This is where your entire argument falls apart. Taxes are STILL at historical lows (since WW2). Typical lying neocon.

      • Johnny Dollar

        Your comment makes so little sense I won’t spend much time responding to it. All I will say is I never made a six figure salary and I have lived comfortably for seven years now on what used to be withheld in taxes from my paycheck every month. Perhaps you have never had a paycheck. Doesn’t surprise me.

    • MissusComprehensivePerspective

      “There is no meaningful connection whatever between “Wall Street” bonuses and the minimum wage.” said poor, blind Johnny Dollar, speaking from extreme – and extremely dangerous! – ignorance about fundamental economic basic facts and total denial of the reality we find ourselves awash in as beings living in human bodies on a planet called Earth.
      Johnny, God does not drop the gigariches the world’s wealthpower giants are in possession of from the sky. The pool of wealth is FINITE – don’t be fooled by the non-sense professional economists get paid to repeat ad nauseum. Only work creates wealth. The number of workers working is a finite number, the number of hours each individual can sacrifice to working is a finite number (we eat and sleep or die by decree of nature), therefore the pool of wealth being divided cannot NOT be a finite number – there is no escape from the logic of this observation. And the POINT of pointing to the fact that the pool of wealth is finite is to make it crystal clear that – write this down – overpay has nowhere to come from but from underpay! That’s right: the connection of overpay to underpay not only exists, it is ironclad, it is unbreakable. Overpay is taking more out of the pool of wealth than one can possibly have put into it by virtue of the individual’s own personal sacrifice of hours, and underpay is taking out less than one put in by their own work.
      When one person gets pay for no work done, another – or many others – get work for no pay. Period. This is NOT a debatable point, Johnny, it’s the reality you live in.
      Can the total amount in the pool of wealth grow, or shrink? Certainly – it has that potential, it does grow or shrink as the number of workers or the number of hours they work changes. But don’t confuse the potential with the actual: the actual number, the amount being divided, is always and at every stage a FINITE number.
      Johnny, there is no peace without justice. If one working person is working twice the hours average people work, justice pays her twice as much – not a billion times as much!
      Nobody works harder than the poorest do, Johnny – just to stay alive.
      The rich get richer, poor get poorer does not mean the rich are working harder and harder while the poor are working less and less – it means precisely this: the rich are getting more and more for a unit of work whilst the poor are getting less and less for the same unit of work.
      You KNOW money is power, Johnny: everybody knows it. Super overpay is superoverpower is tyranny-slavery: the colossal destruction of everyone’s everything. Myriad legal thefts are embedded in the globally-rigged economic dystem (nowhere on Earth do the poor make the laws the rich make and then put themselves above) – these myriad legal thefts work to constantly and ceaselessly shift wealth one direction and work in the other direction. Any sane species would recognize this and promptly install measures at the macro-macro level to counter for the miseries-making transfer of wealth from its rightful earner-owner to the freebie-getters, the billionaires who are on the dole with the blessings of the sub-rational majority.
      The biggest, most crucial point is this: the overpayunderpay overpowerunderpower system is as dysfunctional, as anti-natural, obsolete, illogical, irrational, wicked, self-harming, wasteful, costly, and unsurvivable as it is ubiquitous! Because it is extreme injustice writ large, and injustice drives all of the violence pollution in your world.
      If you’d rather the human species survive than commit autogenocide-by-economic lies, you’re welcome to click my name and read what will help you unlearn what isn’t true about money, work, and wealth.
      To be rich is not glorious. To aim for getting more from the finite pool of wealth than you can possibly have put in by your own work is not a noble pursuit, it is not nobly enterprising: it is disgraceful, disgusting – it is THEFT that kills 50 million working poor every year, and it is not to be tolerated but rather condemned in no uncertain terms.
      There is no reason to allow unlimited personal fortunes on this planet. There is every reason NOT to. We do not have to give our rightful earnings away to wealthpower giants in order to have commerce work for our benefit. Indeed, we have to STOP piling heaps of other-earned wealth on a fraction few families at the expense of everyone else. Seriously, how hard is it to understand that for as long as a few are allowed to have superwealth overpower, they are going to have the overpower to make history be whatever they say it will be?!
      All people can and must help Murder the diabolically stupid idea to allow wealthpower giants on your only habitable planet.
      Unless you really don’t mind the human species going extinct this century.
      The violence, miseries, and dangers are proportional to the overpayunderpay ratio we allow. That ratio currently is at a billion, and it’s rising…
      GROK THE EXTREME DANGER, Humanity – wake up and smell the uranium!

      • Johnny Dollar

        i’m glad you are worried about all of that and not me. I’m simply trying to figure out what horses to bet on today.

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  • Gumbie05

    The Liberal/ Progressive Mind never ceases to amaze me! The reason you have such inequality (in ALL industries- not just Wall St! Have you seen what movie actors, TV Show Hosts, Pro Athletes, Social Media and Tech Darlings…make?) is because You (along with war corruptors on the Right -yes Neo Cons) are responsible for the “DEBASEMENT of our currency”! It doesn’t matter if you increased the minimum wage to $15 or $20/ hour it’ll never catch up to the “real” inflation caused by the debasement by the Federal Reserve (a NON-Govt- “Private” Institution with shareholders: i.e. multi national Banking Cartel)! Both political parties have played you (as well as the Right Wingers) for FOOLS! You don’t realize that in order for the Government to pay for all the wonderful good feeling schemes you think of they had one of two choices: TAX the Sh*t out of EVERYONE or “Borrow” the money from a Private Inst. (Fed Res) by printing the fiat money (US Dollar= “Notes” to be repaid by the taxpayers) into oblivion. The Politicians got the best of both worlds: 1) Not raising taxes high enough to cause a Revolution (trust me a 70% marginal tax rate WILL do that!) and 2) Lying over the past 20 years with b/s govt statics saying there’s No Inflation

  • Gumbie05

    In continuation…All of the “Progressives” lament over the “good old days” prior to 1980 about the higher tax rates and more income equality (gotta love those Socialist code words). It’s no coincidence that it started to unravel (i.e. the gap started getting worse) after August 1971 when our old buddy Nixon came into everyone home with an announcement from the Oval Office and instructed the Secretary of the Treasury to take “a temporary measure and take the US Dollar off the Gold Standard. Notice that NO President (from either Political Party) has reinstated or repealed that “temporary measure”? The Government CAN NOT stop borrowing or else it would collapse under all the “feel good” promises it made that, in the end, will never be able to complete. Believe that your future generations will CURSE you for being part of the corruption! If “Money” was backed by something REAL then there would only be so much of it around and there wouldn’t crazy inequalities like we see today. There WILL ALWAYS be Rich and Poor but the gap between the two is wider than ever because what defines them (i.e. money) has never been “Worth LESS” since it has never easier to “print” (now its all done by the push of a button) it….or at least until finally lose faith in the paper its printed! Read your history and you’ll learn that this NEVER ends well. So keep dreaming

  • Gumbie05

    Every one who claims to called themselves a “True” Liberal in the Classical 19th Century sense of the word-needs to educate themselves and watch this! http://youtu.be/y-IemeM-Ado

  • Gumbie05

    This is why it doesn’t matter what minimum wage is…it could NEVER catch up to the “debasement” of what you’re being paid in! Learn and educate yourself and stop being taken for A FOOL by BOTH political parties and their TRUE Masters! http://youtu.be/DyV0OfU3-FU