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An Income Inequality Snapshot: Wall Street Bonuses and the Minimum Wage

Filed in Minimum Wage By on March 17, 2015

Last week, the New York State Comptroller released new data on how much money Wall Street banks doled out in bonuses in 2014. The story is all too familiar: a select, and already wealthy, few raked in a combined $28.5 billion in bonuses last year. Sarah Anderson of the Institute for Policy Studies placed this figure in juxtaposition to the paychecks of minimum wage workers. Her exercise highlights, in a very direct way, the growing problem of income inequality in America.

Anderson estimated that the combined income of full-time workers earning the federal minimum wage of $7.25 an hour is $14 billion. In other words, Wall Street bonuses amounted to twice the annual earnings of more than 1 million full-time minimum wage workers in America. While one may quibble over the most accurate way to estimate the combined earnings of minimum wage earnings, “the broad picture doesn’t change,” notes economist Justin Wolfers.

Wall Street bonuses compared to the total annual earnings of full-time workers making the federal minimum wage.

While this stark 2:1 ratio is telling enough, consider for a moment the pocketbook to pocketbook comparison. There were 167,800 people who worked on Wall Street this past year, suggesting that the lump $28.5 billion in bonuses averages out to about $170,000 per person. Now consider the fact that the annual salary of a full-time worker earning the federal minimum wage is around $15,080. This means that the average bonus of a person working on Wall Street was 11 times what a minimum wage worker makes all year.

If numbers speak for themselves, then together these data points scream of an epidemic in America: far too many workers are earning far too little. It’s time to #RaiseTheWage.

Patrick Oakford is a policy advisor in the department’s Office of the Chief Economist.

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Comments (2)

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  1. Todd says:

    I do not believe these numbers speak for them self. They are a weak comparison of to groups of wage earners that do not provide context to details like location of the jobs and cost of living for the area. I would also be interested in factors like education level, and so on.

    It also does not speak of hours worked. This is not to illustrate the difference in the ratio of time to income, but time sacrificed from one’s family to earn the “Wall Street” income.

    I agree that living on a minimum wage job is not realistic. I do not think changing this standard is the solution. This would have more of a negative impact on individuals making slightly above minimum wage than bringing the low earners closer to the high earners. This would be from the effects of compression. The cost of this increase would be absorbed as a expence by the employer and added to the costs for goods and services provided.

    I agree that families trying to survive on minimum wage is a huge problem in the US, but I do not believe that a magic solution of increased wage minimums will solve it. I would argue that this change would simply shift overall pay scales an create a larger minimum wage population.

    One possible idea would be a required education assistance program to help create opportunities for these individuals to get out of these low paying jobs.

  2. E Brennan says:

    There are 3.6 million workers earning at or below minimum wage. At $7.25 per hour, that translates to $52 billion in compensation, which is two times the bonus compensation paid to 167,800 skilled wall street workers at $170,000 per worker. Pretending that there are only 1 million minimum wage workers, 82% of whom are second and third income earners in their households in order to inflate your statistics causes you to lose credibility.

    So we are talking about skilled workers being paid eleven times what unskilled workers are being paid.

    The five top paid employees of the Clinton Foundation received annual average compensation of $472,389 in 2013. It seems like a bigger complaint that a charity should be paying the well connected $472,389 than that for profit entities are paying $170,000 bonuses.