By 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.
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 reportWall Street Bonuses and the Minimum Wage.
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Common Sense says
Minimum wage by title alone is just that, a minimum wage. The very wage I made as a young teen bagging groceries at Winn Dixie. It is not designed to be a ‘living wage’ that can support a family. Maybe we should look at the slouches that are earning this minimum wage and why and how they have not managed to better themselves or move ahead. Are they high school/college graduates? How many children do they have and were these children the result of a careless lifestyle that the world now grants as acceptable? The same kind of lifestyle that led these adults to have minimum wage jobs perhaps? I say no to any more entitlements be it raising minimum wage to an amount that employers can not afford or handing out welfare and S.S. and food stamps to those not willing to work.
rickg says
How much is enough Wall St??? Thanks for your greed its so becoming of this country..
Steve D says
[Comment disallowed. Insulting. Repeat offender. Please stop posting. Your comments are not welcome. Thanks.–FL]
A.S.F. says
This will not stop until America learns to differentiate between worth and wealth. Greed is not good. Greed is greed.
Anonymous says
Why don’t you send this remarkable revelation to your glorious leader?
James says
Agree 100%
w.ryan says
@Common Sense: Where did you read the definition of minimum wage? It’s sad how “rights” granted by governments moral/social contract with its people have become so negative! “Entitlements” now have such a negative connotation. I know that I pay for the help I will one day need and so do you along with countless millions. I don’t look at the help the helpless has gotten or are getting and complain. Standing by and allowing the abuse of millions is un-American or is it. If America was perfect we wouldn’t have had to fight to change the many wrongs that have been inflicted on many of its citizens. I know the America I believe in stops abusive and evil deeds done to others. Greed has created a horrific and catastrophic dilemma in this country that our nation is stumbling. We grant the increase asked for by FPL and other Corps but F#!@ the small guy!
PCer says
Wow – feel insensitive much? Many minimum wage workers are workers who also have families to support. They may or may not have a hs or college diploma. They may or may not collect food stamps or Social Security. However, they get up everyday and go to work to try to earn a living and get ahead in this world. How dare you call these people slouchers!!! They are the hard working people who are serving your meals at local restaurants and ringing up your groceries at Walmart. Minimum wage is not an entitlement. However, I bet the social security and medicare you probably collect (or will collect) helps you to afford the lifestyle you live. I hope a waitress spits in your food next time you eat out.
A revolution is on the way. If the rich keep getting richer and the middle and lower classes keep getting shoved down, they will rise up against those in power. Some how, some way, the field will be leveled. It is inevitable.
Ted Baideme says
What this simplistic discussion to increase the minimum wage fails to take into account is, that when the minimum is increased, by basic economics the prices of many day to day products and services would have to increase(think how much your happy meal will cost when the burger flipper is making $10 per hour)
Don’t fall for this utopian view of modern monetary conditions…
There are a lot of variables to consider here.
Does wall street need to give their employees these kinds of bonus’…hell no… but this is not the answer…
confidential says
Many just can’t accept the truth perfectly described in this editorial.” Their greed driven ignorance about all for me nothing for you and I could not care less” is what keep our USA down in the dumpsters!
Is not the rich alone who sustains our economy…that is why we owe now a candle to every saint! Instead is the mass middle and lower classes who’s payroll, ss, fica, sales, homes, cars and myriad of other taxes from monies earned and spent in hour country, who makes possible our federal and states budget revenue.
Our workers are not lazy, useless or uneducated as invented justification by the conservative cartel for being out of work…there are no sufficient jobs and they lost theirs to the greedy national employers that took operation overseas to benefit from slave wages. Then they bring here their foreign made cheap wares and many of us are still enough dumb to not boycott them YET!
The wealthy getting those Wall Street bonuses keep their $$ a la Bain in off shore accounts to avoid the duly taxes that we all pay here…and do most their shopping for high end stuff like yachts, planes and cars overseas or else imported.
Raising the minimum wage reassures that those extra $$ earned stay home! Good deed!