Wednesday’s big news on Wall Street wasn’t that for yet another year its average wage and bonuses put finance employees in the top 1 percent. It was that the Federal Reserve’s third interest rate hike in a decade was fueling a stock rally — meaning there was more money for the already wealthy to grab.
The Wall Street Journal’s website was filled with reports on the Fed’s action. Nowhere in its fixation on the changing investment landscape did it note that its frontline readers, the traders and brokers working in New York’s financial industry, were once again the poster boys for economic inequality in America.
But this overwhelmingly white and male cadre are the most visible concentration of America’s economic elite, according to 2016 employment, wage and annual bonus data released on March 15 by the New York State Comptroller’s office. When analyzed by progressive economists, it showed how last year’s average bonuses alone—forget about the six-figure base salaries — could more than offset the demands by millions of low-wage workers nationwide to earn $15 an hour, which would translate into $31,200 in annual pay.
“For Wall Street employees, annual bonuses come as an extra reward on top of their base salaries, which averaged $388,000 in 2015, the most recent year for which data are available,” the Institute for Policy Studies (IPS), a progressive Washington think tank, noted in a report Wednesday. “The average Wall Street bonus increased by 1 percent last year to $138,210. Since 1985, the nominal value of the average Wall Street bonus has increased 890 percent, whereas the minimum wage has risen only 116 percent.”
Taken together, that average salary and bonus equates to $526,000 in income. That stunning figure is just above the $518,000 threshold to be in the top 1 percent of New York State’s earners, according to a study released last June by the Economic Policy Institute, another progressive Washington think tank.
As the Institute for Policy Studies noted, the $24 billion paid in bonuses to 172,400 Wall Street employees could have more than paid for raising wages to $15 a hour for 3.1 million restaurant servers and bartenders (a $17 billion cost), or 1.7 million home health and personal care aides (a $13 billion cost) or 3.2 million fast food prep and serving workers (a $23 billion cost).
But that’s not how the exploitive American economy works, is it? These wage disparities are also followed by gender and racial disparities, IPS said, as women and people of color dominate the bottom rungs of the economic ladder while Wall Street’s mostly male white ranks fill the ever-prospering top.
“The much faster increase in Wall Street bonuses [than minimum wages] has contributed to racial and gender inequality, since workers at the bottom of the wage scale are predominantly people of color and female, whereas those in the financial industry’s upper echelons are overwhelmingly white and male,” IPS noted. “The average Wall Street bonus increased by just 1 percent last year. But the nominal value of the average bonus has grown by 890 percent since 1985, from $13,970 to $138,210. Meanwhile, the [federal] minimum wage has risen only 116 percent, from $3.35 per hour to $7.25. Adjusted for inflation, the minimum wage was nearly 3 percent lower in 2016 than in 1985, whereas the average bonus was about 343 percent higher.”
The big questions raised by these trends remain what should or could be done about this vast disparity. Progressive politicians like Sen. Bernie Sanders, I-Vt., have assailed elected officials who are determined to keep bending laws to reward their wealthiest constituents. One of Sanders’ latest examples came after President Donald Trump’s recent address to Congress, where he replied, “I did not hear President Trump tonight mention — mention the words ‘income and wealth inequality’ or the fact that we now have the widest gap between the very rich and everyone else since the 1920s . . . How could you give a speech to the nation and not talk about that enormously important issue?”
How? The answer is simple. The defenders of the wealthiest Americans — such as the Wall Street Journal and The Economist—keep perpetuating the myth that successful capitalists are the best exemplars of human ingenuity and evolution. Thus, because they’re superior to more ordinary individuals, or have figured out how the financial world works, they deserve their outsized rewards. (That same logic, by the way, is why most incumbents in Congress will never reform the campaign finance system: they figured it out and won. What’s the problem?)
In many respects this tension over redistributing wealth — upward, downward or more equally—is the unspoken backdrop to the Obamacare repeal effort now in Congress. Obamacare’s taxes, which the Republicans uniformly despise, is the law’s way of getting the richest Americans and health industry segments to help pay for insurance premium subsidies for lower wage households. The House GOP doesn’t want Americans who can afford it to contribute more toward the nation’s health; they want to let them keep more money for themselves.
What’s missing in the GOP-led Obamacare debate, and also absent in many economic policy debates, is the basic idea that giving middle- and lower-income households more spending money, via higher wages, contributes more to overall economic growth than making the already rich richer. That point doesn’t get overlooked in IPS’s report on the latest Wall Street bonus data.
“Shifting resources into the pockets of low-wage workers would give the American economy a much bigger bang for the buck than increases in Wall Street bonuses,” the report said. “To meet basic needs, the low-wage workers who prepare our food and take care of the elderly tend to spend nearly every dollar they earn, creating beneficial economic ripple effects. The wealthy, by contrast, can afford to squirrel away more of their earnings.”
This observation keeps emerging every time new statistics surface confirming the growing gaps between America’s rich and everyone else. If the question is what to do about deepening inequality, to progressives the answer is clear: share the wealth.
“Forty-four percent of U.S. workers still earn less than $15 per hour. This is the wage level needed to cover basic living costs in most areas of the country,” the IPS report said. Wall Street’s $23.9 billion in bonuses last year “amounts to 1.6 times the combined earnings of all 1,075,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.”
Those bonuses are in addition to a $388,000 average base annual salary.