Wall Street bankers might have to start counting their pennies: the average banking bonuses fell 26% last year, leaving the average bonus at “just” $176,700.
After significant boosts during the pandemic, profits started to fall for Wall Street firms in 2022 as inflation rose and fears of recessions started to hit, leaving companies with less leeway for bonuses, according to a report from the New York state comptroller office released on Thursday. Bonuses are now at pre-pandemic levels, reaching a low not seen since 2019.
The bonus pool in 2022 was $33.7bn, down 21% from 2021’s record of $42.7bn. In 2021, the average bonus was $240,400 – what had been a 20% increase compared with the year prior.
“A 26% decline brings the average bonus closer to what financial employees received prior to the pandemic,” comptroller Thomas DiNapoli said in a statement. DiNapoli notes that Wall Street accounts for 22% of the state’s tax revenue and 8% of tax collections for New York City.
“While lower bonuses affect income tax revenues for the state and city, our economic recovery does not depend solely on Wall Street. Employment in leisure and hospitality, retail, restaurants and construction must continue to improve for the city and state to fully recover,” he said.
In an analysis of the news, Inequality.org calculated that since 1985, the first year the comptroller reported bonus data, the average Wall Street bonus has increased 1,165%, from $13,970 to $176,700 in 2022 (not adjusted for inflation).
The bonuses came on top of base salaries, which averaged $516,560 for New York securities industry employees in 2021, according to the inequality research non-profit.
Wall Street remains vital to New York’s economy. DiNapoli notes that one in 11 jobs in New York City are within the securities industry, and many employees are back in the office, with 43% of employees riding the subway – “a higher rate than the citywide average for workers”. Wall Street made up 16% of all economic activity in the city in 2021.
“The financial sector’s ability to generate revenue and turn profit is critically important to New York,” he said.
The pandemic turned out to be profitable for the Wall Street companies which assisted with a wave of takeovers and mergers and an increased number of initial public offerings (IPOs) during the pandemic. Firms like Goldman Sachs and JPMorgan reaped huge checks, that trickled down to top employees.
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C-suite executives got the biggest boosts, particularly compared with the average US worker. The wage gap between the average CEO and regular US workers jumped to 670-to-one, according to a June 2022 report. In 2020, CEOs got a pay raise of 29% – compared with the slight decrease workers had received that year.
But many companies who experienced growth during the pandemic have had a sobering year as interest rates rose, tightening the valves on what once was easy-flowing cash. This was seen particularly in the tech industry, which saw a massive hiring boom during the pandemic turn into layoffs over the last few months. On Wall Street, some firms are now posting losses after their pandemic highs. Goldman Sachs in January reported its largest fall in earnings in a decade and laid off 3,000 employees.