Last year, profits in the Wall Street rose to $17.3 billion. This represents a 21% jump from 2015 profits as well as its first increase in four years. The measure that they use is the profits made in the broker-dealer operations at the New York Stock Exchange.
According to the New York State Comptroller’s office, the increase in profits is critical because the financial industry supports 1 in 10 jobs in New York whether directly or indirectly. The financial industry also makes up a fifth of private sector wages. Wall Street last year employed 177,000 people, which is the highest since 2008. However, this is still 6% below pre-financial crisis employment figures.
The New York State Comptroller Thomas P. DiNapoli said in a statement, “Lower costs more than made up for the continued decline in revenues.”
The increase in profits benefits tax collections for New York. The securities industry provides 18.5% of the state budget and 7% of the city budget.
As a result of the increase in profits, the bonuses also followed. Last year, the average bonus was at $138,210. Total bonuses in 2016 reached $23.9 billion. This represents a 1% increase from the previous year. However, in 2015, bonuses fell on Wall Street. Since 1985, bonus amounts have jumped 890%.
The estimate of the average bonus was based on the bonuses Wall Street employees got between December and March. Bonuses are given between December and March and usually are a mix of cash and stock.
One of the reasons why bonuses have increased is because the stock prices of investment banks have been rising. Goldman Sachs, Morgan Stanly and JPMorgan Chase stocks are up by 30% while Bank of America is up by almost 50%.
According to the Institute Policy Studies (IPS), a left-wing think tank in Washington, D.C., “The much faster increase in Wall Street bonuses 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.” 84% to 87% of top executives and managers at the five largest investment banks are white males.
According to the IPS, the average salary in the securities industries in 2015 was at $388,000. With the bonuses, this puts the average take-home pay at over half a million.
Despite the massive bonuses, only 10% of the employees benefited from it according to Michael Karp, CEO of Options group which is a top recruitment firm.
According to compensation firm Johnson Associates Inc., the increase in market volatility due to Donald Trump’s administration may boost trading profits and thus continue to boost Wall Street bonuses. The forecast for financial services pays this year was described as “upbeat.”
Bankers are looking forward to regulation being loosened under the Trump administration. This is seen to boost trading profits and will allow more creativity with pay packages. This could mean more stock options and other unique financial products rather than just restricted stocks.